If you have grown tired of losing sleep chasing the currency markets but losing money anyway as a retail Forex trader, there is a simple alternative to Forex trading – the Forex binary options or Forex binaries for short.
A typical Forex binary option contract will only cost you $20 but will give you a payout of $100 per contract. It is as simple as betting for (buying) or betting against (selling) a particular currency pair contract. If you bet for (bought) a particular currency pair contract and the price of which went up by the end of the week (if it is a weekly binary), then you win $100. However, if the price by the end of the week ended lower, then you lose the difference between your buying price and selling price. Similarly, if you bet against a currency pair contract and the price goes down by the end of the week you gain $100. If the price goes up then you gain nothing and lose only what you paid for the contract. No over loss what so ever. It is as simple as that. The best part is you rid yourself the hassle of analyzing every single fundamental that goes through the wire plus you sanitize yourself from the worries of losing more than you wanted to lose.
There are no margin calls or problems of being booted out of your position. You can only get timed out if you fail to close the contract by the end of the contract period which can be an hour, a day, a week or whatever.
You need not wrestle with the problem of slippage, widening spreads, and other sneaky problems scrupulous brokers can think of to rob you of your hard earned money. There are only two possible outcomes – either you end up ‘in the money’ which means the price ended in your favor; or, ‘nothing’ which means the price ended against your position. That is why it is also called an ‘all or nothing’ binary option. All you need to do is predict whether the price is going to end up or down by the end of the contract period. The risks and rewards are certain and highly manageable.
You may even use Forex binary options to hedge your position in the spot market. For example, if you are selling a currency pair in the spot market, then you should buy the binary option for the same currency pair. If you lose in the spot market then at least you will be able to recoup some of your losses with your winnings in the binary options. In short, you now have a mechanism to cushion the effects of an adverse price movement. You can even use it instead of a trading stop in times when you feel the adverse price movement is only temporary.
Forex binaries are relatively new and there are but a handful of brokers offering them. It is however a very promising trading instrument you should consider including in your trading arsenal.
Wednesday 24 December 2014
Thursday 20 November 2014
Common Forms of Currency Trading Signals
Foreign exchange or currency trading signals refer to indicators that signal traders about the perfect time to make a move in the forex market. For example, it indicates the perfect time to enter a trade or sell a certain currency. The signals can be developed and provided by a human analyst or computer. All of these indicators are also time-sensitive. This means that these are capable of providing traders with the most ideal time-frame or lead time to take action. This is the reason why most alerts are available on websites, SMS, email and other means of communication that support immediate and fast access.
The indicators play a crucial role when formulating a trading decision. These are valuable in deciding whether to enter or exit the market. It also enables traders to determine whether it is best to sell or purchase a currency pair at a provided time. Providers of the signals make sure that the offered alerts use systems related to stop loss, take profit and entry. While there are numerous forms of alerts or signals available for traders, it is crucial to select one which you can easily comprehend and suits your trading platform, strategies and needs.
There are alerts that are available in simple buy or sell indications offered at price messages. There are also those that can be accessed in either line graphs or pie charts. Aside from the conventional buy or sell alerts, it is also possible to get the OB/OS signal. This indicates that a currency is already oversold or overbought when the alert reaches a particular level.
Volatility is also another useful form of signal. This refers to a statistical measurement frequently presented in the form of a line graph. It works by measuring the likelihood and frequency of a currency pair to obtain deep falls or high rises within a short period. SL/TP signal also stands for stop-loss/take-profit. It refers to a particular point wherein the prediction system offers a suggestion to stop incurring losses using downward trending currency pairs. It also suggests obtaining the profits acquired based upon an upward trending pair.
Currency trading signals can either be manual or automated. Both are also accessible online either for free or with a price. However, a trader should make sure that he takes extreme caution when selecting the best trading signal system for him. If possible, choose a system which offers a free trial. This can help in testing the suitability of the alerts to your platform and strategy and their usefulness in formulating the soundest trading decisions.
