WRITING Inside

Market Maker Brokers: Is It Evil or Prohibited to Be a Market Maker?

noreply@blogger.com (Anonymous) — Thu, 3 Mar 2016 16:54:00 +0600

One of the Fx friend, Shuvo, asked me a question that made me write this post. As we always talk against market maker brokers, most traders think it is too bad to be a market maker and it can be even illegal. They wonder if market maker brokers are really bad why there are still too many of them and why it is not illegal to be a market maker.

Before I tell you whether it is bad to be a market maker or not, first I have to explain what a market maker is.

What Is a Market Maker?

There are some complicated definitions over the Internet for this. But I am going to make it as simple as possible.

I am a market maker if you buy and sell currencies with me. To do that you have to contact me and ask for the prices and fees. For example you want to pay Swiss Franc and buy $1000 USD. I tell you that I charge you 900 CHF to give you $1000 USD. You agree and pay me 900 CHF and get your $1000 USD. I hold your 900 CHF until someone else comes and pays another currency to buy CHF from me.

Who is the market here?

I am the market, because you deal with me, not anybody else. So I am the market maker here, because the market is me. I give you the price, I buy from you or sell to you.

Why am I doing this?

I do it for profit. First of all, I charge you a service fee or commission whenever you buy or sell. Second, I make profit from the difference of the bid and ask price (buy and sell prices) which is the spread. Above all, the price I offer you is determined by me. Although it can be too close to the real market price, but it is different because I am free to offer you my own price. Just refer to few different banks in your city and ask for the USD price. Although their prices are so close to each other, but they are different and are not the same. Also the spread they charge you is different.

If the value of the currencies that I hold goes up, I will make a lot of profit, and visa versa. Therefore, I like the value of the currencies that I receive from you to go up, and the value of the currencies that I sell to you to go down. If the opposite happens, I lose money. In the above example, I took 900 CHF from you and gave you $1000 USD. If you come back the next day to give me your $1000 USD and receive your 900 CHF back while the values are changed and $1000 USD costs 800 CHF, then 100 CHF will be my profit because if you give me your $1000 USD I will give you 800 CHF only.

So getting different currencies from people and holding them can be profitable or risky for me.

Is it evil to be a market maker?

Absolutely not. I am offering a service that you need. We are both benefited from this service. I make profit and you get the currency you want. Also if you think the prices I offer or the fees I charge are not fair enough, you can refer to another market maker or dealer. It is your own choice. However, as I have too many competitors, I have to offer competitive prices and fees to attract more customers.

This is exactly what market maker brokers do, with this difference that they offer their service online and you can deal with them through a software which is called trading platform.

It is not bad by itself to be a market maker. It is a service that people need. However, when a market maker tries to cheat its clients to make more profit or prevent them from making profit, it becomes a bad market maker. Sometimes they do this only because they want to make more money (greed). Sometimes they do it because they are afraid of losing money (fear).

Online market maker brokers can deal with thousands of traders through the Internet. As over 95% of the traders lose on their own, market maker brokers make profit automatically without having to cheat their clients. However, sometimes they get greedy and make some tricks that cause their clients to lose faster and easier (e.g. stop loss hunting). Sometimes some other clients make a reasonable amount of profit which is the broker’s loss, so that brokers have to cheat the other clients to become able to pay for the profit the other clients have made.

These actions make the clients unhappy.

Online market maker brokers cheat because they don’t know how to manage and balance between the clients losses and gains. They only make money through the clients losses and this makes them vulnerable to possible big losses when the other clients make profit.

Strong liquidity providers are also market maker, but they don’t cheat their clients. The reason is that liquidity providing is not the only source of income they have. They make money through too many other services they offer. They also participate in too many different investments. The money that floods in their company through liquidity providing for retail Forex traders will not be just hold by them. They use it to offer the other services to the other clients like loans and mortgages, or participating in different investment opportunities. So they make money with the traders money. Therefore, they don’t care even if some traders make profit, because they have already used the money to make profit through the other ways. And of course they also make money when the other traders lose money.

