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Almost 90% of the investors enter currency markets as short term speculators. Most of the investors look for quick capital gains in forex. Many start forex day trading as a speculative venture. If you have made the positive decision to start forex trading, your first step should be choosing the right forex broker. This is very important. The right choice of a forex broker will greatly influence your success as a forex trader.

These days, the market is overcrowded with companies and banks offering online brokerage services to individual traders and investors to access the currency markets. It is not easy to make the right choice without a certain set of criteria. These criteria will mostly depend on the interests, preferences and means of each individual trader depending on his/her trading strategies and tactics. You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.

What is the amount of the interday and overnight margin? What is the corresponding leverage? Many online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 100:1. Higher margin requirement means lower investment efficiency for you. Margin is the amount the broker sets aside as guarantee against your trading losses. However, beware of lower margin. It means that most of the time the forex broker will be against you as a trader and will do everything possible to prevent you from winning. You will face many trading problems with such a broker. It will become difficult for you to work under such conditions.

What is the minimum contract size offered? Now days, the standard contract size is a $100,000 lot. This contract size is quite affordable. This contract size also allows small individual investors to participate in currency speculation. It allows for reasonably effective money management with limited capital. What are the minimum deposit requirements demanded by the forex broker? It is not unusual that many new traders dont have sufficient funds to open an account. The investment and financial means of traders differ. $10,000 is the required minimum amount corresponding to the forex market conditions by good dealers. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement.

What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves. The amount of slippage depends on the current state of the currency market. It can vary from a few pips to tens of pips. It is practically impossible to arbitrate the prices received from the broker during a currency transaction. The slippage creates favorable conditions for the abuse of an individual trader by the forex broker.

When choosing the right forex broker, you should find from the broker what are the spread size and its dependence on the contract size? Spread is the difference between the bid and the ask price given at any moment on the trading terminal. The smaller the spread size, the better it is for the trader. Spread is your cost of trading. Most forex brokers give spread up to 5 pips under steady market conditions. Spread up to 5 pips is reasonable and should be acceptable. Some brokers will offer spreads lower than 5 pips if you trade contracts of $500,000.

ECNs (Electronic Communications Networks) offer spreads of not more than 1-2 pips maximum. But they require initial deposit of $10,000. If you have $10,000, then its better to open an account with an ECN. The rates offered by ECNs are interbank and are far better than most of the retail forex brokers. You should look at the additional service like analytical, data, news, quotes, graphics and such offered by the forex broker. Online forex trading is quite popular now. You can monitor currency market movements by following current real time prices, graphics and even news on your laptop or PC monitor.

Does the broker provide trading software with the opportunity to manipulate, modify, and customize graphics; technical analysis using indicators and draw trend lines with support and resistance lines? This can save substantial money by eliminating the necessity of buying an expensive market quote service and analytical and charting software for conducting technical analysis. Does the broker charge commissions and other payments and dues? The most reputable forex dealers and forex brokers charge no transaction fees from their clients. Reputable dealers when transferring an open position to the following day execute the rollover operation in accordance with the current LIBOR rates. The rollover is reflected in your daily statement.

It depends on the currency pair and the direction in which the position was opened. At the moment of its transfer the next day, the client could actually win as the result of the transfer. A certain amount of interest would be added to his account just for holding the position for more than one day. This interest is the difference between the interests offered on the deposits on the two currencies in the pair. Sometimes a trader will hold two opposite positions overnight.

For example, a trader may have executed USD/CHF transaction for the total amount of $400,000 buy and $200,000 sell. Then the long position of USD/CHF amounting to $200,000 should be transferred to the next day and the corresponding interest deposited or charged to the traders account accordingly. Most forex brokers always charge the client interest for holding the position overnight regardless. They do not bother with these calculations. Many brokers will charge interest for practically non existent positions. You as a new trader should know these facts. You need to choose you dealer after due diligence.

Forex Training - Forex News Trading
Currency markets react violently to the release of fundamental economic news like the release of the NFP figures, the housing sales figures, the GDP figures or other socioeconomic and political news. Volatility is what makes currency markets so attractive to so many traders. One of the popular methods of trading currencies is to trade news releases. This type of trading strategy is intriguing to many traders as it provides the possibility of instant gratification. You lay on the trade minutes before the news release. Your heart pumps when the clock ticks within 60 seconds of the number coming out.

When the news does come out, either you feel an instant sense of elation, a trading high that you had the right instincts or an instant sense of frustration when the market behaves in a totally unpredictable fashion. News trading is great for those traders who like a lot of action within a short period of time. News trading is based on the fact that when an economic number deviated significantly from the consensus forecast, there is usually a knee jerk reaction in the markets accompanied by a decent follow through. There are many ways to trade the news. However, if done incorrectly, it can lead to more losers than winners.

Trading the news means attempting to capture the volatility in the currency markets created by a news release. This volatility creates the breakout trade as the prices smashes through the support or resistance. However, please note that a news trade is not a trade that is placed just before the news is released or is placed just after the news is released. Many traders trade the news. They follow the adage, “Buy the rumor and sell on the news”. However, news trading is a risky business. You need to understand the risks involved in news trading. There are several forms of risks unique to news trading.

