Forex Figures

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’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 can 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.

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

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.

All Forex traders have a favorite Forex tool or indicator that they find essential for their trading. While the answer might be different from 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?

I come from a long line of gamblers; twice a week bingo, Friday night poker games, Saturday afternoon visits to the race track; at 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.

The Forex market can be appealing for several reasons to the average trader. For some, it is the leverage that can be applied to your positions. For others, it is the fact that you only have to pay attention to a handful of currencies in order to be involved. This certainly is an advantage of trading currencies as there are literally thousands of stocks available in New York alone. But for some traders, it is the “exotic” nature of trading currency pairs that is truly attractive.

The last sentence in the above paragraph was the kind of person I was when I entered the Forex arena. I always considered myself a “worldly” person, and as such thought it only natural that I should trade an international market. I even ran out and got signed up with a broker that offered over 100 currency pairs because someone like me would need that!

What I found though, is quite different than what I had imagined. There is no real “sexiness” to trading the exotic currencies, and truth be known, it only causes heartbreak for the average small retail trader. The fact is that the currencies aren’t trading heavily, and as such tend to move very erratically.

This can pose a serious issue for the beginner who is simply not used to trading fast moving markets, and an illiquid one isn’t any place for them to be messing about in. When I started, my first trade was in the South African Rand against the US Dollar. Since this market isn’t traded very heavily, it tends to act in a schizophrenic manner at times. Let’s just say it was an experience I will never forget.

One of the biggest arguments against trading the exotic currency pairs is the spread. While you should only be paying about 2 pips in a pair like the EUR/USD, you might find yourself paying a spread of 50, 100, or even 200 pips in other pairs that are less liquid like the USD/MXN, CZK/JPY, or even the AUD/MXN. When you start out being down 100 pips, it makes placing a profitable trade a real challenge. These markets have their place, but only if you are in a situation like being a Hungarian construction firm needing to buy machinery from Japan (HUF/JPY).  In other words, only players that absolutely have to be in these markets tend to show up.

While not trading the “exotics” might take some of the excitement out of Forex trading, the truth is that you aren’t trading them anyway! You are speculating on the perceived value of one currency to another, not taking delivery of the Hungarian Forint as an example. Whatever your profits turn out to be, it will be credited as Dollars, Pounds, Euros, or whatever base currency you trade out of anyway. So when you think about it, there is nothing special about “owning” the Forint anyway.