The foreign exchange market mainly deals in the trading of global currencies. Depending on currency projections, the currencies that are traded the most are Canadian Dollar, Australian Dollar, U.S. Dollar, Pound Sterling, Swiss Franc, Euro and Yen.
There are other currencies which are also traded but are done in smaller scale. The highest traded currency is U.S. Dollar. There are certain misconceptions regarding Forex market.
Contrary to popular belief there is no central market where all the currencies are traded. The market is a combination of many contrasting markets, each of which has their own set of rules and regulations. As Forex depends on currency projections, it becomes impossible to trade properly due to the difference in time zones.
That is why the major markets located in Tokyo, London and U.S are opened at different hours. Almost two thirds of the trading that can be followed by currency projections happens during the convergence of New York market opening and European markets are still operating.
Thursday, May 12, 2011
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Forex Scalping strategies and forex Scalping Methods
Forex scalping is one of the most used and highly demanding forex trading strategies nowadays. In the Forex scalping methods, trading is done over shorter time frames and profits are taken after relatively small moves in the market.
Since the time that the position is exposed to the market is shorter, small profits are taken more frequently in Forex scalping methods. Therefore, it has less chance of facing the market events that may cause the price to go against the trade.
Forex scalping method of trading is different from other traditional forex trading methods where the profits are allowed to run and losses are cut shorter.
When somebody is scalping the market he/she is not looking for the big move of the markets; instead he is looking for the small moves in his favour that will result in significant gain without any risk or insecurities involved in waiting for big move.
Forex scalping is nothing but playing with spreads. In the Forex scalping method a currency is bought at the Bid price and sold at the Ask price to gain the bid ask difference.
This procedure is profitable in the case even when the Bid and Ask prices don’t even move. Traders even pay market price for any currency because they can make profit by doing that as well. The Forex scalping method normally involves establishing and liquidating a position quickly, usually within minutes.
People who are expert in forex scalping methods of trading are the markets makers or specialists who are into maintaining the liquidity and order flow of a product of a market. These forex market makers can have superior execution speed as an insider. They also have a greater knowledge of trading and actual market situation due to their information gathering capacity.
Scalpers are only exposed in a relatively short period. They do not hold overnights. So, the exposure they get is lower than other trades while the risk is also less in this type of trading. Here are some of the factors that affect Forex scalping:
1. Liquidity: Scalpers like to trade in more liquid market since they can make thousands of trades a day to add up their small profits offered on each trade.
2. Volatility: Stable forex market attracts forex scalpers. If the prices don’t move throughout the day, the scalpers can still make profits by placing their orders on same Bid and Ask and can make thousands of trades. They do well in trade, as they don’t have to think about sudden price changes.
3. Time frame: The scalping method of Forex trading is done on a very short time frame. People even make profit from the market waves that are too small to be seen even on the one-minute chart. Therefore, the more the number of moves during the day the scalper can make more profits.
Forex scalping is very easy to follow if you know the basics of forex scalping method of trading and have a Forex Scalping Platform to help you scalping various currencies. The whole secret is to get in and get out of the market as quickly as possible.
Since the time that the position is exposed to the market is shorter, small profits are taken more frequently in Forex scalping methods. Therefore, it has less chance of facing the market events that may cause the price to go against the trade.
Forex scalping method of trading is different from other traditional forex trading methods where the profits are allowed to run and losses are cut shorter.
When somebody is scalping the market he/she is not looking for the big move of the markets; instead he is looking for the small moves in his favour that will result in significant gain without any risk or insecurities involved in waiting for big move.
Forex scalping is nothing but playing with spreads. In the Forex scalping method a currency is bought at the Bid price and sold at the Ask price to gain the bid ask difference.
This procedure is profitable in the case even when the Bid and Ask prices don’t even move. Traders even pay market price for any currency because they can make profit by doing that as well. The Forex scalping method normally involves establishing and liquidating a position quickly, usually within minutes.