This is how a strong liquidity provider can manage and balance between the losses and gains and remains profitable almost all the time and keep on offering its service. This is what market maker brokers don’t do, don’t know how to do, or are not big enough to do. That is why they have to balance through cheating the clients.

If you make money while trading with a strong liquidity provider, they not only don’t cheat you to make that you lose, but also they appreciate your business because when you take a position, your money will be added to their treasury, and so they can use it instantly to offer the other services or invest with the other companies. They have too many specialists who manage these affairs for them. But most retail market maker brokers cannot afford to do that.

So, it is neither bad nor illegal to be a market maker. It is bad and illegal when a market maker cheats its clients.

The Difference of True and False ECN/STP Brokers

noreply@blogger.com (Anonymous) — Fri, 26 Feb 2016 13:32:00 +0600

Since forex is introduced to the public, traders learn more and more every day. Few years ago, most traders would have no answer if you asked what ECN/STP was. Thanks to the Internet and the free information accessible to public through it, now most traders know how to choose a good broker and what a market maker and ECN/STP brokerage system is.

However, scams never stop cheating. Since most traders look for ECN/STP brokers to open an account with, many scam brokerages that were used to be market maker, call themselves ECN/STP now, just based on some small changes they have made in their systems. They are not true ECN/STP brokers. This is what you have to be aware of. So, what is the difference of a true and a false ECN/STP broker?

ECN stands for Electronic Communications Network. An ECN broker is the one that its platform is electronically connected to the network of international banks or liquidity providers. When you trade forex through such a platform, indeed you are communicating and trading with the real and true international currency market.

STP stands for Straight Through Processing. It means everything from placing the orders to closing them is done automatically and electrically without any manual intervention.

Does it mean that if a broker electronically and without any human intervention connects the platform you install on your computer to another organization called liquidity provider, it is an ECN/STP broker?

Technically speaking yes. It is an ECN/STP broker, because it routes your orders to a liquidity provider electronically and without any human intervention. But what if that so called “liquidity provider” is another market maker broker that belongs to the same company but with a different name or a sister company?

That is still an ECN/STP broker from the electronic and technological point of view. But it is a fake ECN/STP broker, because he routes your orders to another market maker broker that rips you off and shares the profit with him (the broker). Or, it routes your orders to a different system with a different name which indeed belongs to the same company. I mean they take your money from one pocket and put it in another pocket. In both cases, you are not trading with the real currency world. You are dealing with a market maker broker that wants you to lose.

Why do they do this?

They do it because they want to claim they are ECN/STP, not market maker. They proudly advertise it on their sites. As I mentioned, they are ECN/STP from the electronic point of view, but they are market maker indeed.

Who Is a True ECN/STP Broker?

A true ECN/STP broker is the one that its platform is connected to at least one trusted and well-known liquidity providing organization (like Bank of America, Goldman Sachs, JP Morgan, Citi Bank, Nomura, HSBC) that has nothing to do with brokerage firm and there is no relationship between them. The broker just routes your orders to the liquidity provider. The liquidity provider makes money through the spread and swap and the broker makes money through the commission they charge you. You pay the spread and swap to the liquidity provider, and the commission to the broker.

Nowadays, most true ECN/STP brokers are connected to several liquidity providers at the same time. When you want to place an order, the system automatically chooses the liquidity provider that is offering the best price, and your order will be routed to that liquidity provider. Therefore, your orders will be distributed among several liquidity providers and none of them will have any chance to know your account and go against you in case you make money. That provides the best possible service for you as a trader, and because liquidity providers compete with each other, they offer lower spread every day which is good for retail traders.

