Category Archives: Forex Learning Curve

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Investment Markets Search for New Ways to Attract Traders

In the world of investing, both brokers and traders agree on one thing: there is a constant need for new and exciting offerings. Traders move from one investment instrument to another when the one they were using becomes either boring or not profitable. And brokers have to step in and fill in the need while at the same time generating fees and commissions so they can maintain their position in the market.

Although foreign exchange has been used by banking institutions and government agencies for decades, Forex trading through an online broker is a relatively new endeavor and over the last decade or so Forex trading has become an extremely popular way for investors to make some quick profits.

But like anything that is novel and exciting at first, the luster of Forex trading is starting to tarnish and maintaining an online brokerage which offers only foreign exchange has become increasingly challenging. So Forex brokers are on a constant search for newer and better options so they can attract new clients while holding on to their existing ones.

There are some excellent Forex brokers in the market today and they are finding upscale technologies that will give them the edge over their competitors. The next new phase, which has
been around for some time (since 1990 in the UK) but has remained low key up until now, is the use of CFD (Contract for Difference) trading.

Forex and CFDs are similar in many respects but the main difference is in the breadth of products to choose from. Forex trading is straight currency trading. CFDs covers a wide set of markets and offers a selection of different contracts that vary in increment value and currency type.

Although CFD trading is as risky as straight Forex trading, CFDs offer simple and instantaneous trading. There are usually no fees or commissions with CFDs and they are highly liquid. They are, however, required to maintain a certain amount of margin designated by the brokerage which range from 0.5% to 30%.

Something for Everyone

The easiest way to make share indices and commodities accessible to small retail clients is through making them CFDs. Forex or shares or any other asset can be a CFD or a non-CFD trade.

Many Forex brokers include CFDs in their line-up and there are few brokers where CFDs are their only product. For a broker offering CFDs to stand out from the crowd, it needs to provide at least one unique feature and CFD brokers are scrambling to come up with something distinctive and innovative.

One broker has introduced a feature that will allow a trader to hedge its market exposure on the futures markets in real-time with very high frequency execution.

Another company offers its traders a choice of major indices, including some in the U.S. as well as contracts in gold, silver, oil and other commodities.

Still another broker has introduced no-requotes trading to index CFDs and will waive certain restrictions when placing limit orders and stops close to the market price on indices. Some brokers offer traders new indices created specifically for their traders.

For investors looking to leave Forex altogether, commodities trading is another area that has re-emerged as a good investment option. Investors in the U.S. began trading commodities at the Chicago Mercantile Exchange in 1898 and it has been suggested that rice futures may have been traded in China as long ago as 6,000 years. The popularity of commodity trading seems to depend on how well other investment areas are doing. It’s been the last choice by the average investor when all else seems to be puttering out.

The commodity markets have not changed much over the years and at present only certain commodities have made a comeback and only as a result of global forces at play. For those who believe they can foresee the future, betting on oil and gold can bring in some good profits—or losses.

Commodities are traded separately on commodity markets but can also be traded as CFDs through Forex brokers.

Financial markets are always changing and the attraction of one type of investment wanes as another one gains in popularity. Both brokers and traders alike must constantly stay on the ball if they are to remain ahead of the investment game.

 

The Impact of Technology on Your Trading Performance

The Forex and VPS relationship

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“A 5 millisecond server delay could cost a firm as much as 4 million USD every millisecond”

Millions of traders rely on complex technology solutions each day with millions of dollars being transmitted every millisecond. But how often do traders really think about the technology they are using and do most traders fully understand its impact? It’s an area few have explored but recent surveys suggest that trader’s knowledge varies widely.

Most companies and some individuals rely on server technology to power their trading activities. A logical choice for many but what are the key elements of these and how can you as a trader gets the most out of them? After all, a delay or a poorly configured server can be the vital difference between a successful and non-successful day.

Understanding Your Server

Of course, most traders aren’t that familiar with the deeper workings of server technology but they do have an understanding of how these fit into the overall process of trading. While we don`t need to get into these finer details traders should know about some of the core things they should require of their server, for example speed and down time rates.