People who are expert in forex scalping methods of trading are the markets makers or specialists who are into maintaining the liquidity and order flow of a product of a market. These forex market makers can have superior execution speed as an insider. They also have a greater knowledge of trading and actual market situation due to their information gathering capacity.
Scalpers are only exposed in a relatively short period. They do not hold overnights. So, the exposure they get is lower than other trades while the risk is also less in this type of trading. Here are some of the factors that affect Forex scalping:
1. Liquidity: Scalpers like to trade in more liquid market since they can make thousands of trades a day to add up their small profits offered on each trade.
2. Volatility: Stable forex market attracts forex scalpers. If the prices don’t move throughout the day, the scalpers can still make profits by placing their orders on same Bid and Ask and can make thousands of trades. They do well in trade, as they don’t have to think about sudden price changes.
3. Time frame: The scalping method of Forex trading is done on a very short time frame. People even make profit from the market waves that are too small to be seen even on the one-minute chart. Therefore, the more the number of moves during the day the scalper can make more profits.
Forex scalping is very easy to follow if you know the basics of forex scalping method of trading and have a Forex Scalping Platform to help you scalping various currencies. The whole secret is to get in and get out of the market as quickly as possible.
about forex brokers
One of the hardest decisions you face when starting out as a forex trader is which forex broker to go with. If you do a search online you will find hundreds of different forex brokers to choose from. The trouble is that some are better than others, and furthermore there are some that you should avoid like the plague.
So let me give you a list of things you should look out for when choosing a forex broker:
1. Regulation
This is arguably the most important factor because whichever broker you decide to go with, you must make sure that they are fully regulated with the relevant authority. So if they are based in the US, for example, then you should ensure that they are regulated by the NFA (National Futures Association) or the CFTC (Commodity Futures Trading Commission). Similarly if they are a UK-based company, then they should be regulated by the FSA (Financial Services Authority).
If you go with an offshore forex broker that is completely unregulated, for example, then you are taking a huge risk because you may never see your money again.
2. Spreads
If you are a relatively long-term trader and mainly use the 4 hour or daily charts, for instance, then the spreads offered by your chosen forex broker is not so much of an issue. However if you intend to trade the shorter time frames then your points gains per trade will obviously be a lot less, and therefore the spreads will start to eat into your profits. So as a general guide you ideally want to choose a broker that offers spreads of around 2 or 3 pips for the EUR/USD and GBP/USD pairs, and certainly no more than 4.
3. Leverage
The amount of leverage offered by different forex brokers varies greatly. Some may only offer 100:1 leverage while some may offer as much as 400:1. My own personal view is that 100:1 is more than enough, but if you are more of a risk taker then you may want to look for brokers that offer higher leverage.
4. Demo Accounts
If you are relatively inexperienced or if you want to test out a broker's trading platform before deciding whether or not you wish to open a live trading account, then you should choose a broker that provides a free demo account. Most reputable brokers offer demo accounts nowadays so I would always recommend you take advantage of this facility.
5. Account Types
Although all forex brokers cater for the well capitalized traders, not all of them cater for those traders who wish to trade smaller positions. Therefore if you yourself fall into this category, then you should look out for brokers that allow you to trade mini-lots (equivalent to around $1 per pip) or micro-lots ($0.1 per pip).
6. Minimum Deposit
If money is tight or you want to start off small (which is always a good idea), then you will want to choose a forex broker that requires a relatively low minimum deposit when opening a live trading account.
7. Charting Software
Nearly all forex brokers provide some kind of charting software free of charge when you open an account with them. It may be the highly popular Metatrader 4 platform or it may simply be a no-frills charting package. So therefore if you do want to use some of the more advanced charts, then I suggest you go with a broker that provides the Metatrader 4 or ProRealTime platform, for instance, otherwise you will have to fork out some money to access some decent charts elsewhere.
8. Additional Services
As well as charting software, you may also want your broker to provide a range of additional services such as daily commentaries, market analysis, educational materials and the option to deal through your mobile phone.
