If you are a forex trader considering one of these '400-1 leverage' offers, you should first know:
1. The rules of the game you are about to play.
2. About leverage in Forex and how it works, not for you, but for the broker.
Here is how it works:
Leverage can be beneficial but it can be your worst enemy. 400-1 means that US$1000 can control a $400,000 position say against the Yen. This is great but it also means that even a small move against your position can wipe your account clean. This is obviously very bad news for you but great news for the broker!
Why Is It Great News For Them?
Well, the first thing that traders must realise is that Forex firms make their own markets - they make the bid-offer price to clients. They use the assumption that as most highly leveraged speculators lose then it's good business to take the opposite position to them.
This is done automatically, so when a client buys Dollars against the Yen, the broker sells short the Dollar. When the client covers the position (either for a profit or loss) the broker is taken out also. If the client wins the broker loses and vice-versa. This is how the leverage game is played.
So, who do you think usually wins in this game? No, not you. It’s the broker. It’s a statistics game and the statistics say highly leveraged speculators lose.
Ok then. If the brokers stand to gain when a client loses, what is the best way to make sure that the clients lose Bigtime?
Easy, let them trade huge positions on a limited amount of capital so that the odds even for the best and most talented traders are pretty much - ZERO.
Why do you think that the ads of '400-1 leverage' are splashed all over the brokers websites? They are selling you the supposed ‘benefit’ when in turn, the reality is that the only ‘benefit’ is to them.
Conclusion:
If you want to play the leverage game in forex, understand how the game works. The game basically works this way: The broker is the shark. The retail trader is shark food. If you are serious in your quest to make money currency trading – educate yourself on the risks involved.
[Jovan Vucetic via ArticleCity]
Wednesday, December 5, 2007
Highly Leveraged Forex Trading;The Dangers
Free Forex Signal 05-12-2007
If you are relatively new to this blog, you might want to read these first:
GBP/USD
Stop/Limit/Market Order
buy @2.0640
Result: +20 pip profit
Today (05-12-2007) Forex Signal
Best time to place this order: 8.00 (GMT+3) or 5.00 GMT
GBP/USD
Stop/Limit/Market Order
sell @2.0587
Stop Loss @ -30pip
Set Profit Target @ 20 pip
Daily Pivot: 2.0607
To make an adjustment, please read this:
Tuesday, December 4, 2007
Free Forex Signal 04-12-2007
If you were relatively new to this blog, you might want to read these first:
GBP/USD
Stop/Limit/Market Order
sell @2.0636
Result: NO TRade
Today (04-12-2007) Forex Signal
Best time to place this order: 8.00 (GMT+3) or 5.00 GMT
GBP/USD
Stop/Limit/Market Order
buy @2.0640
Stop Loss @ -30pip
Set Profit Target @ 20 pip
Daily Pivot: 2.0620
To make an adjustment, please read this:
Sunday, December 2, 2007
6 Tips to Start Trading Forex
You have decided to be a trader in the forex market, and you have no idea on how to begin. Let's first start by defining what the forex market is and what it does.
The term "forex", also known as the foreign exchange is a market for the sale and purchase of all kinds of currencies. It originated in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the forex market traders were the ones who set the value of one type of currency against another.
Nowadays, the market forces determine the value of a currency against another. One unique aspect of the Forex market is that very little trading qualifications are required of anyone intending to trade therein.
Independence from external control ensures that only the market forces influence the currency prices. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, or USD, the money moves so fast, it’s impossible for a single investor to substantially affect the price of any major foreign currency.
In addition, unlike any stock that is rarely traded, forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.
1. The first thing you need to do is open a forex account. You will have to fill an application form which includes a margin agreement stating if the broker will be allowed to intervene with any trade when it appears too risky. Since most trades are done using the broker's money, it is only logical that he protect his interests. However, once you have established an account, you can fund it and begin trading in the forex market.
2. Adopt a trading strategy, that has proven to be successful for you. Remember that strategies will work differently for different traders, so don't try to adopt a strategy that works well for another trader. It might backfire on you. The two available approaches are either technical analysis or fundamental analysis. A combination of the two is a more preferred choice for experienced traders.
3.Understand that prices move by trends. Forex has a popular saying, “The trend is your friend.” There are certain movements that have been studied over many years in order to identify a pattern in the trend. These trends need to be understood in order to understand a good trading strategy. For small accounts that are $25,000 and under, trading with a trend may help improving your odds when compared to bi-directional trading. Most newbie’s will look to trade in any direction, when they should be trading with a trend.
4. Ensure you know which are the top five currencies pairs in the foreign exchange. These are USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.
5. For newbies, it is advisable to maintain two accounts to ensure you learn to play the trading game. Keep one real account, one that you will actually use to trade real money; and the second account should be a demo, one that you can use to test alternative moves in the trading game. You can easily use your demo account to shadow the trades in your real account so you can widen your stops to see if you are being too conservative or not.
6. Always examine the one hour, four hour and daily charts that concern your trades. Although you can trade at 15 and 30 minute time intervals, doing so requires a handful of dexterity.
by Gerald Njuguna the owner of http://www.diamondringscare.com, a site where you can read more articles on diamonds. Visit the site to read more information on how to clean diamonds here: http://www.diamondringscare.com/clean-diamond-rings.htm
via articlecity
