Why day trade forex?
Trade largest market in the world. This market enables us to capitalize on its huge fluctuation each day. Forex are traded 100% electronically, hence, they’re perfectly suited to online traders who value transparent prices, instant execution, and low costs. Forex are also appealing because of their excellent liquidity and around-the-clock trading hours. It's a good hedging tool for stock investors worldwide. We can close our position and have a good night sleep. We do not have to worry if a sudden incidents occur like Japan earthquake, 9/11etc.
Is forex trading easy and profitable?
The foreign exchange 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. Presumably, these characteristics would enable traders to have tremendous success. However, success has been limited to 5% of the forex traders mainly for the reasons described below. A lot of traders come with false expectations of the profit potential and lack the discipline required for trading. Short-term trading is not an amateur's game and is definitely not the path for get rich quick. Though currencies may seem exotic or less familiar than than equities, futures, etc, the rules of finance and simple logic are not suspended. One cannot hope to make extraordinary gains without taking extraordinary risks. A trading strategy that involves taking a high degree of risk means suffering inconsistent trading performance and often suffering large losses. Trading currencies is not easy if it was, everyone would already be a millionaire, and many traders with years of experience still incur periodic losses. One must realize that trading takes time to master and there are absolutely no short cuts to this process. This is where FXProgress Practical Trading Course comes in.
Is there a “central exchange” for this market?
No. Unlike stock and futures markets, FX trading is not centralized on any exchange. It is considered to be an Over-the-Counter (OTC), or 'Inter-bank,' market. This is because transactions are conducted between two counterparts via an electronic network.
Who are the “participants” in this market?
'Inter-bank market' means that it was dominated by approximately 300 banks up until recently – i.e., central banks, commercial banks, investment banks.However, thanks to market makers, other market players then entered the market in record numbers. They include international money brokers, large multinational corporations, registered dealers, hedge funds, money managers, speculators, and futures and options traders.
When is this “market open” for trading?
This is a true seamless 24-hour, five and a half-day-a-week, market. Trading begins each day in Sydney, and then moves around the world, as each financial center opens up – Tokyo, London, and then New York – in that order. The big advantage to trading the forex market is that traders like you and I can respond to currency fluctuations caused by economic, political or social events as they unfold – day or night. This is much unlike other financial markets, as you know.
Which “currencies” should I trade in this market?
The most commonly traded are those that are 'liquid' – i.e., those of countries with stable governments, low inflation, and respected central banks. Over 90% of all trading activity are around the major currencies – i.e., the British Pound, Canadian Dollar, Euro, Japanese Yen, Swiss Franc, and the U.S. Dollar
Do I need a lot of “money” to trade this market?
No. It is suggested that you start with at least US$1,000 to US$5,000 in your trading account. You can execute margin trades with up to 200:1 leverage, and you can also execute trades of $10,000 with an initial margin requirement of $50, in some cases.
However, it is important to note that, while such leverage allows you to maximize your profit potential, the potential for loss exists too. It acts like a double swords. A more pragmatic margin trade for you, if you are new to the FX markets, might be in the order of 20:1, but this ultimately depends on your appetite for risk. The most common ratio is 100:1 for a standard account, and that’s what we recommend when you open your account. Of course, you can start with a mini account, and upgrade from there.
Concerning risk, FXProgress trading method has a 65% success rate, so you will not be “trading blindly,” as most traders do. We are here to help you get on the winning side of most of your trades with our FXProgress Practical Trading System which has captured the Forex market by storm.
What is “margin?”
Margin is collateral for a position. Your broker will request additional funds by way of a "margin call," if the market moves against your position. It will immediately close out your open positions, if there are insufficient funds in your account.
What are “long” or “short” positions?
A long position is one in which you buy a currency at one price, with the expectation of selling it at a higher price. Obviously, you anticipate that the market will rise. A short position is one in which you sell a currency with the expectation of buying it back at a lower price. Here, you expect the market to decline. Every FX position you take automatically entails going long in one currency, and short the other. If you buy one, by default you are shorting the other.
What is the difference between “intraday” and “overnight” positions?
Intraday positions are those positions you would take during the 24-hour period, after the broker’s normal trading hours open, but not hold after the close. Overnight positions are those of your positions that are still on at the end of normal trading hours. Your broker rolls over your positions at competitive rates (based on the currencies’ interest rate differentials) to the next day's price.
What “drives” currency prices?
Currency prices are affected by a variety of economic and political factors – most importantly employment rate, inflation, interest rates, large market orders, and political climate. Furthermore, governments sometimes enter the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency to lower its price, or conversely by buying it to give it a boost. This is commonly called “central bank intervention.” Any of these factors can cause volatile currency prices. However, the sheer size and volume of the Forex market makes it virtually impossible for any one entity to "influence" the market for any length of time.
How should I “manage risk?”
The most common risk management tools in Forex trading are the limit and stop loss orders. A limit order restricts the maximum price to be paid, or the minimum price to be received. A stop loss order ensures that your position is automatically liquidated at a predetermined price, should the market move against you. Limit order and stop loss orders can easily be executed due to the huge liquidity of the Forex market.
How “often” should I trade?
Market conditions will dictate your trading activity on any given day. The average small-to-medium trader could conceivably trade up to 10 times a day. However, it is not advisable because there are spreads when you trade currencies on the Forex, you can take long or short positions as often as you like, the spread will costs you a great deal.
What is the “spot rate,” and what is the “spot market?” What “exchange” does it trade on?
Spot rate means that currencies can be exchanged for delivery in two days which is considered on the spot. The bulk of forex trading is conducted between approximately 350 large international banks, which process transactions for large companies and governments. These institutions continuously provide prices for each other, and their corporate and institutional clients. Forex trading is not bound to any one trading floor, but takes place electronically within a network of banks continuously over a 24-hour period.
What do the terms “bid/ask” and “spread” mean?
Bid is the price that the seller is offering for a particular currency at the moment; ask is the price acceptable to the buyer. Together, the two prices constitute a quotation; the difference is spread.
Forex trading involves a substantial risk of loss and is not suitable for all investors,
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