Some brokers are true ECN/STP brokers, but they increase the spread in addition to the commission they charge you. What they add to the spread is called markup. They are not allowed to do that, unless they let the clients know. However, many of them don’t inform the clients about this hidden fee and extra charge and when you ask them why the spread is too high, they answer that it is the market’s normal spread, which is a lie. So, even a true ECN/STP broker can cheat you too. Read this: 6 Ways Forex Brokers Cheat You.

So, when you want to choose a broker, make sure it is a true ECN/STP broker first. Also ask them if they charge markups or not. You have to ask them about this and ask for proofs. In case they refused to give you a good answer, don’t open an account with them.

Good luck :)

Leverage, Margin, Balance, Equity, Free Margin, Margin Call And Stop Out Level In Forex Trading

noreply@blogger.com (Anonymous) — Thu, 18 Feb 2016 19:27:00 +0600

I always see so many traders who trade forex, but still don’t know what margin, leverage, balance, equity, free margin and margin level are.

Margin and leverage are two important terms that are usually hard for the forex traders to understand. It is very important to understand the meaning and the importance of margin, the way they are calculated, and the role of leverage in margin.

Leverage:

Leverage is a feature offered by the broker, to help the traders to trade larger amounts of securities by having a smaller account balance. For example, when your account leverage is 100:1, you can buy $100 by paying $1. Therefore, to buy $100,000 (one lot), you should pay only $1000 (this is just an example. I know nobody pays dollar to buy dollar.

Now you tell me please. How much you have to pay to buy 10 lots USD with an account that its leverage is 50:1 ?

That is right. You have to pay $20,000 to buy 10 lots or $1,000,000 USD:

$1,000,000 / 50 = $20,000

Leverage was so easy to understand, right? I had to explain it first, to become able to talk about the other term which is margin.

Margin:

Margin is calculated based on the leverage, but to understand the margin, lets forget about the leverage for now and assume that your account is not leveraged or indeed its leverage is 1:1

Margin is the amount of the money that participates in a position or trade. Let’s say you have a $10,000 account and you want to buy €1,000 against USD. How much US dollars do you have to pay to buy €1,000?

EUR/USD rate is currently 1.4314. It means each Euro equals $1.4314. Therefore, to buy €1,000, you have to pay $1,431.40:

€1,000 = 1000 x $1.4314

Therefore:

€1,000 = $1,431.4

If you take a 1000 EUR/USD long position (you buy €1000 against USD), $1,431.4 from your $10,000 account has to participate in this position. When you set the volume to 0.01 lot (1000 unit) and then you click on the buy button, $1,431.4 from your account will be paid to buy 1000 Euro against USD. This $1,431.4 is called margin. Now, if you close your EUR/USD position, this $1,431.4 will be released and will be back to your account balance.

Now let’s assume that your account has a 100:1 leverage. To buy 1000 Euro against USD, you have to pay 1/100 or 0.01 of the money that you had to pay when your account was not leveraged. Therefore, to buy 1000 Euro against USD, you have to pay $14.31:

$1,431.4 / 100 = $14.31

Now, please tell me that if you take a one lot EUR/USD with an account with the leverage of 100:1, how much margin will participate in the trade?

One lot EUR/USD = 100,000 Euro against USD
EUR/USD rate: 1.4314 100,000 x 1.4314 = 143,140.00 Therefore: One lot EUR =$143,140.00
$10,000 – $50 = $10,050
(200,000 x 1.4300) / 100 = $2,860.00
$10,050 – $2,859.52 = $7,190.48
($10,050 / $2,859.52) x 100 = 351.46%

Leverage: 100:1

Margin = $143,140.00 / 100 = $1,431.40

Therefore, to have a one lot EUR/USD position with a 100:1 account, $1,431.40 margin is needed.

Balance:

When you have no open position, balance is the amount of the money you have in your account. For example, when you have a $5000 account and you have no open position, your account balance is $5000.