Many brokers charge more for a trade just after news is released. The spread charged by the brokers may jump to 10 pips from 2-3 pips right after the release of the NFP Figures. Most brokers find it difficult to enter your order just right after a news release as they are flooded by thousands of orders in just a few seconds. This means that your order may take longer to process and your trade could be entered many pips away from where you had wanted. The stop order placed by you needs to be touched by the price before it’s triggered. However, sometimes after the release of fundamental news, the markets can become highly volatile and jump several pips all of a sudden.

For example on the EUR/USD pair, the price may suddenly jump from 1.3249 to 1.3255 all of a sudden on the release of the news. Suppose you had the stop loss placed at 1.3250. The price jumped from 1.3249 to 1.3255 without touching 1.3250. Your stop loss order was not triggered as the price never touched 1.3250; you did not get stopped out. You are still in the market and exposed to potentially unlimited losses.
There are many strategies for news trading. Unfortunately there are a lot of news events in the forex world. These news releases often disrupt the short term currency markets. Quarterly reports carry more weight than the weekly and monthly news.

Sometimes the results of fundamental announcements are surprising and shock the markets for a while. Let’s take an example. The release of the NFP figures has been moving the EUR/USD pair on average 100 pips for the last two years. About half of these pips occur just within two minutes of the release of the figures. Let’s consider this worst case scenario. You are a news trader. You immediately sell the EUR/USD pair within 2-5 seconds after the release of the NFP figures. However, the EUR/USD has already dropped 30 pips because of the pre news guessers.

Your forex broker gets thousands of sell orders just like yours almost at the same moment. It will take your broker a few seconds to execute these orders. Meantime, the EUR/USD pair falls another 15 pips while you wait for your order to be executed. Because the volatility is so extreme to the downside as no traders are placing the buy orders, the broker widens the pips from 3 to 12. The moment your order hits the market, you are already -12 pips but you are also 45 pips away from where you thought the market would be.

Suddenly the EUR/USD pair starts to pull back. But you have already pulled your trigger and now you are at a loss of 55 pips. You exit your trade to cut your losses. You are angry. You want to blame the broker. But you can’t blame the broker. You should read the agreement with the broker that you had to sign when you opened your trading account. There will be a clause in it that says that the broker does not guarantee order execution at times of high volatility.

Do news traders always end up like this? Not always but they can and do end up behaving this way quite often depending on the importance or surprise results of the economic announcement. So you need to develop a survival strategy that calls for the preservation of your capital at all cost while at the same time giving you maximum pips if you really want to trade the news. Do all that not to lose money.

The priority is not to make as much money as possible; it is to reduce your risk by patiently waiting for conservative repeatable setups. News trading puts a trader’s patience to test. Your objective should be to use the undue volatility to identify the important levels of support and resistance. After the results of the fundamental economic announcement hits the news wires, the currency markets often jump. When it does, it smashes through the nearest and weakest levels of support and resistance.

However, at some point the price has jumped too far and too fast and pulls back. This price level is very important. It often takes three to five minutes to reach that level. When the price level reaches this level and begins to pull back, this is the end of the news spike in most of the cases. Mark this level with a horizontal line on the chart. Just before the news came out, the markets began to wake up. Some traders are placing orders on hunches, rumors and guesses. Don’t forget that they can’t know the results of the news before it is released.

Sometimes, this last minute volatility is created by traders exiting a trade before the news came out. So the chances are the market may move in the wrong direction as the initial reaction. Don’t trade just because you see the market moving in a particular direction 20 seconds before the news was announced. Don’t pull the trigger at this point. Preserve the capital. The news is then released suddenly and the market moves dramatically. Thousands of orders are placed.

There are unique risks like slippage, gapping, spreads and such. Don’t pull the trigger yet. However, we now have two pieces of vital information with us now. We know the results of the economic announcement. We now know whether it was good, bad or surprising for the markets. We also now the direction in which the market is moving. Let the market move. Stay out. Discipline is important. Don’t pull the trigger. It may feel like you are missing a great trading opportunity. You are only missing the risk.

Once the price begins to pull back you have a better market to trade now. Volatility is still high but not wild, crazy or out of control. Slippage risk drops to zero and the danger of spreads widening is not drastically reduced. You now know the direction, support and resistance of the market. The price retracements are often where the novices lose money. You have avoided it by waiting for the price to pull back. Now trade in the direction of the market.

You can also let the news come out, let the volatility identify the support and resistance, let the price pull back, let the price bounce again and cross the horizontal line that you had drawn. That’s too much waiting and requires good patience on your part. It will keep you out of bad trades. If the market reacts powerfully to the news, only then trade. Otherwise stay out of the trade. The main focus should be preservation of your capital and only trade if the chances of winning are high.

Forex Training Free: Day Trading..What is it??
Day trading is basically the buying and selling of stocks over a relatively short period of time, sometimes minutes. It was once only available to floor traders and investment banks but now the Internet has made day trading accessible to anyone with a computer system. There is good money to be made (and lost) using this method.

If you are just starting off with Forex, be sure to take the factors into consideration that are mentioned on our Free Training Website i.e Forex Training Free. Analyze the features of the provided software to make sure that they’re right for you. So with all that said,
Good luck and Happy trading!

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