9. Customer Service
If you are just starting out as a forex trader you will probably have several questions and queries when you first open an account with a broker. So therefore you should try and join a broker that offers a high level of customer service. One way of testing this out is to contact the help desk of the brokers you are considering joining, ask them a particular question, and see how long they take to get back to you.
10. Customer Comments And Reviews
Finally your ultimate choice of forex broker will often be swayed by what other traders have to say about them. There are several websites which contain customer reviews of all of the leading brokers and you will find no shortage of opinions on all of the different forex forums.
However one thing I will say is that you will never come across brokers that have nothing but positive reviews, so don't waste too much time looking for the perfect broker because it simply doesn't exist. Just look for brokers that have a high number of positive comments and you should be fine.
* * * * * * *
To help you narrow down your search, here's a list of some of the leading online forex brokers:
Alpari
Location: Russia / UK / US
Online Since: 1998
Account Types: Micro / Classic
Minimum Account Size: $200
Free Demo Account: Yes (unlimited)
Spreads: 1.8+
Charts / Trading Platform: MetaTrader 4
(Note: Alpari has three different websites (UK, US and Russia) so account features may vary).
CMS Forex
Location: US
Online Since: 1999
Account Types: Universal (trade mini and standard lots from same account)
Minimum Account Size: $200
Free Demo Account: Yes
Spreads: 2 pips for EUR/USD and USD/JPY pairs
Charts / Trading Platform: VT Trader 2.0
dbFX
Location: Germany
Online Since: 2006
Account Types: Standard
Minimum Account Size: $5000
Free Demo Account: Yes
Spreads: 2-4 pips for major currency pairs
Charts / Trading Platform: dbFX Trading Platform
Dukascopy
Location: Switzerland
Online Since: 2004
Account Types: Live / Managed
Minimum Account Size: $50,000
Free Demo Account: Yes (14 days)
Spreads: 0-2 pips for major currency pairs
Charts / Trading Platform: Java / JForex / Web
Forex.com (part of GAIN Capital)
Location: US
Online Since: 1998
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (30 days)
Spreads: 1.1+ for major currency pairs
Charts / Trading Platform: MetaTrader 4
FXCM
Location: US
Online Since: 1999
Account Types: Mini / Standard
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: Typical spreads between 2 and 4 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4
(Note: Separate Micro account also available).
FXDD
Location: US
Online Since: 2002
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (90 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4 / MTXtreme / FXDD Trader / FXDD Auto / Power Trader
FXPro
Location: Cyprus
Online Since: 2008
Account Types: Standard / Premium
Minimum Account Size: $500
Free Demo Account: Yes (unlimited)
Spreads: 0.5+ for major currency pairs
Charts / Trading Platform: MetaTrader 4
GFT Forex
Location: US / Worldwide
Online Since: 2001
Account Types: Mini / Standard / Silver / Gold / Platinum
Minimum Account Size: $250
Free Demo Account: Yes
Spreads: 3-4 pips for major currency pairs
Charts / Trading Platform: DealBook 360
Interactive Brokers
Location: US
Online Since: 1998
Account Types: Universal
Minimum Account Size: $3000+ (depending on the type of account)
Free Demo Account: No
Spreads: 1 pip for EUR/USD pair
Charts / Trading Platform: Trader Workstation
Interbank FX
Location: US
Online Since: 2001
Account Types: Mini / Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (30 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4
MB Trading
Location: US
Online Since: 2002
Account Types: Standard
Minimum Account Size: $400
Free Demo Account: Yes
Spreads: 0.1-1 pip for major currency pairs
Charts / Trading Platform: MetaTrader 4
MIG Bank
Location: Switzerland
Online Since: 2003
Account Types: Standard / Professional / Institutional
Minimum Account Size: $2000
Free Demo Account: Yes (90 days)
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4
Oanda
Location: Canada
Online Since: 2001
Account Types: Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (unlimited)
Spreads: 0.9 for EUR/USD pair
Charts / Trading Platform: FXTrade platform
ODL Securities
Location: UK
Online Since: 2004
Account Types: Standard (can trade from $1 per point upwards)
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4 (and other platforms for professional traders)
Saxo Bank
Location: Denmark
Online Since: 1999
Account Types: Saxo MiniTrader / Saxo Trader
Minimum Account Size: $2000
Free Demo Account: Yes (20 days)
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: SaxoTrader
So let me give you a list of things you should look out for when choosing a forex broker:
1. Regulation
This is arguably the most important factor because whichever broker you decide to go with, you must make sure that they are fully regulated with the relevant authority. So if they are based in the US, for example, then you should ensure that they are regulated by the NFA (National Futures Association) or the CFTC (Commodity Futures Trading Commission). Similarly if they are a UK-based company, then they should be regulated by the FSA (Financial Services Authority).