With daily trading equation roughly to 4 trillion dollars traders understand the importance of timing. While traders may know when to execute a specific transaction it may take a server some additional time to process it. In turn it is important to have a server that responds quickly. While the obvious thing to do would be to look at hardware traders should also ask their technicians to closely inspect internet connection speeds and server logs. A server that is working overtime on things such as non-essential tasks will slow down your trading.

The other big area for consideration is uptime. Traders will want to ensure they experience as little down time as possible. This means careful maintenance programs and good backup systems are required. Traders will want to make use of specialist server providers like Artmotion of Switzerland. A good supplier can make a huge different and is very important these days as many companies outsource their server requirements.

Since we are dealing with financial transactions security is also vitally important. The aim is always to reduce the risk of being compromised. There have been well documented cases of this and it can cost firms millions of dollars.

Gaining through Knowledge

By nature Forex trading is very competitive and the very best traders are constantly on the move and updating their skills. Many have learned about the growing complexities of technology and continually try to innovate in this area. While it is not always possible to innovate traders should look to develop their understanding in a wide range of areas including technology. Many have done this and now work closely with their IT technicians to deliver the best possible results. Regular audits provide a great starting point and there are many ways to monitor your server performance. In truth, there is no one solution that will fit all. It is largely about finding a solution that fits you and optimizing it as best possible.

However you decide to approach this there is no doubting the impact of technology on your trading performance. Down time, server outages and slow connections are a key part of success and trading technology will continue to evolve long into the future.

Are Forex Bonuses & Rebates Worthwhile?

If you’re in the market for a new Forex broker, you’ve probably noticed that there are dozens of Foerx bonuses and rebates being offered by brokers looking to get your business.  But are these types of promotions truly worthwhile?  Let’s start by examining what each one means.

Deposit bonus – These are usually a draw for new traders who are making their first deposit with a broker and aren’t quite sure what to expect.  With a deposit bonus, Forex brokers usually give traders a certain percentage or a fixed amount back into their account upon the initial deposit.  It’s always a good idea to consider the broker’s ratings and regulations before registering because of a deposit bonus – there are many unregulated Forex brokers out there that offer deposit bonuses simply to swindle traders out of money.  Ava FX, for example, a top-rated Forex broker, is currently offering excellent deposit bonuses.

No deposit bonus – This type of Forex bonus is typically offered by small or new Forex brokers looking to attract traders.  No deposit bonuses mean that the broker will deposit the advertised sum into the trader’s live trading account even if no deposit has been made.

Trading bonuses – Offered to entice traders who plan to make repeated deposits, trading bonuses are Forex bonuses offered to traders who reach certain trade volumes or deposit levels.

Forex trading contests – Many Forex brokers offer prizes to traders who reach the highest percentage of profit in a given time period (often over the course of a month).  You can get a full explanation of Forex contests here.

Forex rebates – As its name suggests, Forex rebates are basically the opportunity to get cash back for every trade placed via your trading platform.  Forex rebates can be offered by the broker itself, but they’re also often offered by introducing brokers (IBs) or other marketing companies that wish to serve as an intermediary between you and your Forex broker, enabling them to get a commission on your trades, of which they’re willing to share some with you.

There’s no question that someone looking to make a quick buck in the Forex market may be enticed by Forex bonuses or rebates.  But traders who are looking to build a Forex trading career that will expand over time should look first and foremost for a Forex broker with the best trading conditions for the long term rather than those that offer limited bonuses or performance-based incentives.  Then again, if you can find a Forex broker with tight spreads that also offers decent Forex bonuses, maybe you really can have the best of both worlds!

I’m a (Forex) Loser

I’d had enough.  I’d “played” for a few days, doing lots and lots of simple trades in the demo mode.  This is kids stuff, I think.  I canForex trading - Losing money is part of life solidify my Forex trading strategy as I go along; I’ll just keep using my “toe in the water” approach and it will be fine.  Gulp.

I sign out of demo mode and sign into “Real USD.”  Gulp again.  No more tokens, no more Monopoly money.  This is the stuff in my wallet, in my kids’ piggy banks – the stuff I work pretty darn hard for (okay, maybe I work a little hard for it).  It’s real honest-to-goodness George Washington dollar bills.

Okay, I’m in.  Deep breath.  I’m going with the old EUR/USD standby which I’ve been following very, very closely.  There are some issues over in Portugal (aren’t there always) that should give the Euro a little bit of trouble, so I’m thinking a slight drop is more than probable.  I’ve read the analysts’ insights and adhered to professional Forex trading strategies and most agree that the Euro will be hard pressed to find any support.

