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Diversifying Forex Trading Strategies

2007-09-04T20:53:00.000+07:00

by David McLauchlan

The critical difference between who will win and who will lose in the business of Forex market trading is learning how to manage your money. For example, if 100 Forex traders begin trading by using a system with 60% of winning odds, only about 5 of those traders would see a profit by the end of the year. Despite those 60% winning odds, only 95% of those Forex traders will lose because of poor money management skills. When entering a trading system one must have great money management skills in order to succeed. Traders enter the Forex system to make a profit, after all, not to lose money.

The amount of money you will put on a trade and the risks you are willing to accept for that trade is money management. It is very important to understand the concept of managing money and to understand the difference between managing money and trading decisions, in order to diversify your Forex trading strategies. There are a number of different strategies that can be employed that will aspire to preserve your balance from any high-risk liabilities.

To begin with an understanding of the “core equity” is a necessity. Basically the core equity illustrates the starting balance of the account and what amounts are in the open positions. Your money management will greatly depend on this equity so it’s very important to understand the meaning of core equity. For instance, if you have an open account with a balance of $5,000 and you enter a trade with $1,000 your core equity will be $4,000. If you enter another trade for another $1,000 then your core equity would be $3,000.

From the outset, it’s best to diversify trades by using several different currencies. By only trading one currency pair, you will generate very few entry signals. For example, if you have an account balance of $100,000 and have an open position for $10,000 then that makes your core equity $90,000. If you choose to enter on a second position, then calculate the 1% risk from your core equity, but not your starting account balance. This would mean that the second trade would not exceed $900. Then if you decide to enter a third position, with a core equity of $80,000 then the risk from that trade should not surpass $800. The key is to diversify the lots between all currencies that have a low correlation.

For example, if you want to trade EUR/USD and GBP/USD with a $10,000 (1% risk) standard position size in money management, then it would be safe to trade $5,000 in each EUR/USD and GBP/USD. This way, you will only be risking 0.5% on each position.

When trying to diversify your Forex trading strategies, it’s very important to understand the strategies of the Martingale and the Anti-Martingale. The Martingale rule means: increasing your risks when you’re losing. Gamblers worldwide who claim that one should increase the size of a trade even when one is losing have adopted this strategy. Basically, gamblers use the rule in the following way: bet $20, if you lose bet $40, if you loose bet $80, if you lose bet $160, if you lose bet $320, etc.

The strategy is to assume that if you lose more than four times, then the chances to win become bigger and as you add more money, you will be able to recover from your loss. Although there are many people who choose to use this strategy, the truth is, the odds are still the same 50/50 regardless of the previous losses. Even if you lose five times in a row, the odds for your sixth bet, and even for those there after, are still 50/50. This is a common mistake made by those who are new to the trading business. For instance, if a trader started with a $10,000 balance and lost four trades of $1,000 a piece for a total of $4,000 then the traders remaining balance would be $6,000. If the trader thinks there is a higher chance of winning the fifth trade and increases the size of the position four times, enough to recover from the loss, then if the fifth trade loses the trader will be down to $2,000. A loss like this can never be recovered back to the $10,000 starting balance. No experienced trader would use such a risky gambling tactic as the result is negative - losing all the money in a short period of time.

Structure Of The Forex Market

2007-09-04T20:25:00.000+07:00

By David McLauchlan

First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit.

In the beginning countries would trade with each other using the barter system. If one nation needed lumber but had cattle, they would trade one product for another. This was pure trading. This type of economy has many limitations, but served mankind well for many centuries. However, nations quickly saw the benefit of having a system of exchange, and while some cultures used pretty rocks, or animal teeth, precious metals quickly became established methods of exchange. God and silver were the most popular. Initially gold and silver coins were used, and in fact the name of the British standard currency, the pound sterling, came from the Hasterling region where gold coins were made, and originally meant coins of the Hasterling’s. Up until World War I most nations had central banks that supported the value of their currencies and most used gold as the standard. Paper money was printed and it legally could be exchanged for gold but this did not often happen. Since it was rarely converted, some banks and some nations believed they no longer needed to keep reserves of gold in their vaults, as the US once did with Fort Knox. Inflation then occurred.