Equity:

Equity is your account balance plus the floating profit/loss of your open positions:

Equity = Balance + Floating Profit/Loss

When you have no open position, and so no floating profit/loss, then your account equity and balance are the same.

When you have some open positions and for example they are $1,500 in profit in total, then your account equity is your account balance plus $1,500. If your positions were $1,500 in loss, then your account equity would be your account balance minus $1,500.

Free Margin:

Free margin is the difference of your account equity and the open positions’ margin:

Free Margin = Equity – Margin

When you have no position, no money from your account is used as the margin. Therefore, all the money you have in your account is free. As long as you have no position, your account equity and free margin are the same as your account balance.

Let’s say you have a $10,000 account and you have some open positions with the total margin of $900 and your positions are $400 in profit. Therefore:

Equity = $10,000 + $400 = $10,400

Free Margin = $10,400 – $900 = $9,500

Margin Level:

Margin level is the ratio of equity to margin:

Margin Level = (Equity / Margin) x 100

Margin level is very important. Brokers use it to determine whether the traders can take any new positions or not. Different brokers have different limits for the margin level, but this limit is usually 100% with most of the brokers. This limit is called Margin Call Level. 100% margin call level means if your account margin level reaches 100%, you can still close your open positions, but you cannot take any new positions. Indeed, 100% margin call level happens when your account equity equals the margin. It happens when you have losing position/positions and the market keeps on going against you and when your account equity equals the margin, you will not be able to take any new positions anymore.

Let’s say you have a $10,000 account and you have a losing position with $1000 margin. If your position goes against you and it goes to a -$9000 loss, then the equity will be $1000 ($10,000 – $9,000), which equals the margin. Therefore, the margin level will be 100%. If the margin level reaches 100%, you will not be able to take any new positions, unless the market turns around and your equity becomes greater than the margin.

But what if the market keeps on going against you?

If the market keeps on going against you, the broker will have to close your losing positions. Different brokers have different limits for this too. This limit is called Stop Out Level. For example, when the stop out level is set to 5% by a broker, the platform starts closing your losing positions automatically if your margin level reaches 5%. It starts closing from the biggest losing position.

Usually, closing one losing position will take the margin level higher than 5%, because it will release the margin of that position, and so the total used margin will go lower and therefore the margin level will go higher. The system takes the margin level higher than 5% by closing the biggest losing position first. However, if your other losing positions keep on losing and the margin level reaches 5% again, the system will close another losing position.

Why the broker closes your positions when the margin level reaches the Stop Out Level?

The reason is that the broker can not allow you to lose more than the money you have deposited in your account. The market can keep on going against you forever and the broker can not pay for this continuous loss. It makes sense, doesn’t it?

Cancelled By the Dealer:

When you have some open positions and some pending orders at the same time, and the market wants to trigger one of your pending orders while you have no enough free margin in your account, that pending order will not be triggered or will become cancelled automatically. Those trader who don’t know what “cancelled by the dealer” is complain when they see that a pending order is cancelled or not triggered. They think that the broker had not been able to carry their orders, because their liquidity providers had no enough liquidity or because the broker is a bad broker. But the the truth is that your pending orders could not be triggered or were cancelled because you had no enough free margin in your account.

There is a margin check that tests for what the MT4 account margin level will be after the trade is open, and if it is within the acceptable limits, it lets the trade through. The threshold for measuring the post-trade margin ratio is set by the broker usually at 120%, meaning that the bridge will calculate what the used margin will be in the MT4 account after the new trade opens, and if the account equity is less than 120% of the post-trade used margin, the trade will fail margin check and will be automatically cancelled by the bridge MT4 dealer accounts. Of course different brokers can have different post-trade margin ratio setting, but it is usually 120%.

How to check your account balance, equity, margin and margin level?

You can see this information by checking the MT4 terminal. Open the MT4 and press Ctrl+T. The terminal will be opened and it shows your account balance, equity, margin, free margin and margin level.