If you go with an offshore forex broker that is completely unregulated, for example, then you are taking a huge risk because you may never see your money again.
2. Spreads
If you are a relatively long-term trader and mainly use the 4 hour or daily charts, for instance, then the spreads offered by your chosen forex broker is not so much of an issue. However if you intend to trade the shorter time frames then your points gains per trade will obviously be a lot less, and therefore the spreads will start to eat into your profits. So as a general guide you ideally want to choose a broker that offers spreads of around 2 or 3 pips for the EUR/USD and GBP/USD pairs, and certainly no more than 4.
3. Leverage
The amount of leverage offered by different forex brokers varies greatly. Some may only offer 100:1 leverage while some may offer as much as 400:1. My own personal view is that 100:1 is more than enough, but if you are more of a risk taker then you may want to look for brokers that offer higher leverage.
4. Demo Accounts
If you are relatively inexperienced or if you want to test out a broker's trading platform before deciding whether or not you wish to open a live trading account, then you should choose a broker that provides a free demo account. Most reputable brokers offer demo accounts nowadays so I would always recommend you take advantage of this facility.
5. Account Types
Although all forex brokers cater for the well capitalized traders, not all of them cater for those traders who wish to trade smaller positions. Therefore if you yourself fall into this category, then you should look out for brokers that allow you to trade mini-lots (equivalent to around $1 per pip) or micro-lots ($0.1 per pip).
6. Minimum Deposit
If money is tight or you want to start off small (which is always a good idea), then you will want to choose a forex broker that requires a relatively low minimum deposit when opening a live trading account.
7. Charting Software
Nearly all forex brokers provide some kind of charting software free of charge when you open an account with them. It may be the highly popular Metatrader 4 platform or it may simply be a no-frills charting package. So therefore if you do want to use some of the more advanced charts, then I suggest you go with a broker that provides the Metatrader 4 or ProRealTime platform, for instance, otherwise you will have to fork out some money to access some decent charts elsewhere.
8. Additional Services
As well as charting software, you may also want your broker to provide a range of additional services such as daily commentaries, market analysis, educational materials and the option to deal through your mobile phone.
9. Customer Service
If you are just starting out as a forex trader you will probably have several questions and queries when you first open an account with a broker. So therefore you should try and join a broker that offers a high level of customer service. One way of testing this out is to contact the help desk of the brokers you are considering joining, ask them a particular question, and see how long they take to get back to you.
10. Customer Comments And Reviews
Finally your ultimate choice of forex broker will often be swayed by what other traders have to say about them. There are several websites which contain customer reviews of all of the leading brokers and you will find no shortage of opinions on all of the different forex forums.
However one thing I will say is that you will never come across brokers that have nothing but positive reviews, so don't waste too much time looking for the perfect broker because it simply doesn't exist. Just look for brokers that have a high number of positive comments and you should be fine.
* * * * * * *
To help you narrow down your search, here's a list of some of the leading online forex brokers:
Alpari
Location: Russia / UK / US
Online Since: 1998
Account Types: Micro / Classic
Minimum Account Size: $200
Free Demo Account: Yes (unlimited)
Spreads: 1.8+
Charts / Trading Platform: MetaTrader 4
(Note: Alpari has three different websites (UK, US and Russia) so account features may vary).
