Forex traders often find themselves quite pressed for time whilst trading. It is all too common for traders, especially those who are new to Forex, to end up spending too much time on their trades at the expense of everything else. Sometimes, realising that even the most seasoned traders take time to live a normal life is just what you need to get back on track.
Many traders spend too much time watching charts in the hopes that something will change dramatically during that time. In reality, this technique sets many back because it causes them to focus too much on the possibility of failure. Conducting research prior to a trade is always a good idea, but this, too, can get out of control. If a solid plan for conducting trades isn't in place, no amount of obsession over current trends or expert advice will correct it.
There are many different advantages to having a working plan for your trading. Organisation is one of the major advantages, but a solid plan will also help you manage your time more efficiently. Remembering the fact that successful people generally have a plan will in turn help you stay focused.
When you have a good plan for managing your trades, you will have more freedom to do other things and feel less confined by your trading activities. You will be able to focus more on the meaningful parts of the trading process and less on worrying about the minor things.
Most investors are aware of the fact that having a really good forex broker will help them succeed in the forex market and make consistent profits. However, finding the best forex broker can be difficult. Today, there are literally hundreds of brokers offering their services on the internet.
Locating a good broker
A novice trader, looking for someone to help him or her start trading will find many a forex brokerage promising effortless and inexpensive forex currency trading accounts. Although most of them are legitimate, some will be fraudulent.
To avoid falling victim to scams, the first thing a newcomer to the forex market should do is contact the Financial Services Authority (FSA). Monitoring forex brokerage firms and individual brokers, this institution provides critical information about its members, including contact details, reviews, complaints and disciplinary actions. In fact, a trader looking for a reputable broker should be aware that all brokerages and professional brokers must be authorised by the FSA in order to perform specific forex trading tasks.
Investors who already trade in other markets should ask their current brokers if they have any experience with forex. If they do not, they may recommend a fellow broker who has a good reputation. The investor should always be sure that the prospective broker really does know how to trade forex. This can be done by simply asking for references from existing clients or looking for feedback on one of the forex forums.
Since the relationship with a broker involves constant contact and financial commitment, investors should never take the decision of hiring a broker lightly. Failure to do so may result in serious repercussions, such as becoming the victim of a scam. In conclusion, if a broker does not have FSA authorisation the investor should look for an alternative service provider.
Whether you’re looking for the latest forex news or for an article on John Keynes economic ideas, the internet is an excellent source of information, and is more readily available than books in many homes in the UK. However, when using internet sources, it’s important to ensure that the information is good.
How can information be bad?
There are a couple of ways in which essays can be tripped up by bad information.
Satirical and spoof internet sites such as The Onion, and the Daily Currant, can appear to be upstanding news sources and it is partly their similarity to websites like bbc.co.uk that adds to their humour. However, whilst the information should be obviously silly and incorrect, it isn’t always.
There are also many people who create websites to use as their own personal soapboxes, but just because the information has been published on the web doesn’t mean that it is factual. It isn’t always obvious that the information is bad, and sometimes writers go out of their way to make it look good.
Spot the signs of bad information
You should always double check your sources. Use books where possible, or check the internet for more sites that say the same thing. If you can only find one instance of the information, or if you find lots of instances but all using exactly the same phrasing, there is a chance this is bad information.
Take a good look at the site you got the information from. Can you spot spelling errors? Grammatical issues? (‘Your’ and ‘you’re’ are common mistakes to watch out for). How about the site itself? Is it a professionally designed site, or one that appears to have been cobbled together?
You may need to carry out some detective work when searching for information on the internet but it’s important to ensure that your sources are solid.
When it comes to currency trading, forex is one of the most liquid exchange markets available today. The market is huge and traders who are involved are looking to achieve profitable results consistently; in order to do so they must develop a complex strategy. Unfortunately, recent reports indicate that about 95 per cent of traders are unable to achieve consistently positive results. That is largely because most of them focus on unreliable information, which means they make the worst possible trading decisions.
