Monday, March 2, 2009
Monday, February 16, 2009
FOREX TRADING BROKERS
When choosing forex trading brokers, your primary concerns include best possible trade execution, reliable back office functions, and competitive prices.
You need best possible trade execution to keep slippage as small as possible, which plays a role in profitability of any trading system.
For short-to-medium range trading strategies, slippage (the price you were quoted vs. the price you actually get from the market) can change the profitability of such system profoundly.
Because of the popularity of stock market trading, stock brokerages execution capabilities are measured weekly by such companies as Keynote (the Keynote Broker Web Transaction Performance Index shows the average response times and success rates for creating a standard stock-order transaction on selected brokerage Web sites).
Unfortunately, there are no similar services for forex brokerages.
What I've found useful, is to go to forex discussion forums and discussion groups (such as those at groups.google.com) and reading the user reviews of forex brokers. For some brokerages, you'll find that the trade execution capabilities are not up to what you'd want.
You need best possible trade execution to keep slippage as small as possible, which plays a role in profitability of any trading system.
For short-to-medium range trading strategies, slippage (the price you were quoted vs. the price you actually get from the market) can change the profitability of such system profoundly.
Because of the popularity of stock market trading, stock brokerages execution capabilities are measured weekly by such companies as Keynote (the Keynote Broker Web Transaction Performance Index shows the average response times and success rates for creating a standard stock-order transaction on selected brokerage Web sites).
Unfortunately, there are no similar services for forex brokerages.
What I've found useful, is to go to forex discussion forums and discussion groups (such as those at groups.google.com) and reading the user reviews of forex brokers. For some brokerages, you'll find that the trade execution capabilities are not up to what you'd want.
MINI FOREX ACCOUNTS – PROVIDERS
With Internet, the popularity of mini FX accounts has skyrocketed. In fact, many stock investors seem keen to spread their risk by taking positions on the forex market with mini FX trading accounts.
There are tens of providers available for mini FX accounts. These providers differ in, for example, overnight rates, trading spreads, and maximum leverage rules, so you should take your time comparing the offers.
In addition to comparing the mini forex accounts, compare the trading platforms available. There are huge differences in the ease of use and interface design between trading platforms. The choice of a platform may, in fact, affect your trading returns (you have to have the ability to use the platform correctly and quickly), so choose one that you’re comfortable with.
There are tens of providers available for mini FX accounts. These providers differ in, for example, overnight rates, trading spreads, and maximum leverage rules, so you should take your time comparing the offers.
In addition to comparing the mini forex accounts, compare the trading platforms available. There are huge differences in the ease of use and interface design between trading platforms. The choice of a platform may, in fact, affect your trading returns (you have to have the ability to use the platform correctly and quickly), so choose one that you’re comfortable with.
TRADING WITH MINI FOREX ACCOUNTS
Because the trades placed with mini FX accounts are placed outside of the interbank forex market (due to their size), the marketmaker for the mini trading lots is usually the same brokerage that you have the mini forex account with.
But, because the brokerage can hedge risk effectively in the interbank market, they can (usually) also offer comparative spreads and comparative market prices to the actual forex markets.
However, you’ll find differences in rollover rates (rates paid to or subtracted from an account held overnight) that will affect your trading performance. Therefore, it usually pays off to compare mini FX accounts to find the best rates on overnight positions (in addition to the most competitive spreads).
But, because the brokerage can hedge risk effectively in the interbank market, they can (usually) also offer comparative spreads and comparative market prices to the actual forex markets.
However, you’ll find differences in rollover rates (rates paid to or subtracted from an account held overnight) that will affect your trading performance. Therefore, it usually pays off to compare mini FX accounts to find the best rates on overnight positions (in addition to the most competitive spreads).
MINI FOREX ACCOUNTS
Mini forex accounts describe an account within a forex brokerage that allow the customer to participate in trading FX with fractional minimum account size to the “real” forex accounts.
The mini FX accounts are possible due to the fractional trading sizes, with one mini lot being a fraction of one actual lot in the interbank forex market.
This way, the margin requirement and account size can be fractional in size as well.
The mini FX accounts are possible due to the fractional trading sizes, with one mini lot being a fraction of one actual lot in the interbank forex market.
This way, the margin requirement and account size can be fractional in size as well.
PROFESSIONAL CURRENCY TRADING INFORMATION SOURCES
For larger corporations and individuals with larger forex accounts, the professional systems are a natural choice. Companies offering professional platforms include
Reuters
Bridge (Reuters company)
Bloomberg
ILX Systems (Thomson company)
Primark Corp.
FactSet Research SystemsThe assuring aspect of purchasing one of the professional systems is that you know that you’re at par with the dealing room traders, who get the exact same information from the same providers. This might be important especially if you day-trade forex products.
Reuters
Bridge (Reuters company)
Bloomberg
ILX Systems (Thomson company)
Primark Corp.