CMS Forex
Location: US
Online Since: 1999
Account Types: Universal (trade mini and standard lots from same account)
Minimum Account Size: $200
Free Demo Account: Yes
Spreads: 2 pips for EUR/USD and USD/JPY pairs
Charts / Trading Platform: VT Trader 2.0
dbFX
Location: Germany
Online Since: 2006
Account Types: Standard
Minimum Account Size: $5000
Free Demo Account: Yes
Spreads: 2-4 pips for major currency pairs
Charts / Trading Platform: dbFX Trading Platform
Dukascopy
Location: Switzerland
Online Since: 2004
Account Types: Live / Managed
Minimum Account Size: $50,000
Free Demo Account: Yes (14 days)
Spreads: 0-2 pips for major currency pairs
Charts / Trading Platform: Java / JForex / Web
Forex.com (part of GAIN Capital)
Location: US
Online Since: 1998
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (30 days)
Spreads: 1.1+ for major currency pairs
Charts / Trading Platform: MetaTrader 4
FXCM
Location: US
Online Since: 1999
Account Types: Mini / Standard
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: Typical spreads between 2 and 4 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4
(Note: Separate Micro account also available).
FXDD
Location: US
Online Since: 2002
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (90 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4 / MTXtreme / FXDD Trader / FXDD Auto / Power Trader
FXPro
Location: Cyprus
Online Since: 2008
Account Types: Standard / Premium
Minimum Account Size: $500
Free Demo Account: Yes (unlimited)
Spreads: 0.5+ for major currency pairs
Charts / Trading Platform: MetaTrader 4
GFT Forex
Location: US / Worldwide
Online Since: 2001
Account Types: Mini / Standard / Silver / Gold / Platinum
Minimum Account Size: $250
Free Demo Account: Yes
Spreads: 3-4 pips for major currency pairs
Charts / Trading Platform: DealBook 360
Interactive Brokers
Location: US
Online Since: 1998
Account Types: Universal
Minimum Account Size: $3000+ (depending on the type of account)
Free Demo Account: No
Spreads: 1 pip for EUR/USD pair
Charts / Trading Platform: Trader Workstation
Interbank FX
Location: US
Online Since: 2001
Account Types: Mini / Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (30 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4
MB Trading
Location: US
Online Since: 2002
Account Types: Standard
Minimum Account Size: $400
Free Demo Account: Yes
Spreads: 0.1-1 pip for major currency pairs
Charts / Trading Platform: MetaTrader 4
MIG Bank
Location: Switzerland
Online Since: 2003
Account Types: Standard / Professional / Institutional
Minimum Account Size: $2000
Free Demo Account: Yes (90 days)
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4
Oanda
Location: Canada
Online Since: 2001
Account Types: Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (unlimited)
Spreads: 0.9 for EUR/USD pair
Charts / Trading Platform: FXTrade platform
ODL Securities
Location: UK
Online Since: 2004
Account Types: Standard (can trade from $1 per point upwards)
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4 (and other platforms for professional traders)
Saxo Bank
Location: Denmark
Online Since: 1999
Account Types: Saxo MiniTrader / Saxo Trader
Minimum Account Size: $2000
Free Demo Account: Yes (20 days)
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: SaxoTrader
Should You Use Multiple Time Frames When Trading Forex?
In today's article I want to talk about the merits of using multiple time frames to trade the various different forex pairs. If you go to some of the forex forums and check out the different strategies that people use, you will find that some prefer to use just one time frame, whilst others prefer to use two, three or four different time frames. So how many time frames should you use?
Well the short answer is that you can potentially make money from forex trading using however many time frames you want. There is no right or wrong approach in my opinion.
You may automatically assume that you are more likely to make winning trades using multiple time frames because you can find pairs that are trending in the same direction on each of these time frames, and then pinpoint your entry point on the shortest of those time frames. For example you could look for currency pairs that are trending upwards on the 1 hour, 15 minute and 5 minute charts, and then look to go long at the most opportune moment on the 1 minute chart.