The indicators play a crucial role when formulating a trading decision. These are valuable in deciding whether to enter or exit the market. It also enables traders to determine whether it is best to sell or purchase a currency pair at a provided time. Providers of the signals make sure that the offered alerts use systems related to stop loss, take profit and entry. While there are numerous forms of alerts or signals available for traders, it is crucial to select one which you can easily comprehend and suits your trading platform, strategies and needs.
There are alerts that are available in simple buy or sell indications offered at price messages. There are also those that can be accessed in either line graphs or pie charts. Aside from the conventional buy or sell alerts, it is also possible to get the OB/OS signal. This indicates that a currency is already oversold or overbought when the alert reaches a particular level.
Volatility is also another useful form of signal. This refers to a statistical measurement frequently presented in the form of a line graph. It works by measuring the likelihood and frequency of a currency pair to obtain deep falls or high rises within a short period. SL/TP signal also stands for stop-loss/take-profit. It refers to a particular point wherein the prediction system offers a suggestion to stop incurring losses using downward trending currency pairs. It also suggests obtaining the profits acquired based upon an upward trending pair.
Currency trading signals can either be manual or automated. Both are also accessible online either for free or with a price. However, a trader should make sure that he takes extreme caution when selecting the best trading signal system for him. If possible, choose a system which offers a free trial. This can help in testing the suitability of the alerts to your platform and strategy and their usefulness in formulating the soundest trading decisions.
Tuesday 4 November 2014
Techniques for Setting Stop Loss Orders
Leverage is a trading tool that all forex traders use when they trade in order to increase the amount of their profit. However, it is also very risky because it also intensifies the chances that your trading account will be wiped out if a trade goes against you. It is very tempting to use high amounts of leverage, both because it can greatly magnify profits but also because it is so readily available. In fact, your broker may even offer you leverage of as much as 100:1, which means, for example, that if you have just $500 in your trading account, you can trade as much as $50,000.
Hence, in order to reduce your risk of losing too much, you have to learn to set the appropriate stop-loss orders. Here are some of the approaches you can take in setting stops:
1. Static stops. In this method, you set your stop loss a certain number of pips from your entry price. For example, if you are trading the USD/JPY currency pair and you enter at 1:9800, you may opt to fix your stop loss order at 20 pips. This method is ideal for traders who are risk-averse and willing to limit their potential profit in exchange for also reducing their potential losses, as well as new traders who are still learning the ropes.
2. Static stops based on market indicators. With this method, the trader considers what the market conditions are before setting their stop loss orders, by monitoring indicators such as price swings or average true range. This method is ideal for traders who have more experience in the markets and can more accurately analyze the risk of a trade.
3. Trailing stops. In contrast to the first two methods, these stop loss orders can be moved based on the way the trade is going. The trader adjusts the stop and limit orders based on the way his trades are going. For example, if the trade is going his way and he wants to increase his profits, he can remove or increase the limit order. On the other hand, if he wants to protect himself, he can increase the stop order to a level close to the entry price. There are a number of ways you can create trailing stops, such as dynamic stops in which you move the stop every time the trade moves a pip in the trader’s favor; fixed stops in which the stop adjusts in increments every time the trade moves in their favor; manual stops in which the trader monitors the trade and manually moves the stop based on how the trade is going. These methods are recommended for traders with a high level of experience in the markets since they can be tricky.
Hence, in order to reduce your risk of losing too much, you have to learn to set the appropriate stop-loss orders. Here are some of the approaches you can take in setting stops:
1. Static stops. In this method, you set your stop loss a certain number of pips from your entry price. For example, if you are trading the USD/JPY currency pair and you enter at 1:9800, you may opt to fix your stop loss order at 20 pips. This method is ideal for traders who are risk-averse and willing to limit their potential profit in exchange for also reducing their potential losses, as well as new traders who are still learning the ropes.