Near the end of World War II a conference known as Bretton woods had many nations reach an agreement on a reserve currency system based on the US dollar. The World Bank and other organizations agreed, and a fixed exchange rate system was reached. The value of the dollar was fixed on a certain amount of gold, and other currencies were fixed on value to the dollar. Currency trading after this however has evolved and currencies have grown in value, and gone down in value, leading to fluctuation.

Today traders take advantage of the fluctuation in value among currencies through the forex or foreign currency markets. It is quite common to see a trader who suspects that the value of the Euro will go up against the yen or the dollar and follow the old axiom of “buy low and sell high.” On of the ways this is done is through margin trading. With margin trading a trader doesn’t have to have all the money in an account that is being traded. If a trader has 10,000 and works with a one percent margin, he is able to trade $100,000 in currency. This adds great leverage to the trade and makes forex trading very attractive to many who are looking for a large and quick return on their investments. Forex traders are also attracted to the low costs associated with trading since most trades are without commission. The fact that there is a 24 hour trading cycle is also attractive to many. Traders have opportunities for large profit, but they also have risk inherent. An aggressive trader may experience profit and loss swings of up to 30% in a day. This can be 30% to the good, or to the bad, so forex trading requires education and courage as well as capital. However there are no daily limits and no restrictions on trading hours other than the weekend when markets are closed. For this reason there are always opportunities. Money will always be made.

Some nations in the past have complained about hedge funds and other large institutions involved in forex trading, saying that they have intentionally devalued their currencies to make quick profits. George Soros, the famous billionaire who is involved in politics, has been accused of this practice by the government of Indonesia. Whether it is true or not, and if true whether it should or should not be done is not for this article. However, when institutions control such large amounts of money, the chance of manipulation does exist. As long as foreign currency is traded, there will be such accusations. However, the forex market remains a way to achieve substantial financial gain.

There is a wealth of opportunity in the Forex Market. Millions will be made by millions but of course the contrary is also true unfortunetaly. Always be cautious and do not mortgage the farm...

Trying Forex Trading with the Best Strategy and Approach

2007-08-13T22:32:00.000+07:00

By Sara Jenkins

With the way things are today, more people are getting interested in investing their dollars to make them grow faster. The problem is, not too many people are willing to take the risk of investing it, so they just let their money rut in banks.

Not that there's anything wrong with banks' it's just that they have low rates and the money takes a long time to grow.

If you want real money, you have to have the guts to risk it. Making money takes money; risks are always involved if you want to have money fast and big.

One of the largest arenas where you can invest is Forex (Foreign Exchange).

Forex trading is regarded as the largest financial forum in the world with an estimated 3.1 trillion dollars of volume everyday.

Forex trading is open 24 hours and never sleeps. Transactions are done all over the world via telephones and computers, money exchanges hand in the number of millions in just mere seconds.

Forex trading is composed of thousands of banks and individual Forex trading companies that monitor development all over the world, developments that may influence the value of their currency.

Forex trading deals with the exchange of currencies from different countries. The idea is to determine the rise and fall of the value of a certain currency and trade when it is deemed advisable.

For small Forex trading transactions, managed accounts are the ideal -- they are for the cautious because they have the least risky participation. Here you entrust your investments along with others to a reliable, honest and ethical seasoned Forex brokers. These Forex brokers use their extensive knowledge and experience and use their strategy to make your money grow, for a fee of course.

With the rise of the internet, Forex trading can be done in a click of the mouse. Money travels through space and wires all the time. The computers have done a big help in the growth of Forex trading, transactions can now be done anytime anywhere. Since somebody is up at a given time everyday anywhere in the world, you will never lose someone to trade with.

There are two basic and fundamental ways to analyze and evaluate foreign exchange trading. There is the technical analysis and the fundamental analysis. There is a huge difference between the two.

