Archive for February, 2009

Feb
08

Forex Trading: Make certain that you know exactly what you’re doing.

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Although every investment involves some risk, the risk of loss in trading off-exchange forex contracts can be substantial. Therefore, if you are intending to get involvedwith this market, you should understand some of the risks associated with any forex product so you can make an informed decision before investing.

The only money that you should use for playing the forex markets is money that you are prepared to lose. This is common sense, but so often, people get carried away with thh excitement of it all that they lose sight of this fundamental precept. There are also other reasons why forex trading may or may not be an appropriate investment for you.

The market could move against you
It goes without saying that no one can predict which way exchange rates between currency pairs will go, and the forex market can be volatile. Variations in the foreign exchange rate between the time you place a trade and the time you close it out will affect the price of your forex contract and the potential for profit or loss.

You could lose all of your investment
You will be required to deposit an amount of money (often referred to as a security deposit or margin) with your forex broker in so that you can buy or sell forex contracts. Because of the leverage involved, a relatively small amount of money can enable you to hold a trading position worth many times the account value. This is referred to as leverage or gearing. The smaller the deposit in relation to the underlying value of the contract, the greater the leverage.

If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. Depending on your agreement with your dealer, you may also be required to pay additional losses.

There is no central marketplace
Unlike regulated futures exchanges, in the retail off-exchange forex market there is no central marketplace with many buyers and sellers dealing directly with each other. It is the forex system broker himself who determines the execution price, so you are relying on the dealer’s integrity for a fair price.

You are relying on the broker’s reputation
You should be aware that retail off-exchange forex trades are not guaranteed by a clearing organization. Furthermore, any deposit that you have lodged to trade forex contracts are not insured and do not receive a priority in bankruptcy. You should also be aware that customer funds deposited by a broker in an FDIC-insured bank account are not protected if the broker goes bankrupt.

You could become a victim of fraud
As with any investment,especially over the web you should always protect yourself from fraud. Be very cautious about of any forex system or scheme that promise significant returns with little or no risk. You should take a close and cautious look at the investment offer itself and continue to monitor any investment you do make.

The Trading System could break down
If you are using an Internet-based or other forex trading system to place trades, some part of the system could fail. In the event that this occurs, you could find yourself unable to close exposed positions. A system failure may also result in loss of orders or order priority.

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Categories : Forex Trading
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Feb
04

Forex Brokers | Choosing One That Won’t Rip You Off

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forex
At the best of times forex currency trading can be a risky business with a huge potential for profit or loss. As a fulltime trader i have seen the best and the worst that the forex market has to offer, the dizzying highs of large wins, and the gut wrenching lows of people going bust.

You might be a forex trader yourself, or maybe you are just curious about how forex markets work, whomever you are, you need to learn how to seperate the legit forex brokers from the scam merchants. The internet has a great deal of genuine forex dealers offering quality services, it is also unfortunately infected with just as many thieves dressed up as companies who will gladly take your money and then dissapear. This fear of being taken advantage of puts a lot of people off the idea of trading forex, this shouldn’t be the case.

Now there are a few key differences between stock markets and forex markets that you are going to have to learn:

  • Forex has no centralized exchange house
  • Forex is a largely unregulated market

Looking at that list, it kind of seems that the forex market is akin to a wild west town full of outlaws and gunslingers. In this market there is noone to complain to, noone who will hold your hand. So how can you find the genuine dealers amid all the garbage? Do not trust any broker whose reputation cannot be confirmed, and whose company is not tied to the forex market.

The attraction of the forex market can be overwhelming. The scent of huge profits often overpower the common sense of the average person. They enter eagerly, just waiting to invest their life savings.Lying in wait are the scammers with huge promises, they capture the new investors money, and suddenly dissapear.

The good news is, is that many genuine forex brokers do actually exist. Easy-Forex, Oanda, and many more have proven track records that justify their positions in the market. Usually if a company is small, has no affiliation to forex or a financial institution, then stay away. Also a word on looking for reviews about brokers online. You can find honest reviews on forex brokers online, however there seems to be a habit of late of competing forex companies, and/or traders engaging in negative marketing of each other. Dig deeper and you will usually find an honest answer.

So remember:

  • Validate the companies reputation
  • Make sure they are tied to the forex legitimately
  • If the company is small and unheard of, stay away
  • Finally if the broker has a proven online track record, a legitimate financial institution affiliation, and a few good reviews, give them a try

My ultimate advice is, if unsure, invest the smallest amount you can, and find out for yourself. This is how i usually used to find brokers, and it worked for me.

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