Understanding the basic essentials
To develop a lucrative forex currency trading strategy, an investor must consider a number of key elements, such as technical indicators, trading systems and money management techniques. All trading decisions must be made based on certain technical indicators, such as price fluctuations. For example, a broker can make a massive profit by following a simple day trading strategy, which consists in buying when the currency is low and selling when its price goes up.
To get the best out of using a certain strategy; for example, day trading, the individual should develop his or her personal forex day trading system, one that fits their specific needs and goals. This means each trader has to make an ongoing effort to develop a system that works perfectly for him or her.
In addition, multiple money management techniques can help traders make profit without risking too much. A good rule of thumb is to invest around one per cent of the money deposited in their forex account. Although this is likely to result in only small returns on investment, it leads to exponential profit growth over time.
After creating a particular trading strategy, traders should try it on a forex demo account. Once a particular strategy delivers consistent results, it can be transferred to a ‘live’ forex account.
Having attended an introductory seminar on the possibilities offered by online forex trading, many novices are eager to get involved in this potentially lucrative industry. Once they realise how much homework has to be done before becoming a successful trader, however, many of them develop uncertainties. Learning to interpret a multitude of fundamental and technical indicators and charts, not to mention becoming familiar with concepts such as money management and trading systems, may suddenly seem overwhelming.
This is when many of them turn to professional money managers to carry out online currency trading on their behalf. With a managed forex account it is not necessary to know anything about the intricacies of the marketplace yourself, you simply employ an expert to trade on your behalf.
Benefits of managed accounts
Arguably the biggest single benefit of a managed fx trading account is the fact that it is possible to benefit from the experience of someone who has been in the industry for many years. There is no quick way to become a master trader and for individuals who do not have the time to acquire the necessary skills, a managed account might be the perfect solution.
Managed accounts are also ideal for people who simply cannot handle the stress involved in dealing with trades that start to go the ‘wrong’ way.
Dangers of managed accounts
Perhaps the biggest danger involved in using a managed forex account is that the person who handles your trading funds might misrepresent his or her track record, experience or qualifications. The services of these money managers come at a price and it is up to the individual to do the necessary research to ensure that a particular individual or organisation does indeed have the necessary qualifications, experience and skills required.
Forex is a decentralised worldwide market, but most traders still require the services of a broker. The role of the forex broker is to act as an intermediary and provide services such as trading strategy advice, technical analysis and research.
Newcomers to the world of forex trading are strongly advised to check out a selection of brokerage sites. Websites such as forexloft.com are packed with advice and tips for both experienced and novice traders.
Any brokerage house should be registered with the relevant regulatory body. Before signing up with a particular broker it is also advisable to check whether a help desk is available 24-hours a day, seven days a week. This is because foreign exchange dealing continues round the clock, so if they are trading at 3am in the morning he or she needs to be confident that there will be help available should a problem arise.
The vast majority of brokers recognise the importance of novice traders and gear a range of online services towards them. They usually provide instruction, demo accounts or simulated trading, which enable the newcomer to practice trading without risking any actual money. Of course, when the trader feels confident enough he or she will begin trading for real.
For the experienced forex trader online, brokers concentrate more on detailed advice rather than instruction.
Another important aspect provided by forex brokers is the trading tools they provide online. When looking for a suitable broker it is a good idea to check how these tools operate and if they meet the trader’s personal requirements. This can easily be done by checking out a demo account. Even an experienced trader should do this when moving to a new broker as it will allow him or her to decide whether the trading tools and other essential facilities being offered are suitable.
For best forex trading, an investor new to currency trading will want to seek out the best advice available. This is where a forex forum can help. A forex forum, such as forex factory, is an internet-based platform offering advice and assistance on all aspects of forex online. Posts to a forex forum typically come from fellow investors, so anyone using one knows that they are receiving advice from similar-minded people, whether they are just starting out with currency exchange trading or whether they are more experienced. Some forums will provide charts and analysis, as well as links to educational resources for new investors. Once an investor becomes more experienced in currency trading, they can post their own advice on a forum for the benefit of fellow investors.