In Fundamental analysis, Forex analyzers and brokers watch out for causes to market fluctuation. These causes may include the political condition of the country, their laws and legislations, financial policies, their growth rate and other factors as well.

Technical analysis of Forex trading includes graphs, charts and other method of measuring past data to see the indication of the rise and fall of currencies. They get all the information they need and use them to calculate and forecast the possible direction of a certain currency.

There is a lot to learn about Forex trading; even the seasoned broker learns something new every day.

Forex trading has huge returns in an instant if you catch the right moment and transaction. But always remember there is still risk. Forex trading can be quite a gamble, especially if your forecast is wrong.

Before investing your money in any firm, try to investigate about its record and history in Forex trading.

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Making Money With Money

2007-07-24T22:42:00.000+07:00

By. Leon Chaddock

Forex trading is one of the fastest-growing markets for making money in today’s world economy.

If you are part of the forex trading game, you need well-thought-out and planned strategies. You also need up-to-the minute information and reliable data to help you along the way.

With this said, in order to be successful with forex, you'll want to invest in high-quality products to help you analyze, watch and track the forex market. No little project at all. The good news to you is that there are options out there to help you do just that.

First of all, realize that forex trading is an excellent market to trade in. It has the ability to make you money without a whole lot of investing. And, you can trade with whatever you have, not necessarily millions of dollars.

To get into the forex market, it makes sense to pay attention to the numbers for some time. Then, you’ll have a good feel for it long before your dollars are involved.

But, once you do get in, you’ll need up-to-the minute information.

Consider the purchase of and use of valuable forex trading software programs.

These programs can help you to track what is happening and in some, it will help you to better analyze the information as well. Of course, this in turn will help you to make the right decisions about your investments.

While market trading is always risky, many find that forex trading, when done right, is one of the most profitable without much start up investment opportunities out there.

With the ability that you have to monitor and respond virtually instantly to the world’s market in forex, you are better able to make the right decisions which will then lead to those gains you are seeking.

Money Management Tips For Trading On The Forex

2007-07-15T21:35:00.000+07:00

By David McLauchlan

What is Money Management: describes strategies or methods a player uses to avoid losing their bankroll.

Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas. First, a definition of the foreign exchange currency or forex market is called for. The forex market is simply the exchange of the currency of one country for the currency of another. The relative values of various currencies in the world change on a regular basis. Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country’s currency may go down in relative value compared to the currency of other countries.

The Forex, or foreign currency exchange, is all about money. Money from all over the world is bought, sold and traded. On the Forex, anyone can buy and sell currency and with possibly come out ahead in the end. When dealing with the foreign currency exchange, it is possible to buy the currency of one country, sell it and make a profit. For example, a broker might buy a Japanese yen when the yen to dollar ratio increases, then sell the yens and buy back American dollars for a profit.

There are five major forex exchange markets in the world, New York, London, Frankfurt, Paris, Tokyo and Zurich. Forex trading occurs around the clock in various markets, Asian, European, and American. With different time zones, when Asian trading stops, European trading opens, and conversely when European trading stops, American trading opens, and when American trading stops, then it is time for Asian trading to begin again.

Most of the trading in the world occurs in the forex markets; smaller markets for trade in individual countries. Simply put forex trading is the simultaneous buying of one currency and selling of another. Over $1.4 trillion dollars, US of forex trading occurs daily and sometimes fortunes are made or lost in this market. The billionaire George Soros has made most of his money in forex trading. Successfully managing your money in forex trading requires an understanding of the bid/ask spread.

Simply put the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for. For instance, if the ask price is 100 dollars, and the bid is 102 dollars then the difference is two dollars, the spread. Many forex traders trade on margin. Trading on margin is buying and selling assets that are worth more than the money in your account. Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin. To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account. This means the trade has leverage of 50 to one. This amount of leverage allows a trader to make good profits very quickly. Of course, with the chance of high profits also comes high risk.