This kind of strategy definitely has it's merits because you are always trading in the same direction as the longer term trend, and therefore you always have probability on your side. However if you use too many time frames you can over-complicate things and you ultimately end up getting a lot of conflicting signals and fewer and fewer opportunities to actually trade the markets.
That's why when I trade my main 4 hour trading system (see right for more details), I only use two time frames. I use the daily chart to highlight the current trend, and the 4 hour chart to find opportunities to go long/short in the same direction as this trend.
The actual system I use only produces a few really good trading opportunities every week (and sometimes none at all) across the major currency pairs. So if I were to use the weekly and monthly charts for additional confirmation of the long term trend, then my trading system would barely produce any trades at all.
I also think it's important to point out that whilst it's a good thing to always be trading in the same direction as the long term trend, you don't always need to use multiple time frames when trading forex. For instance the Forex Morning Trade system, which has made me a lot of money since I first started trading it last September, only ever uses the 15 minute charts.
Similarly when I trade early morning breakouts using my own breakout trading system, I only ever use the 5 minute charts to enter and exit positions. I don't even look at the 15 minute or 1 hour chart, for instance, to look at the longer term trend. All I am interested in is finding a profitable breakout opportunity on the 5 minute chart using simple price action and a couple of technical indicators.
So the point is that you can indeed use multiple time frames to trade forex. I myself use two different time frames when trading my main 4 hour trading system. However as you start to use more and more time frames, you will start to get a lot of conflicting signals and you will also get a lot fewer trading opportunities. Furthermore it is sometimes just as easy to make profits trading just one single time frame, as I have hopefully demonstrated using the two examples above.
The fact is that everyone has their own trading strategies, and it doesn't really matter how many time frames you use because you can still generate profits regardless of how many you use.
Well the short answer is that you can potentially make money from forex trading using however many time frames you want. There is no right or wrong approach in my opinion.
You may automatically assume that you are more likely to make winning trades using multiple time frames because you can find pairs that are trending in the same direction on each of these time frames, and then pinpoint your entry point on the shortest of those time frames. For example you could look for currency pairs that are trending upwards on the 1 hour, 15 minute and 5 minute charts, and then look to go long at the most opportune moment on the 1 minute chart.
This kind of strategy definitely has it's merits because you are always trading in the same direction as the longer term trend, and therefore you always have probability on your side. However if you use too many time frames you can over-complicate things and you ultimately end up getting a lot of conflicting signals and fewer and fewer opportunities to actually trade the markets.
That's why when I trade my main 4 hour trading system (see right for more details), I only use two time frames. I use the daily chart to highlight the current trend, and the 4 hour chart to find opportunities to go long/short in the same direction as this trend.
The actual system I use only produces a few really good trading opportunities every week (and sometimes none at all) across the major currency pairs. So if I were to use the weekly and monthly charts for additional confirmation of the long term trend, then my trading system would barely produce any trades at all.
I also think it's important to point out that whilst it's a good thing to always be trading in the same direction as the long term trend, you don't always need to use multiple time frames when trading forex. For instance the Forex Morning Trade system, which has made me a lot of money since I first started trading it last September, only ever uses the 15 minute charts.
Similarly when I trade early morning breakouts using my own breakout trading system, I only ever use the 5 minute charts to enter and exit positions. I don't even look at the 15 minute or 1 hour chart, for instance, to look at the longer term trend. All I am interested in is finding a profitable breakout opportunity on the 5 minute chart using simple price action and a couple of technical indicators.
So the point is that you can indeed use multiple time frames to trade forex. I myself use two different time frames when trading my main 4 hour trading system. However as you start to use more and more time frames, you will start to get a lot of conflicting signals and you will also get a lot fewer trading opportunities. Furthermore it is sometimes just as easy to make profits trading just one single time frame, as I have hopefully demonstrated using the two examples above.