This can be different in other platforms.

Balance will change only when you close the position. The profit/loss will be added/deducted to the initial balance and the new balance will be displayed.

Balance – Floating Profit/Loss = Equity

Margin = $2,859.52

Equity – Margin = Free Margin

(Equity / Margin) x 100 = Margin Level

I hope you are not confused. It is very easy to understand. You may need to read the above explanations for a few times to completely digest the terms I explained.

Briefly and in very simple words:

Leverage: Is the bonus you receive from the broker to become able to trade large amounts with having a small amount of money in your account. When the leverage is 100:1, it means you can trade 100 times more than the money you have in your account.

Margin: Is the money that will be placed and engaged in the positions that you take. For example, to buy $1000 with the leverage of 100:1, $10 from your account will be engaged in the position ($1000 / 100 = $10). You can not use this $10 to take any other positions, as long as the position is still open. If you close the position, the $10 margin will be released.

Balance: Is the total amount of the money you have in your account before taking any position. When you have an open position and its profit/loss goes up and down as the market moves, your account balance is still the same as it was before taking the position. If you close the position, the profit/loss of the position will be added/subtracted to your account balance and the new account balance will be displayed.

Equity: Equity is your account balance plus the floating profit/loss of your open positions. For example when you have an open position which is $500 in profit while your account balance is $5000, then your account equity is $5,500. If you close this position, the $500 profit will be added to your account balance and so your account balance will become $5,500. If it was a losing position with -$500 loss, then while it was opened, your account equity would be $4,500 and if you close it, $500 will be deducted from your account balance and so your account balance will be $4,500. When you have no open positions, your account equity will be the same as your account balance.

Free Margin: Free margin is the money that is not engaged in any trade and you can use it to take more positions. You remember what the margin was, right? Free margin is the difference of the equity and margin. At the above example, your position margin is $10. Lets say the equity is $1000. Therefore, your free margin will be $990 ($1000 – $10). If your open positions make money, the more they go to profit, the greater equity you will have, and so you will have more free margin.

Margin Level: Margin level is the ratio (%) of equity to margin. For example, when the equity is $1000 and the margin is also $1000, margin level will be $1000 / $1000 = 1 or in fact 100%. If the equity was $2000, then the margin level would be 200%.

Margin Call Level: Is the level that if your margin level goes below it, you will not be able to take any new position. Margin call level is determined by the broker. When it is set to 100%, you will not be able to take any new position if your margin level reaches 100%. When you have losing positions, your margin level goes down and becomes close to the margin call level. When you have winning positions, your margin level goes up.

Stop Out Level: Is the level that if your margin level goes below it, the system starts closing your losing positions. It will close the biggest losing position first. If this helps the margin level go above the stop out level, no more position will be closed. Then if your other losing positions keep on losing and the margin level goes below the stop out level again, the system closes another losing position which is the biggest one.

Thanks for your time and have a great day/night

What is Margin Call & Stop Out level?

noreply@blogger.com (Anonymous) — Thu, 18 Feb 2016 19:10:00 +0600

QUICK SUMMARY

"Margin Call" vs "Stop Out level"

When the broker says that Margin Call = 100%,
this means that Margin Call = 100% and Stop Out level = same 100% of the Required Margin

This means that once your Account Equity = Required margin x 100%

You’ll get a Margin Call and immediately a Stop Out, where your trading positions will be closed forcibly (one by one starting from the least profitable and until the minimum margin requirement is met).

When a broker says that Margin Call = 30% and Stop Out level = 20%,
this means that once your Account Equity = Required margin x 30%
you'll get a Margin Call in the form of a Warning.

And when your Account Equity = Required margin x 20%
your trades will be closed automatically starting form the least profitable one.

DETAILS

"Margin Call" vs "Stop Out level"

While some Forex brokers operate only with Margin Calls, others define separate Margin Calls and Stop Out levels.

What's the difference?