In for a penny, in for a pound – isn’t that the old saying?  (Or in this case ten thousand dollars!)  Against all earlier inclinations (and my gut instincts), when confronted with the choice, I opt to go higher than the minimum trade.  I am that confident.  I put in a $10,000 sell order for EUR/USD.

So much for analysts’ insight.  The Euro seems to be finding some support after all, at least in the few seconds after I’ve got my trade in.  Like a car accident that you can’t look away from, I’m compelled to watch.  And it ain’t pretty.

I’m down $3.00 (Diet Cokes are too expensive here, anyway, I think).

I’m out $10 (there goes the Chinese food for lunch – oh well, MSG probably isn’t good for me).

$15.00 (I can get away without a haircut for another month – the shaggy look is in here).

$25.00 (I’m pretty sure my daughter can squeeze into her sneakers for a while longer if she scrunches up her toes a bit).

And I’m thinking, why the heck am I still watching this?  Why isn’t my well thought out Forex trading strategy working?  Why am I not putting an end to this madness?  I can’t help but watch the numbers move back and forth, worsening, improving, worsening more.  Finally, it dawns on me – I am losing for goodness sake – and I just don’t have it in me to take anymore punishment!

Why didn’t I put a stop to it earlier?  I’ll tell you why; it’s pure gambler’s mentality – the next spin is going to give me the jackpot.  Or maybe it’s the one after that?  In any event, for now, I am a Forex loser.

 

 

Episode 2: I’m a Forex Trading Newbie

So, here I am, a newly registered Forex trader, and I’m anxious to make my first million (in any currency, I’m not picky).  First things first, I need the trading platform.  This particular broker has two trading platforms, one is Java based, and the other is downloadable.  Now, I’m all for Java, but only in a cup with lots of cream and sugar – so I opted for the downloadable version.  A few minutes later, it’s installed and I’m now the proud owner of a Forex trading platform!

Diving into Forex trading

Diving into Forex trading

From what I’ve heard, trading Forex is all about decision making, and my very first decision will be to decide whether I want the demo platform or the “real” one.  Now, I’m a “toe in the water” kind of girl, so the decision is easy.  But, if you’re a “Geronimo” type of person (i.e., the kind who cannonballs into the water regardless of the water’s frigidity), you might want to bypass the demo.

Not me, thank you very much; I’ll just wade around a bit while I adjust.  I double-click and get the demo application started; could be my internet connection, but it takes forever to load.  (Note to self:  Don’t ever have a preconceived notion of the “perfect trade” because in the minute or so it took the application to open, the market changed.)

Finally, the platform opens.  If you’ve ever seen Willie Wonka and the Chocolate Factory (the original movie) – when Mr. Wonka opens the doors to the factory and the ticket winners stand there with their mouths open – well, I’m like that.  I don’t know what to indulge in first.  I need some java (the liquid kind) so I can sit back for a few minutes and analyze the situation.  Nope.  Still overwhelmed.  I can see I’ll have to move in baby steps here.

My demo platform gives me a $100,000 to play with.  I’m thinking, heck, it’s play money – why be so stingy?  But I’ve never had $100,000 in my life, play money or otherwise – not even Monopoly money now that I think on it.

In keeping with my “toe in the water” strategy, I decide to go with the minimum amount for my Forex trading venture.  How low can I go?  In this case the minimum is $5,000 and that’s what I use for my first unofficial/official trade.  I decide that I’m going to buy EUR/USD.  Not for any particularly astute or logical reason, but just cause it’s first currency pair on the drop down list.  I now know that this is the most popular currency pair, but I didn’t know that then.

I get a pop-up box that tells me I’m “buying”, and directs me to choose my pair.  Okay.

Then, select my trade amount. Okay.  Then I have an option to let the trade go as is or to set my stop and/or limit.  Why not?  I try to set my own stop and limit rather than take the “house hint” and all I get for my effort is an error box.  Apparently, I’m too close to the actual trading price so I can’t use that limit or stop.  I’m directed to set a different limit and stop; and I do it and hit the enter button.

Oops!