The fact is that everyone has their own trading strategies, and it doesn't really matter how many time frames you use because you can still generate profits regardless of how many you use.
try to take longer term trades
was playing around with my charts this morning and I never thought to kick my existing charts up to weekly and monthly time frames because many of the indicators I use don't calculate that far back. I have been saying alot how the Chandeliers stop indicators catch bigger moves the higher time frames you go, thats a given, but I'm inclined to want and try to take longer term trades now based on what I see. When I first started out I thought I wouldn't be able to handle large swings and trade on an interday basis. But it still may be a good idea to not just give them a passing glance, but to base your entire approach of whether or not to go long or short on what your longer time frame chart says the trend is on a yearly basis. This is what I am referring to when I ask, do we want to catch a move here and there, or do we want to catch THE move that the big money goes after? I should ask, do you want to be on the grind day after day, or do you want to enter a trade and live your life knowing you're money is working for you?
THIS IS A 10,000 pip MOVE!
As you can see in this example, between July and August of 2007, GBPJPY had gone up all the way to 250.00 with a green chandelier that lasted at least one year. So you see these chandeliers on the highest time frame charts will last you a LONG time, keeping you in the trade in the direction of the trend which is nothing new. But what I'm interested in is the inception of THE moves that the big banks and big traders are going after. So, the green chandelier turns to red on 8/24/2007, but this is not a magical entry point finder that will get you into a massive winning trade. If you notice, there are slight pullbacks (it seems) on this chart, but represent hundred pip moves (against us) that would wipe most of us out.
Trend lines really help in this regard, as you can see the yellow dotted lines are drawn underneath the upswings in this downward moving pair. If we enter at the exact moment these trend lines are broken, that all but eliminates the need to withstand huge losses before price went our way.
How I would approach this, is keep on scalping, looking for entry points but only in the direction of the weekly chandelier, draw the trend lines above or below the short term trends, and wait for crossovers of these levels to go back to your 5 Minute or 100 Tick charts to look for the proper entry levels on the shorter term time frames. But always exit the trade break even when it goes against us too far. Re-enter when shorter term indicators tell us things may go the way of the longer term trend again.
That's why I think it's wise to have a short term approach that turns into an longer term strategy when the right move is caught. It's one thing to just enter when the indicaotrs flip having to withstand hundreds of pips of swings up and down and knowing the LONG term trend has changed and trading in that direction (getting out when small swings down occur) until you get it right which could save your account from getting margin called. Patience is key with longer term strategies, and always think about the rollover, I have no idea what the fee would be for holding on to GBP/JPY for an entire year, but it can't be good.
So as always please use caution with any method, this is not magic like I said, but is a good way to incorporate longer term charts into your daily strategies, whatever they may be.
THIS IS A 10,000 pip MOVE!
As you can see in this example, between July and August of 2007, GBPJPY had gone up all the way to 250.00 with a green chandelier that lasted at least one year. So you see these chandeliers on the highest time frame charts will last you a LONG time, keeping you in the trade in the direction of the trend which is nothing new. But what I'm interested in is the inception of THE moves that the big banks and big traders are going after. So, the green chandelier turns to red on 8/24/2007, but this is not a magical entry point finder that will get you into a massive winning trade. If you notice, there are slight pullbacks (it seems) on this chart, but represent hundred pip moves (against us) that would wipe most of us out.
Trend lines really help in this regard, as you can see the yellow dotted lines are drawn underneath the upswings in this downward moving pair. If we enter at the exact moment these trend lines are broken, that all but eliminates the need to withstand huge losses before price went our way.
How I would approach this, is keep on scalping, looking for entry points but only in the direction of the weekly chandelier, draw the trend lines above or below the short term trends, and wait for crossovers of these levels to go back to your 5 Minute or 100 Tick charts to look for the proper entry levels on the shorter term time frames. But always exit the trade break even when it goes against us too far. Re-enter when shorter term indicators tell us things may go the way of the longer term trend again.
That's why I think it's wise to have a short term approach that turns into an longer term strategy when the right move is caught. It's one thing to just enter when the indicaotrs flip having to withstand hundreds of pips of swings up and down and knowing the LONG term trend has changed and trading in that direction (getting out when small swings down occur) until you get it right which could save your account from getting margin called. Patience is key with longer term strategies, and always think about the rollover, I have no idea what the fee would be for holding on to GBP/JPY for an entire year, but it can't be good.