Like many other speculative investments, a key part of money management for the forex trader is only using money that can be put at risk. It is wise to set aside a portion of your net worth and make that the only money you use in forex trading. While the chances of good profits are there, if you should have a problem and get wiped out, you’ll only have a limited amount of money placed at risk. Also remember that the market is n constant motion. There are always trading opportunities. If a currency is becoming stronger or weaker in relation to other currencies there is always a chance for profit. For instance, if you believe that the Euro is gong to become weak compared to the US dollar then selling Euros is a good bet. If you believe that the dollar is going to become weaker than the yen, or the pound sterling, then selling dollars is wise. Staying current on the news and current events in the countries whose currency you hold is a smart move. Many people reach points where they can predict currency changes based on political or economic news in a given country. Remember though that forex trading is speculation, so be careful when managing your funds and only invest what you can afford to risk.

Please always make sure you check with the pros when dealing in this market unless you are doing this as a hobby and don't have a lot at stake in it. There are a lot of big boys playing here and they won't lose much sleep if you and thousands others lose their shirts...

Investment Myths And The Forex Markets

2007-07-03T22:28:00.000+07:00

David McLauchlan

First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

What is a myth: A myth is often thought to be a lesson in story form which has deep explanatory or symbolic resonance for preliterate cultures, who preserve and cherish the wisdom of their elders through oral traditions by the use of skilled story tellers.

Many new Forex market traders have misconceptions about the entire system. They see people making money trading with the Forex market and automatically assume they can easily do the same. What they tend to forget it that there is strategy and research done in order to make successful trades and profits from trading. If you are new to the Forex market system, don’t get caught up in popular investment myths. Be sure that you know exactly what to expect and be realistic when trading.

When you are trading and investing in any market, including the Forex, you must have the discipline needed to be successful. Although the system is enormous and there is a lot going on that you won’t be involved within, you must actively protect your investments. Your investments will not be protected just because they are in the market. A lot can change throughout a day, so you have to always be aware of what is going on in order to be fully protected to your best ability. You should always make logical and researched decisions when trading. It is not a system to use to “get rich quick”. It is a serious financial system that can break your pocket if you are not careful.

One thing to remember when trading and trying to protect your investments however will be that you must take risks to gain. Along with taking a large risk, can come a large success or large loss. You have to be prepared for the worst. You can do this by educating yourself as much as possible on the trading system and your investments. The more you know, the better prepared you will be to make successful decisions. If you are unsure about a system of trading, like the Forex, be sure to take classes and read about the system before you begin trading. Only trade when you are certain you are ready to begin. Even after you learn what you need to know about the system and are a seasoned trader, there are times when you will have losses. The system is not one that protects your investments or your money in general. So, be prepared and aware of this issue. Being realistic can really help you gain more success.

Leverage is something that is both great when it comes to the Forex and possibly dangerous. Trading currencies offers a high level of leverage. Those who don’t have a lot of money to begin with can use leverage to gain more money. When used correctly, you can often do this in short amounts of time. Most people think however that this is something that can be done easily. Those who use leverage to their potential are often those with years of experience in trading. Some people tend to follow the myth that anyone will be able to easily use leverage to get rich fast. This is simply not true. You must be a trader with an excellent knowledge of the system in order to make leverage work to your maximum advantage.

Another thing to keep in mind is that just because you are trading with a minimum marginal deposit does not mean you should trade at levels above your portfolio. The myth that you can get away with this every time is not true. You should not over leverage yourself. By trading in small amounts, you will be able to make safe investments that will not result in huge losses. You will win some and lose some, especially when you are first starting out.

When it comes to the Forex market, you should know that what you assume to be true may not be true at all. You may think that you can use the Forex market to protect your investments. You have learned from reading this however that the Forex may not protect your investments, and one should be diligent in watching their investments in order to avoid anything catastrophic. You may also think that you can get rich quickly using the Forex market. The truth is that short term trading, which is notorious for turning profits quickly, is not for the beginner. Those who have traded for years may try short term investing, but it is very risky indeed. Lastly, you may think that leverage will help you “play with the big boys” and still stay safe. This can be a horrible assumption and many people will over leverage themselves if they are not careful. So, do research, be smart, and think before you act when dealing with the Forex.