Discussions cover a range of issues, from forex broker recommendations and forex software advice to day trading tips and different types of trading systems.
A search online will return any number of forex forums, which users can search to find the information most appropriate to their needs. Free forex advice is invaluable to new investors as they discover the ins and outs of currency trading. Registering for a forum tends to be very straightforward. Just choose a username and password and have an e-mail address for verification purposes. Most forums allow guests to view posts before making a commitment to signing up, so investors can see if a particular forum has the kind of advice they are looking for. Active forums will have posts updated on a regular basis so they are best ones to look for.
Rather than opening an ordinary forex account and trading one or more currency pairs, there is another great alternative to trading in the forex market. That alternative is trading forex options.
A forex option is simply the right, but not the obligation, to buy (call option) or sell (put option) a given currency at an agreed exchange rate (the strike price), on a certain future date (the expiration date).
There are two types of options: call options and put options. The strike price of a call option is normally above the current market price, and the strike price of a put option below the current market price, but that does not necessarily have to be the case.
With a call option the trader wants the price of the currency to move above the strike price at expiration, because then he or she has the right to buy it at the (lower) strike price and sell it again at the higher market price.
With a put option, a trader wants the price of the currency to drop below the strike price, because then they can buy the currency at the lower market price and sell it again at the higher strike price.
Buying call options is attractive because the option only costs a fraction of what buying the actual currency would have cost and, if you are right about the market, you will get the full benefit of the amount by which the market price moves beyond the strike price.
The same is true for put options, but in this case the profit for the trader would be the amount by which the price drops below the strike price.
Another reason why forex traders love options is because what you pay for the option is the maximum you can lose on the deal. The risk, therefore, is lower than with a straight currency deal.
Sir Richard Branson has giving his backing to a business which uses a so-called “peer-to-peer” technology to cut out the traditional international bank payments system, effectively matching consumers and companies in other countries that wish to use the opposite currency. What this does is to cut out or bypass that traditional method of using banks.
The London based company is called “TransferWise” and is enthusiastically backed by the entrepreneur, who has described it as an “innovative idea for shaking up the financial services sector while helping start-ups in a practical way”. He has said that one of the biggest obstacles facing businesses trading overseas has always been the cost of transferring money. This has often resulting in the company never managing to trade abroad or to get off the ground in the export markets.
The new company is another novel idea from the former Skype director Taavet Hinrikus and consultant Kristo Käärmann, they have said that the idea came following the amount of money that Skype was “constantly wasting” on banking fees. They also cite the reason that not only is it being cheaper for the users than traditional bank transfer methods; it makes charges transparent and exchange rates readily visible to the company.
In a statement TransferWise said it will give away $100m worth of foreign transfers for free to small and medium-sized companies on a first come, first served basis, waiving its usual flat 0.5pc charge”.
Many novices get involved in the world of online currency trading after attending some sort of introductory seminar. They get excited with what they perceive to be a get-rich-quick opportunity and start to trade forex without taking time off to first learn forex. Unsurprisingly, the probability that such a trader will become successful is low.
There are numerous websites providing free forex training tutorials. They cover technical indicators, fundamental indicators, how to red charts, trading systems and many other aspects of trading. There really is no excuse for the novice investor not learning the basics of the forex market before entering into a trade.
There are websites such as the Forex Factory, which specialise in providing forex training and vital tools to both novice and professional traders. Anyone new to the market is advised to study the basics of the market by checking out one or more of these sites before opening a demo account. Once you feel comfortable with the core principles of trading you are ready to open a demo account and start making ‘paper’ trades.
This is the point where you should start developing your own trading system; before, not after you make your first live trade. During this stage feel free to experiment with various systems. Try using different technical indicators and or combinations of them. Somewhere along the line you will learn which technical indicators work best for you.
Keep records of your demo trades. It is vital to learn what worked for you and what did not and to identify why.