So as always please use caution with any method, this is not magic like I said, but is a good way to incorporate longer term charts into your daily strategies, whatever they may be.
Your broker earns its wages by charging you a certain amount of pips between the bid and ask price
ASH BACK FOREX is a site I check on from time to time because so many of you are letting me know how well it works out for you, and now they are reaching an important milestone of 10,000 members. If you haven't heard about Cash Back Forex Rebates then you are literally throwing money away!
Forexforums.comYour Broker: Your broker earns its wages by charging you a certain amount of pips between the bid and ask price.
Rebate Company: Sometimes a company will offer to turn people on to that broker in return for a "cut" of that spread on each trade you make. The rebate company gives you a cut of the cut!
The Rebate: Earn a nice return up to an entire pip off the price of each trade you make. Sometimes its a percentage, but most of the time it will be a flat .2-1.0 pip rebate. I recommend FXDD for American traders since they are offering one of the highest rebates now, 0.7 pips per round lot traded. I made the following calculations based on this. But there's also FXCM UK, Instaforex, and a few other big brokers that you may already belong to and can easily sign up for rebates through CBF.
If you are enabling rebates on your account through this service, I can not guarantee how much you could make back from your trading, but they have a calculator that can give you a good estimate based on your current trading habits. For instance, being very conservative and trading 1 mini lot at 5 trades a day consistently earns you nearly $1000 this year. I trade full lots these days, 5-10 trades per day, so I'm even thinking about switching brokers to open myself to over $10,000 in rebates yearly!!! My current broker is not on this very big list of available rebate brokers.
Basically, even if you already have an account with a broker on their list, you can sign up through CBF to the broker so that CBF gives you a rebate for every trade you make, win, lose, or draw. What caught my attention is that they are nearing 10,000 registered users and almost 8,000 live accounts meaning almost 80% of people who sign up actually use it! Compared to our forum they are winning Forexforums.com But no matter, if you have not yet definitely sign up your existing or new broker account through the free Cash Back Forex program. This is all above board and legitimate too, maybe even a little known secret your broker doesn't want you to know, but whatever your concern, there's no need to worry about account closing, in fact it comes as a separate payment altogether through paypal or check.
Forexforums.comYour Broker: Your broker earns its wages by charging you a certain amount of pips between the bid and ask price.
Rebate Company: Sometimes a company will offer to turn people on to that broker in return for a "cut" of that spread on each trade you make. The rebate company gives you a cut of the cut!
The Rebate: Earn a nice return up to an entire pip off the price of each trade you make. Sometimes its a percentage, but most of the time it will be a flat .2-1.0 pip rebate. I recommend FXDD for American traders since they are offering one of the highest rebates now, 0.7 pips per round lot traded. I made the following calculations based on this. But there's also FXCM UK, Instaforex, and a few other big brokers that you may already belong to and can easily sign up for rebates through CBF.
If you are enabling rebates on your account through this service, I can not guarantee how much you could make back from your trading, but they have a calculator that can give you a good estimate based on your current trading habits. For instance, being very conservative and trading 1 mini lot at 5 trades a day consistently earns you nearly $1000 this year. I trade full lots these days, 5-10 trades per day, so I'm even thinking about switching brokers to open myself to over $10,000 in rebates yearly!!! My current broker is not on this very big list of available rebate brokers.
Basically, even if you already have an account with a broker on their list, you can sign up through CBF to the broker so that CBF gives you a rebate for every trade you make, win, lose, or draw. What caught my attention is that they are nearing 10,000 registered users and almost 8,000 live accounts meaning almost 80% of people who sign up actually use it! Compared to our forum they are winning Forexforums.com But no matter, if you have not yet definitely sign up your existing or new broker account through the free Cash Back Forex program. This is all above board and legitimate too, maybe even a little known secret your broker doesn't want you to know, but whatever your concern, there's no need to worry about account closing, in fact it comes as a separate payment altogether through paypal or check.
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