How Currency Exchange (FOREX) Market Works

2007-06-19T21:20:00.000+07:00

I bet you are well aware of the existent of Forex trading nowadays. Forex market exists wherever one currency is traded for another. Forex, or Foreign Exchange Market, is generally works as an international currency exchange market. Investors and speculators are allowed to trade currencies from all around the world thru Forex trading.
Forex is a very unique type of trading where traders are buying and selling 'money' in the same time. The trades are done in pairs, such as Euro/JPY, USD/CHF, and CAD/USD. It is the world largest trading market where an average of $1.9 trillion trades is done on a daily basis. The turnover rates in FOREX are nearly 30 times larger than the total volume of equity trades in United States. Know more about major currencies traded in Forex market.
Despite its large volume of trades done daily, Forex is relative new to the publics nonetheless. It is only made available to publics in year 1998 where big sized inter-bank units are sliced into smaller pieces and offered to individual traders like you and me. Before that, Forex is a game only for banks, multi national cooperation, and big currency dealers. Only those with large business size and strong financial background were permitted to trade foreign currencies.
Facts about Forex market
As a matter of fact, large international banks are still the major traders in currency exchange market. Deutsche Bank is one of the top currency traders; along with other major banks like UBS, Citi Group, HSBC, Barclays, J. P. Morgan Chase, Coldman Sachs, ABN Amro, Morgan Stanley, and Merril Lynch; these banks are said to be responsible for more than 70% trades in currency market.
When you are trading Forex with currency dealer, the Forex quotes might look a bit different from our previous example. Often, a two-sided quote, consisting of 'bid' and 'ask' price, is listed when dealing with currency brokers. For example, EUR/USD 1.2385/1.2390: 1.2385 is known as the 'bid' price while 1.2390 is commonly known as the 'ask' or 'buy' price. The 'bid' is the price at which you can sell the base currency; while the 'ask' is the price at which you can buy the base currency. As you study the numbers, you might realize that the two-sided currency price is quoted against you. Traders are forced to buy the currency in a higher price than the selling one. This is done because FOREX trades are done without any commission chargers. Thru quoting currency 'bid & ask' price differently in this way, the currency brokers are manage to make profit without charging their client commission fees directly. Learn more on Forex quotes.
Fundamental analysis and Technical analysis in Forex
Fundamental analysis refers to the study of the core underlying elements that influence the economy of a particular entity. As in Forex trading, government policies, bank policies, natural disasters, and speculators mood are some of the fundamentals considered to predict the currency market trends. Fundamental FOREX traders will review a country economy's situation base on these fundamental elements and respond accordingly. To gain max, fundamentalists often apply precise method to convert study's results into accurate entry/exit price indicator. Overview on Fundamental analysis in Forex market.
Instead of reviewing on the fundamental issues, traders from technical side define market movement according to data purely generated from the market. The term 'Technical' is applied in all trading fields, from commodity stocks exchange to option trading, from Forex to futures.
Generally, the purpose of technical analysis is to find potential price reversal or pivotal points. These points basically refer the change of market trends, which then indicates when to enter or exit from the market. It is important to know that as with any other techniques in your trading system, these technical analysis indicators could be used alone or with other indicators. Traders are always recommended to learn more different technical methods to analyze different market data because none of these techniques are 100% accurate and 100% foolproof. Taking example of the 'price' data and the 'time' data, which are widely used by FOREX trader. There are some techniques consider solely on the 'price' factor, while some solely rely on the 'time' factor. The fact is if you know both technical methods, you can take both price and time into consideration during estimating market future trends. This will of course then reduce the risks of losing money in Forex market. Also, it would be wise if traders combine both technical and fundamental techniques when trading Forex, as a country currency value depends a lot on fundamental variables such as war, change of national leaders, terrorism attacks, as well as natural disasters. Overview on Technical analysis in Forex market.
Conclusion
Without a doubt, Forex is gaining its popularity fast against other kind of trading. No limited market access, no liquidity issues-after market hours, zero commission fees, low capital requirements with high leverage rates, and no restrictions on short selling -- Forex can be very beneficial to a variety of people. Like any other trading business, if you are new to it, best advice you can get is to learn and practice more before you test your 'wings'. Seminars, eBooks, Internet, papers, video courses - all these are helpful to raise your confidence level before you trade with your real hard-earn dollars.