Margin Call is literally a Warning from a broker that your account has slipped past the required margin in %, and that there is not enough equity (floating profits - floating losses + unused balance) on the account to support your Open trades any further.

(Speaking of trades, definitely only the losing trades will drag your account equity down, but even if you haven't accepted the losses yet, at some point you might run out of money, because your floating losses count).

Stop Out level is also a certain required margin level in %, at which a trading platform will start to automatically close trading positions (starting from the least profitable position and until the margin level requirement is met) in order to prevent further account losses into the negative territory - below 0 USD.

How does it work with different brokers?

If you see in the trading conditions something like this:

Margin Call - 30%Stop Out level - 20%

This means that when your Account Equity becomes equal 30% of the Required Margin, you'll get a warning from a broker: it can be

either a highlight on your platform, or a certain message, or an email etc. saying that your equity is now insufficient to continue trading and maintaining currently active positions; and that means that you have to either think about closing some of them or add more funds to the account to meet the minimum margin requirements.

If you don't do so in a timely manner & the market still doesn't cut any slack to your losing trades, you'll be approaching the Stop Out level - at which the system [a trading platform] will perform an automated closure of your unprofitable trades starting from the least profitable and until the minimum margin requirements are met.

If you see in the trading conditions something like this:
Margin Call - 100%
No mentioning of a Stop Out level

This means that Margin Call = Stop Out level = 100% Required Margin
When your equity slips past 100% of the Required Margin, you'll get a Margin Call & the trades will be closed forcibly in the same manner described above (starting with the least profitable one). The Warning Stage here is omitted, BUT don't be overexcited about the opportunity to get a Warning first with the 2 staged process, because a broker keeps the right to close your trades without prior notice even if it's only a Margin Call "stage".

Formulas and Examples:

To calculate the margin requirement required for every open position:

Required Margin = (Market Quote for the pair * Lots) / Leverage.

Example: You want to open 0.1 (10 000 base currency) lots of EUR/USD at the current market quote of 1.3500 and with a leverage level of 1:400

Required Margin = (1.3500 * 10 000) / 400 = $33.75

In order to open & further keep such a trade, you'll need to have at least $33.75 of the available equity on the account.

If we open 2 x 0.1 lots, the Required Margin is doubled = $67.5 and so on. The more positions you open, the higher is the requirement to keep them in the market.

Account equity = available not used in trade funds + floating profits from still open trades - floating losses from still open trades

Margin Call = Account equity has become equal to Required margin.

Pros and cons of 100% Margin Call vs lower % Margin Calls & Stop Outs

Simply put:

(+) being stopped at 100% margin saves for traders significantly more money when the losses are inevitable;
(-) being stopped at 10% margin saves only a few dollars on the doomed account.

(-) having a 100% margin requirement means that the Margin Call is looming much closer
(+) having a low 10% margin requirement puts the risks of getting a Margin call further away

(+) 100% margin requirement does the final stage money management job for you, so you won't lose your last short if you don't have the skills yet to do the proper money management yourself

(-) 10% margin requirement requires a perfect understanding and managing of the own account equity and margins.

How to avoid Margin Calls & Stop Outs?

1. Carefully choose the leverage. If you choose a lower leverage, make sure you have sufficient funds to open and maintain trades. If you choose a higher leverage, make sure you don't open more trades than you can handle with your account equity.

2. Reduce your risks. Control how many lots are traded at one time. Watch your account statistics for Required and Available Margin.

3. If in doubt about meanings of the numbers in your Account, read more educational topics about the subject.

4. Place stops to protect your equity from significant losses.

5. If in trouble and approaching a Margin Call point:
a) try changing your leverage to a higher one
b) add more funds to the account

c). close unprofitable trades before the platform does it for you

d). hedge those trades, IF you know how to get out of the hedged trades later (requires experience)

All these measure will delay the approaching of the Margin Call, BUT you would still need to manage your losing trades before they bring any more losses.

