May 2010

8 Basic Tips on choosing Best FOREX Broker

8 Basic Tips on choosing Best FOREX Broker

There are some basic notices that you should consider when you want choosing online forex broker.

#1- Spread Amount

The spread, which is calculated in pips, is the difference between how much you can buy or sell a currency at a specific point in time.

Forex currencies are not traded through a central exchange market, so the spread can be different depending on the forex broker you use. Some online forex brokers have variable spread; some of them have two spread amounts that depend to day and night.

Some of them their spread depends to the position of market. When market is quiet the spread is small and when market is busy the spread is high. I prefer forex brokers that have fixed spread, because over the long term fixed can be safer.

#2- Execution

— How fast is the broker’s order execution?

— Do they offer automatic execution?

— How much can you trade before having to request a quote?

— Do they trade against their clients?

The best way to find out is to open a demo account and give them a test drive.

#3- Leverage Options

Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Leverage is a necessity in forex trading because the price deviations in the currencies are set at fractions of a cent.

Before choosing an online forex broker notice that what is their leverage. Many brokerages offer a flexible margin that allows you to choose the leverage that’s right for you.

#4- Account Types

Notice the forex broker you choose has mini account or not. Mini account is designed for those new to online currency trading and those with limited investment capital. There is a smaller deposit required to start trade of just $300 or less.

#5- Trading Platform

Good trading software will show live prices that you can actually trade at, not just indicative quotes. It will offer Limit and Stop orders, and ideally will let you attach these to your entry order. One-Cancels-Other orders are another useful feature — they mean you can set up your trade and then leave the software to get on with it.

#6- Dealing tools and value-added services

Find out online forex broker that offers the best resources and information to help you make the smartest trading decisions. A good company should offer real-time charts, technical analysis tools, real-time news and data, and software or website support. Be weary of any company that refuses to share information or trial versions before opening up an account. You will want to try out their system before you choose to invest money in it.

#7- Support

Forex is a 24 hour market, so your online forex broker should offer 24 hour support. You should also check if you can close positions over the phone — essential in case your PC or internet connection crash at a critical moment. You could contact to their Internet help desks to see how quickly they respond to enquiries.

#8- Get Referrals

Ask around and read forex forums to find out which forex brokers other people use and why they selected a specific broker.

by Mostafa Soleimanzadeh

The Seven Most Traded Currencies in Forex

Currencies are traded in dollar amounts called lots. One

lot is equal to $1,000, which controls $100,000 in currency.

This is what is known as the “margin”. You can control $100,000

worth of currency for only 1,000 dollars. This is what is called High Leverage.

Currencies are always traded in pairs in the FOREX. The

pairs have a unique notation that expresses what currencies

are being traded. The symbol for a currency pair will always

be in the form ABC/DEF. ABC/DEF is not a real currency pair,

it is an example of a symbol for a currency pair. In this

example ABC is the symbol for one countries currency and DEF

is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD – The US Dollar

EUR – The currency of the European Union “EURO”

GBP – The British Pound

JPN – The Japanese Yen

CHF – The Swiss Franc

AUD – The Australian Dollar

CAD – The Canadian Dollar

There are symbols for other currencies as well, but these

are the most commonly traded ones.

A currency can never be traded by itself. So you can not

ever trade a EUR by itself. You always need to compare one

currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar

“Euro”

USD/JPY US Dollar / Japanese Yen

“Dollar Yen”

GBP/USD British Pound / US Dollar

“Cable”

USD/CAD US Dollar / Canadian Dollar

“Dollar Canada”

AUD/USD Australian Dollar/US Dollar

“Aussie Dollar”

USD/CHF US Dollar / Swiss Franc

“Swissy”

EUR/JPY Euro / Japanese Yen

“Euro Yen”

The listed currency pairs above look like a fraction. The

numerator (top of the fraction or “left” of the / however

you want to SEE it) is called the base currency. The

denominator (bottom of the fraction or “right” of the

/however you want to SEE it) is called the counter currency.

When you place an order to buy the EUR/USD, for instance,

you are actually buying the EUR and selling the USD. If you

were to sell the pair, you would be selling the EUR and

buying the USD. So if you buy or sell a currency PAIR, you

are buying/selling the base currency. You are always doing

the opposite of what you did with to base currency with the

counter currency.

If this seems confusing then you’re in luck. You can always

get by with just thinking of the entire pair as one item.

Then you are just buying or selling that one item. Thinking

like this will still enable you to place trades. You only

need to be aware of the base/counter concept for Fundamental

Analysis issues.

So why is it important to know about the base/counter

currency? The base/counter currency concept illustrates

what is actually taking place in a Forex transaction. Some

of you reading this, know that short-selling was restricted

in the stock market *(Short-selling is where you sell a

stock/currency/option/commodity first and then try to buy it

back at a lower price later). But in the FOREX you are

always buying one currency (base) and selling another

(counter). If you sell the pair you are simply flipping

which one you buy and which one you sell. The transaction is

essentially the same. This allows you to short-sell with no

restrictions.

You want to be able to short-sell with no restrictions so

you can make money when the market drops as well as when it

rises. The problem with traditional stock market trading is

that the market has to go up for you to make money. With

FOREX trading you can make money in all directions.

The Forex Markets and Its Trend Patterns

As you start analyzing forex charts you will realize that the market often display’s some very familiar patterns of price movement. Once a pattern is established, it becomes the most probable course of future price action until the market changes.

There are two types of markets which will become very important for you to identify and understand; these are: trending and trend-less markets. Each market type has two specific patterns which you will also notice over time.

These market types and patterns are defined as follows:

Trending – Steady elongated price movements with less than a 45 degree angel with occasional pauses, profit taking, or resting periods.

In a Trending market, you have also other patterns:

- Uptrends – A pattern of higher highs and higher lows.

- Downtrends – A pattern of lower lows and lower highs.

Trend-less – Erratic price movements which are often steep ( greater than 45 -degree angle ) and cannot sustain and therefore must reverse. Although the movements can move many points in a short period of time, they often result in very little net price movement over time.

In a Trend-less market, you have these patterns:

- Choppy – An erratic pattern of higher highs and lower lows.

- Sideways – A narrow pattern of lower highs and higher lows.

While up-trend and down-trend days can offer excellent trading results, choppy markets often create stop outs, while sideways markets produce for little in either direction making them hard to trade and to make any profit during these periods.

Your trading objective is to get into a trending market and ride the trend until you make your target profit objective.

There are many Trend Trading Strategies that you can find in a number of sources listed in my website. You will learn how to identify and draw your own channel trendlines, support and resistance lines, triangle patterns, chart key top and bottom formations, etc.

Remember, knowledge in the Forex Markets is power, and more than power; money.

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