2. Static stops based on market indicators. With this method, the trader considers what the market conditions are before setting their stop loss orders, by monitoring indicators such as price swings or average true range. This method is ideal for traders who have more experience in the markets and can more accurately analyze the risk of a trade.
3. Trailing stops. In contrast to the first two methods, these stop loss orders can be moved based on the way the trade is going. The trader adjusts the stop and limit orders based on the way his trades are going. For example, if the trade is going his way and he wants to increase his profits, he can remove or increase the limit order. On the other hand, if he wants to protect himself, he can increase the stop order to a level close to the entry price. There are a number of ways you can create trailing stops, such as dynamic stops in which you move the stop every time the trade moves a pip in the trader’s favor; fixed stops in which the stop adjusts in increments every time the trade moves in their favor; manual stops in which the trader monitors the trade and manually moves the stop based on how the trade is going. These methods are recommended for traders with a high level of experience in the markets since they can be tricky.
Sunday 2 November 2014
Forex Trading Spreads: The Key to Broker Selection
For Forex trading aficionados, cost is the most important criterion in the selection of a broker. In this regard, a good understanding of the trading spread comes to play. In case you have not noticed, majority of forex brokers earn their dough from the difference between the buy and sell orders. This difference is called the spread. It, therefore, stands to reason that brokers who offer the narrowest spreads represent the best choice cost-wise.
Newbies should, however, be aware that in the foreign exchange market, spreads may vary between currency pairs and over time. As a general rule, some brokers offer the lower spread between one pair, say EUR/USD, and the highest spread for the USD/JPY pair. Brokers typically keep the reason to themselves.
A low spread on one currency pair may not necessarily be so for other pairs. This discrepancy should always be considered if you are eyeing to trade more than one pair. Another thing to watch out for are promotional materials with fine print Some unscrupulous brokers circulate or publish promotional literature in brochures/flyers and on the Internet that contain low spreads; but in actuality, they indicate in fine print that the spreads shown are sample spreads that may not be accurate. Do not be duped by such tactics.
Test the Waters
If you want to have a fairly good idea about the potential spreads of an online broker, opening a demo account would be a great move. Try opening a demo account for two or three currency pairs. Demo accounts are usually supplied with the same live quotes including those of spreads that actual account holders have access to. With the demo account, you will have a better idea of the spread for currency pairs you plan to actually trade later on. Additionally, you also get to observe how the spreads change over time and comparing brokers will be much easier.
Research Is Important
There is also a website called FX Intelligence where interested traders can compare broker spreads live or in real time. However, if you are after spread changes over a period of time, go for the demo account as that is not possible in this website.
Before Taking the Plunge
While spreads are of utmost importance, your research should not stop you from looking at other fees which may be charged to you. It is not enough that you are offered a low spread if the broker charges inactivity fees and other fees which are not charged by other brokers. Evaluate your options after choosing three to five brokers with the lowest spreads.
Newbies should, however, be aware that in the foreign exchange market, spreads may vary between currency pairs and over time. As a general rule, some brokers offer the lower spread between one pair, say EUR/USD, and the highest spread for the USD/JPY pair. Brokers typically keep the reason to themselves.
A low spread on one currency pair may not necessarily be so for other pairs. This discrepancy should always be considered if you are eyeing to trade more than one pair. Another thing to watch out for are promotional materials with fine print Some unscrupulous brokers circulate or publish promotional literature in brochures/flyers and on the Internet that contain low spreads; but in actuality, they indicate in fine print that the spreads shown are sample spreads that may not be accurate. Do not be duped by such tactics.
Test the Waters
If you want to have a fairly good idea about the potential spreads of an online broker, opening a demo account would be a great move. Try opening a demo account for two or three currency pairs. Demo accounts are usually supplied with the same live quotes including those of spreads that actual account holders have access to. With the demo account, you will have a better idea of the spread for currency pairs you plan to actually trade later on. Additionally, you also get to observe how the spreads change over time and comparing brokers will be much easier.