All of the parameters reset with the error box (very tricky, that house).  So instead of the minimum trade I wanted, I discover (with horror) I’m trading the maximum $100,000!

I’m searching like a fiend to cancel the trade, and 15 seconds or so later, it’s done.  My first trade – a total bust, and I’m out $27 play money.

First lesson learned – trading Forex is definitely not as easy it looks.

The Forex Tool I Can’t Live Without

All Forex traders have a favorite Forex tool or indicator that they find essential for their trading. While the answer might be different Forex Toolsfrom trader to trader, the basic premise is that you will find that one thing that helps your trading through and through as it has consistently proven itself. If you don’t have one, don’t worry – you’ll find one sooner or later.

For myself, I have always found the most important Forex tool is simple support and resistance. While many other traders will rave about a specific indicator, I find that these simple lines are like signposts on the highway – they show where we have been, and where we are going.

Quite often when I look at a potential trade, I will check the higher time frames to make sure the coast is clear. I cannot tell you how many times doing this has saved me. If you are not aware of the major support and resistance areas, it is quite easy to buy a currency pair right below massive resistance, for example.

Perhaps that massive resistance hasn’t been tested lately and you are trading off of the 15 minute chart. Will you be aware of it? Of course not, because you are not looking at the “big picture”, which is absolutely essential if you are going to be successful. It is because of this problem I began paying close attention to major support and resistance areas as drawn on the weekly charts, and to relying on this critical Forex tool.

When I first started, it felt like a conspiracy. I would place a trade to buy, and the market would inevitably fall as soon as I placed the order. It took me a long time to understand that there are certain levels that price will react to over and over. If you don’t believe me, look at the 1.0000 level in USD/CAD, the 1.30 level in EUR/USD, or the 1.0000 and 0.8000 levels in AUD/USD. I just wrote that from memory, that is how important support and resistance is for me.

I will often hear people complaining about how support might get broken. That’s fine, because I also understand that when one of these major areas give way, it means something important has changed and we are heading in the other direction. Taking a small loss for that kind of information is a trade I will take all day as the loss might be 1%, but the future gains will be much, much more over time.

Because of this potential for profit, I cannot live without support and resistance. In fact, most trading systems use some kind of variation of the two anyway – so why don’t you test them out for yourself?

 

Episode 1: Introducing The Forex Femme Fatale

I come from a long line of gamblers; twice a week bingo, Friday night poker games, Saturday afternoon visits to the race track; atForex Femme Fatale - The Forex Newbie work there were office pools for the Super Bowl, the World Series, the World Cup, this playoff, that subway series – there was always something to bet on.  When casinos started enticing adventurers with free bus rides and all you can eat buffets, you can bet I cracked open my piggy back and took a chance.  Yes, I had the gambling gene.  And even though I lost far more than I ever won, I enjoyed the noise, the sounds, the smell, the camaraderie, the commiseration and the excitement.  If I won, it was just icing on the cake.

But as I grew older, I started to consider those forms of “entertainment” as “below” me.  After all, I’m an intelligent person.  I’ve got a degree in finance (with honors!).  For many years, I’d worked in international banking organizations and well respected financial firms on Wall Street.  I read the business section of the newspaper – heck, I could write the business section of the newspaper.  The question is can I put my vast knowledge to work for me, for the greater good (i.e. my pitiable bank account)?

I think I can.  But I’ve got a problem.  I’m frugal.  Okay, okay, in truth – I’m cheap.  I hate spending/losing/wasting money without getting something in return for it.  So when I was given the chance to write about my experiences as a newbie Forex trader, with my amazingly wonderful sponsor offering to front me, I jumped at the chance.  You bet I did.

So off to Forex fantasy land I went.  And I survived.  I am living proof that you can come out again, whole, on the other side – oh, maybe not so much richer as wiser – but that’s another story.  And here it begins…

I got myself registered with a Forex broker; one that was well-known, had a good reputation, with an award winning platform (that really appealed to me – honors and awards?!  It must be good!).

I look forward to sharing my experiences with you over the next few weeks.  The profits, the losses, the emotions, and everything in between!

* This is the first of a (purely tongue-in-cheek) series written by The Forex Femme Fatale; opinions expressed therein are the author’s own and may or may not represent the views of Daily Forex.