What’s the Difference In the middle of a Market Maker and an ECN?

noreply@blogger.com (Anonymous) — Tue, 16 Feb 2016 22:02:00 +0600

Market maker or ECN is the single most critical distinction between FOREX broker-dealers. A market maker, or dealer, is always the counterparty to your trades; an ECN requires an actual counter order for execution. Given the liquidity of the FOREX markets, a counter order is only a problem in a very fast or very slow market or if you place an extremely large order. An ECN cannot play many of the games that market makers do -- in large part, they do not need to because they have no book to balance. But ECN trading also requires a more accurate and delicate trading touch -- an additional skill that the trader must acquire.
Regarding market makers: some are good, even very good; many are awful.

Keep in mind what counterparty to your trade means. Then remember that market makers hold all the cards -- the data stream, the dealing desk, or control through their liquidity providers with an NDD (no dealing desk), the trading platform, and all the tools -- requoting, pip spreads, trading rules, dealer intervention, accepting or canceling trades -- all for the supposed purpose of maintaining an orderly market. National Futures Association (NFA) Compliance Rule 2-43 has minimized some of these factors -- but not eliminated them by any means. Progress is being made but continued excesses will make them the dinosaurs of the industry.

ECNs have their own issues -- In fast or slow markets, liquidity may actually be worse with an ECN because they do not have many of the orderly market tools at their disposal. But on balance, I feel that once you have gotten your feet wet in FOREX, shop for an ECN. Several retail brokers are offering ECN trading even to mini-accounts. How they bundle 10k lots into a 250k bank lot without intervention, I have not fully determined and, quite honestly, probably do not want to know.

The core issue -- and the reason the author predicted in the second edition that market makers would lose ground to ECNs -- is that market makers manipulate the books to maintain order. This involves a number of activities such as requoting, dealer intervention, and setting pip spread -- as and when they please. Market makers trade against their customers -- it is why and how they are what they are. A profit for you may well be a loss for them. What would you do with a customer who cost you money on a consistent basis? ECNs may also act as a counterparty. But here -- at least in theory -- it is supplemental to their primary duty of trade matching.

Market makers set, manipulate, or control pip spreads, usually as legitimate operations of the market-making process to maintain an orderly market; ECNs generally do not. Many trading platforms -- both market maker and ECS -- provide depth of market: the ability to see standing buy and sell orders, and the quantities and prices bid and asked. This can be valuable information if you learn how to use it properly.

To complicate matters, some firms that are obviously market makers now advertise a no dealing desk. The author is unsure how such a hybrid operates; in some instances, it appears to be nothing more than semantics in an effort to shake the market-maker moniker. Lack of regulation makes knowing how a broker-dealer processes trades difficult, if not impossible. The author queried five such brokers about this process and received no response from four of them and what can only be described as mumbo-jumbo from the other one. More and more brokers are attempting to distance themselves from the market-maker label, but whether they are actually making any significant changes to how they execute trades remains a question in many instances. All of this said, if you like to trade the minor or exotic currency pairs you will probably get a better deal from a reputable market maker than and ECN. The market maker provides liquidity to these pairs that are many times not available to the trade-matching ECN.

You will hear the term liquidity provider from both ECNs and market makers. For a market maker, it really has little meaning but it sounds good. It does not matter how many liquidity providers a broker-dealer has if it stops the feed to sniff or manipulate it before passing it through to the customer.

In reviewing the fine print of account forms, you notice that even ECNs withhold the right to intervene as market makers. Yes, it is confusing! In FOREX, ultimately, "You pay your money and you take your pick."

How to Classify a True ECN Broker

noreply@blogger.com (Anonymous) — Wed, 10 Feb 2016 14:42:00 +0600

Forex is a very lucrative market and it is attracting people everyday who are eager to invest their hard earned money and make it big in short span of time.