Research Is Important
There is also a website called FX Intelligence where interested traders can compare broker spreads live or in real time. However, if you are after spread changes over a period of time, go for the demo account as that is not possible in this website.
Before Taking the Plunge
While spreads are of utmost importance, your research should not stop you from looking at other fees which may be charged to you. It is not enough that you are offered a low spread if the broker charges inactivity fees and other fees which are not charged by other brokers. Evaluate your options after choosing three to five brokers with the lowest spreads.
Saturday 18 October 2014
Best Forex Broker - What to Look for
Every individual investor who wants to dabble in foreign currency trading has to channel his transactions through a broker who has established linkages with the interbank market. It is only through these brokers that the individual investors will be able to access the special rates of exchange the interbank players conduct business with each other.
The interbank market used to be the exclusive turf of the major banks and large financial institutions. They conduct the buying and selling of various currencies among each other through the use of electronic communications networks set up specifically for this purpose. There are two major networks that connect the major interbank players – Reuter’s Dealing 3000 and the EBS or Electronic Broking System owned by ICAP Plc, a UK based company.
Through time, the need to have more liquidity left the interbank players no other option but to open the doors of the interbank currency market to individual investors. The advent of more efficient communication systems and the emergence of retail forex brokers made this possible.
Brokers sprouted like mushrooms all over the globe to serve as the various conduits between the interbank market players and the individual investors. The trading platforms they offered are digitally linked to electronic communications networks of the interbank market; thus, allowing them to offer the same interbank rates to retail forex clients.
Unfortunately, the brokers are not created equal. They differ from each other in many ways - from the buy-sell spreads they offer, the range of leverage they give, to the quality of service and order execution they provide, not to mention the other value added services and tools of the trade they offer to beef up their services. Naturally these are the things you should consider as your basis of comparison when choosing the best broker for you.
Of course you should also consider the customer feedbacks from various online forums but pay particular attention to the negative comments. They should give you an idea of the kind of service they provide. Add some sense of security to your investment by also looking into the registration and affiliation of the broker.
As a rule of the thumb, you should never deal with a broker who is not affiliated with or under the supervision of a bona fide financial regulatory body. For US based investors, make sure your broker is registered with the CFTC and at the same time a member of the NFA. For brokers based in other countries, make sure they are affiliated with a legitimate regulatory body in those countries and not just from any trumped organization in the Cayman Islands. This should give you some peace of mind knowing you have a ‘big brother’ you can run to in case things turn topsy-turvy.
The interbank market used to be the exclusive turf of the major banks and large financial institutions. They conduct the buying and selling of various currencies among each other through the use of electronic communications networks set up specifically for this purpose. There are two major networks that connect the major interbank players – Reuter’s Dealing 3000 and the EBS or Electronic Broking System owned by ICAP Plc, a UK based company.
Through time, the need to have more liquidity left the interbank players no other option but to open the doors of the interbank currency market to individual investors. The advent of more efficient communication systems and the emergence of retail forex brokers made this possible.
Brokers sprouted like mushrooms all over the globe to serve as the various conduits between the interbank market players and the individual investors. The trading platforms they offered are digitally linked to electronic communications networks of the interbank market; thus, allowing them to offer the same interbank rates to retail forex clients.
Unfortunately, the brokers are not created equal. They differ from each other in many ways - from the buy-sell spreads they offer, the range of leverage they give, to the quality of service and order execution they provide, not to mention the other value added services and tools of the trade they offer to beef up their services. Naturally these are the things you should consider as your basis of comparison when choosing the best broker for you.
Of course you should also consider the customer feedbacks from various online forums but pay particular attention to the negative comments. They should give you an idea of the kind of service they provide. Add some sense of security to your investment by also looking into the registration and affiliation of the broker.