By. www.golearnforex.net

Forex Benefits Over Futures

2007-06-12T13:16:00.000+07:00

From Agricultural Products To Financial Instruments

The origins of the modern futures market lies in the agriculture markets of the 19th century. Farmers started selling contracts to deliver agricultural products at a later date. This was done to anticipate market needs and stabilize supply and demand during off seasons.
The current futures market has moved far beyond agricultural products. It is a worldwide market for all sorts of commodities, including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds.
When the futures market is played by speculators, the actual goods are not important because there is no expectation of delivery. Rather, it is the contract itself that is traded, the value of which changes constantly throughout the day as expectations change regarding the value of the commodity itself.

Win Or Lose
In every futures contract there is a buyer and a seller. The seller takes the short position and the buyer takes the long position. The futures contract specifies a buying price, a quantity and a delivery date.
Speculators hope to profit by the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise, or by buying short (from the seller) if they expect prices to fall. Futures accounts are settled every day.
At the end of the contract period, the contract itself is settled. The final contract buyer can now take delivery of his truckload of whatevers. Of course, he may opt to just start the process all over again by writing up a contract to deliver his whatevers on a certain date at a certain price.

FOREX Benefits

The foreign exchange market (FOREX) has several advantages over the futures market.

More Liquid.
FOREX is an extremely liquid market. As the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that FOREX stop orders can be executed more easily and with less slippage. The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes FOREX more liquid and allows FOREX traders to take advantage of trading opportunities as they arise rather than waiting for the market to open.
Commission-Free.
FOREX transactions have no commissions. Brokers earn money by setting a spread -- the difference between what a currency can be bought at and what it can be sold at. In contrast, traders must pay a commission or brokerage fee for each futures transaction they enter into.
Instant Transactions.
Because of the high volume of trading, FOREX transactions are executed almost instantly. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade -- not necessarily the price of your transaction.
Safeguards.
Final prices in futures are always a little uncertain because of market gap and slippage. The FOREX is less risky because of built-in safeguards in the trading system.

By Ron King
Ron King is a full-time researcher, writer, and web developer. Visit http://www.forex4u-now.com to learn more about this fascinating trading vehicle.

Forex Trading - Advantages and Disadvantages.

2007-06-12T12:18:00.000+07:00

What is Forex Trading?

Forex, or Foreign Exchange, is the simultaneous exchange of one country’s currency for that of another. This market of exchange has more daily volume, both buyers and sellers, than any other in the world. Taking place in the major financial institutions across the globe, the forex market is open 24-hours a day.
Currencies are quoted in pairs. The first listed currency is known as the base currency, while the second is called the counter or quote currency. In the wholesale market, currencies are quoted using five significant numbers, with the last placeholder called a point or a pip.
The forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies to move in strong trends. An enticing aspect of trading currencies is the high degree of leverage available.

Advantages of Forex trading.

Leverage.
Huge leverage is available in Forex trading, often up to 100:1 meaning that large profits can be generated from small margin deposits.
Liquidity.
The enormous size and global trading of the forex markets means that the markets in the major currency pairs are very liquid making trade executions almost instant with little slippage.
Ability to go short.
Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market.
Trends.
Fundamentally, the value of a country's currency is determined by interest rates and the strength of the economy in relation to other countries. Currencies, therefore, have a greater tendency to trend until the fundamentals change.

Disadvantages of Forex trading.

Leverage.
With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.
Brokers.
Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.
Spreads.
As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.

Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them.
Online futures trading provides a much more level playing field for most traders who want to take part in forex trading.

By. Tim Wreford
Tim Wreford operates Online Futures Trading (http://www.online-futurestrading.com), a website that provides information and resources for traders. Tim also provides an article detailing the development of a day-trading system, the results of which are updated daily on the site.