FactSet Research SystemsThe assuring aspect of purchasing one of the professional systems is that you know that you’re at par with the dealing room traders, who get the exact same information from the same providers. This might be important especially if you day-trade forex products.
. AFFORDABLE CURRENCY TRADING INFORMATION SOURCES
If you don’t yet have a brokerage, chances are that you can get a variety of information and analysis tools in the package, at least if you go with one of the online brokers.
Many online brokers add real-time news feed, real-time charts, email alerts, and (technical) analysis tools in their platform package. Not all do, so you should check the details before signing up with a brokerage.
Other affordable information sources include such online web sites as INO.com, Traders.com, Bloomberg and Reuters web sites.
You can also sign up with one of the online companies offering forex analysis for a fee, such as OzForex or Investica. Many of these services send, for example, end-of-day analysis packages via email.
Many online brokers add real-time news feed, real-time charts, email alerts, and (technical) analysis tools in their platform package. Not all do, so you should check the details before signing up with a brokerage.
Other affordable information sources include such online web sites as INO.com, Traders.com, Bloomberg and Reuters web sites.
You can also sign up with one of the online companies offering forex analysis for a fee, such as OzForex or Investica. Many of these services send, for example, end-of-day analysis packages via email.
CURRENCY TRADING INFORMATION
Currency trading information needs are various. Depending on your particular strategy, you might need real-time charts, news feed, and real-time third party analysis.
The most rapidly expanding group of currency traders is those using mini forex accounts and other online forex accounts with smaller account sizes.
The high-end FX trading information sources, such as Bloomberg and Bridge, are very much out of the small investors price range. However, for larger corporations and individuals with larger accounts, these tried and trusted systems are the obvious choice.
The affordable choices for information sources are free online news feeds, your brokerage's news feed and analysis tools attached to the software platform, and other online resources.
The most rapidly expanding group of currency traders is those using mini forex accounts and other online forex accounts with smaller account sizes.
The high-end FX trading information sources, such as Bloomberg and Bridge, are very much out of the small investors price range. However, for larger corporations and individuals with larger accounts, these tried and trusted systems are the obvious choice.
The affordable choices for information sources are free online news feeds, your brokerage's news feed and analysis tools attached to the software platform, and other online resources.
FOREX TRADING SOLUTIONS
Forex trading solutions are sold in many forms, such as forex classes, books, and ready-made systems.
In fact, there are an increasing number of sellers willing to sell you a complete system, with the trading rules completely, partially on not at all revealed.
If the rules of the system are not revealed, the system is called a “black box” system, where you have to rely on the signals the system gives without knowing how they are generated.
Constructing a profitable system is not cheap and thus you’ll find many of the systems sold for $3,000+. However, despite the system being profitable in the past, nothing guarantees that any buyer will make any money with it in the future.
In fact, there are an increasing number of sellers willing to sell you a complete system, with the trading rules completely, partially on not at all revealed.
If the rules of the system are not revealed, the system is called a “black box” system, where you have to rely on the signals the system gives without knowing how they are generated.
Constructing a profitable system is not cheap and thus you’ll find many of the systems sold for $3,000+. However, despite the system being profitable in the past, nothing guarantees that any buyer will make any money with it in the future.
LEARN CURRENCY TRADING
You can learn currency trading from several sources, including courses, books, and personal instruction (mentoring) programs.
Once you know how the foreign exchange markets work, you can apply several trading strategies to the forex markets (that work on many other markets as well).
In fact, many hedge fund managers, for example, diversify their portfolios to forex products from commodities and stocks to spread market risk. And they use the same or similar trading styles for each market.
To learn currency trading, books are usually the cheapest way, with currency trading courses and personal mentoring being much, much more expensive.
Once you know how the foreign exchange markets work, you can apply several trading strategies to the forex markets (that work on many other markets as well).
In fact, many hedge fund managers, for example, diversify their portfolios to forex products from commodities and stocks to spread market risk. And they use the same or similar trading styles for each market.
To learn currency trading, books are usually the cheapest way, with currency trading courses and personal mentoring being much, much more expensive.
LEARNING FOREX
Learning forex markets is traditionally part of the curriculum in most business schools. In addition, you can learn forex markets and currency trading in separate courses, seminars, from mentoring or by instructions from dealers and brokers. Books and forex magazines offer another way to introduce yourself to foreign exchange operations.
Many dealers in banks that handle foreign exchange operations have business school degrees (MBAs), or Master's degrees in quantitative subjects like finance or mathematics.
In fact, because currency trading is becoming more and more popular, many universities offer courses on forex markets as separate modules available to all (for a fee).
Therefore, if you're learning forex markets, your local university should be one of the first places to look at.
Many dealers in banks that handle foreign exchange operations have business school degrees (MBAs), or Master's degrees in quantitative subjects like finance or mathematics.
In fact, because currency trading is becoming more and more popular, many universities offer courses on forex markets as separate modules available to all (for a fee).
Therefore, if you're learning forex markets, your local university should be one of the first places to look at.
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