As a rule of the thumb, you should never deal with a broker who is not affiliated with or under the supervision of a bona fide financial regulatory body. For US based investors, make sure your broker is registered with the CFTC and at the same time a member of the NFA. For brokers based in other countries, make sure they are affiliated with a legitimate regulatory body in those countries and not just from any trumped organization in the Cayman Islands. This should give you some peace of mind knowing you have a ‘big brother’ you can run to in case things turn topsy-turvy.
Thursday 9 October 2014
How to Choose the Best Forex Brokers?
Investing in the foreign exchange market is quite tricky. It might cause traders to deal with substantial amounts of losses if they are unable to make the right trading decisions. Because of this, participating in the forex market also involves working with the best experts in the industry. These include forex brokers who are fully aware of how the money market works and the different strategies that a trader can use in generating huge profits. Below are few tips that are ideal for traders who plan on searching for the best broker who can work based on their needs:
1. Assess a Broker's Capital Base
It is crucial to assess the capital base of various brokers since this can help in ensuring a smooth flow in your trading experience. Note that a large capital base also ensures high quality execution of trades and better profits. This also indicates that the brokers have high trading volumes and solid financial backings for their operations. This also means that they are capable of paying earnings to their clients in a prompt manner.
2. Evaluate Their Records
Evaluating the records of various brokers is necessary in assessing their reliability and reputation. This ensures that you will be working with someone who is honest and trustworthy and did not commit any criminal wrongdoings in the past. This will prevent the risk of being mixed up with someone who cuts corners when using your money. Look for someone who deserves your trust.
3. Find Out How the Broker Handles Withdrawals and Deposits
Check out the way your options handle withdrawals and deposits. Note that while some of them offer utmost convenience to their clients by allowing them to deposit or withdraw using Paypal or other convenient financial methods, there are also those who use confusing withdrawal and deposit methods. These confusing processes may be very time-consuming. This is the reason why it is necessary to choose a broker who uses the simplest methods when it comes to depositing and withdrawing money.
4. Research About their Customer Service
Customer service is extremely important when dealing with forex brokers. Make sure to choose someone who can be easily contacted in case there are problems with your trades. Choose a brokerage firm, which provides various means of contact including email, chat and phone. Your broker should also be capable of providing a quick response to your queries. This will prevent the risk of dealing with complicated trading issues that might only ruin your chances of earning huge profits from forex trading.
1. Assess a Broker's Capital Base
It is crucial to assess the capital base of various brokers since this can help in ensuring a smooth flow in your trading experience. Note that a large capital base also ensures high quality execution of trades and better profits. This also indicates that the brokers have high trading volumes and solid financial backings for their operations. This also means that they are capable of paying earnings to their clients in a prompt manner.
2. Evaluate Their Records
Evaluating the records of various brokers is necessary in assessing their reliability and reputation. This ensures that you will be working with someone who is honest and trustworthy and did not commit any criminal wrongdoings in the past. This will prevent the risk of being mixed up with someone who cuts corners when using your money. Look for someone who deserves your trust.
3. Find Out How the Broker Handles Withdrawals and Deposits
Check out the way your options handle withdrawals and deposits. Note that while some of them offer utmost convenience to their clients by allowing them to deposit or withdraw using Paypal or other convenient financial methods, there are also those who use confusing withdrawal and deposit methods. These confusing processes may be very time-consuming. This is the reason why it is necessary to choose a broker who uses the simplest methods when it comes to depositing and withdrawing money.
4. Research About their Customer Service
Customer service is extremely important when dealing with forex brokers. Make sure to choose someone who can be easily contacted in case there are problems with your trades. Choose a brokerage firm, which provides various means of contact including email, chat and phone. Your broker should also be capable of providing a quick response to your queries. This will prevent the risk of dealing with complicated trading issues that might only ruin your chances of earning huge profits from forex trading.
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