Due to it's high interest among public, new Forex brokers are appearing in the market continuously.

There are countless number of Forex brokers in the trading world so choosing the right one is absolutely crucial to start your trading journey.

In my previous article, I have already stated the basic steps to choose a broker that would keep your trading safari less dreadful and help you achieve your goals without worrying about external factors. After getting useful comments from knowledgeable community members and gaining experience through research and trying out multiple brokers, I am confident that ECN brokers are way more suitable than Market Markers.

What is an ECN Broker ?

The word ECN is an abbreviation for Electronic Communications Network.

It provides a marketplace where people or organizations from different parts of the world gather to compete bid and offer against each other thus providing small spreads for traders.

It is always advisable to pick an ECN broker due to the fact that they will never trade against you like Market Makers.

Their main source of income is through "commission" so they absolutely don't care if your trades win or lose.

However, there are many brokers who claims to be an ECN broker to grab clients when they are actually not. This is a very serious cause of concern and We traders must initiate proper steps in identifying them.

This would not only help to eradicate scam brokers but will also improve your percentage of return in the long run.

How to Identify True ECN Brokers ?

I have come across few terms that I would like to share with you all as often new traders get confused by these :-

A) True ECN
B) ECN by Association

C) Outright Bucketshop.

These are often used interchangeably by Forex Brokers and traders but if you know the real meaning, your life would become lot easier.

True ECN brokers offers a transparent platform where traders, banks, organizations can compete against each other by sending bids and offers. Traders get the best deal for their orders at that specified time.

ECN by Association acts as a Level 2 brokers that forms a bridge between traders and real marketplace or True ECN brokers. These types of brokers have their own in house platform and can manipulate your trades if they want.

Outright Bucketshop are simply thieves, scams who are out there to steal your money. I have only one word for you if you happen to be with them and that is "good luck"

MODE OF IDENTIFICATION

- Most traders usually new and gullible ones never read the broker agreement that usually tells you if the broker is a True ECN or ECN by association. All regulated ECN brokers will state that as it is mandatory for them to disclose such information to their clients.

- True ECN brokers will have variable spreads. I'm sorry to tell you if any ECN broker promises to offer fixed spread then it's not a True ECN broker.

- Absolutely NO dealing Dealing Desk if it's an ECN broker. Usually Market Makers have Dealing Desk meaning they will trade against you. Tips : In order to find out if it's a dealing Desk broker open a demo account and a small real account. you will see the pip difference and how much the price varies during news.

- No restriction in setting the distance of Stop Loss or Take Profit. If a broker doesn't allow Scalpers or Day traders take your pick what would that broker be? Yes you're right. That's not an ECN broker.

- Check Forex brokers chart and your order chart. Do you see any difference any BID price? If there is no difference then bingo you're with an ECN broker.

- A True ECN broker always allow traders to place any lot of trades. You can absolutely trust me on this one. Tips : If you really want to find out if it's a True ECN broker, place a trade bigger than 5 standard lots. If the order gets rejected then it's not a True ECN broker.

- Usually True ECN brokers won't promise you big offers and discount while opening an account. Like I said before they would generate revenue through commission regardless of you win or lose your trades.

- True ECN brokers will display all pricing updates every minute as the prices are coming live from the market. Tips : Check the Platform and best would be to compare it with a demo platform as well.

All these tests can be done by anyone to distinguish a True ECN broker from a Fake ECN broker.

So what does your ECN broker stand for? Electronic Communications Network or Electronic Con for Newbies ?

If I have missed out on any point, feel free to add them and let me know as well. We can only make our trading journey beautiful by helping each other.

- If your Broker is giving you only negative slippages then it's not a True ECN broker. Slippage is an usual occurrence and that's pretty normal in a True ECN market. Slippage can be both positive as well as negative.

Cheers !

A Book and B Book Model

noreply@blogger.com (Anonymous) — Wed, 30 Dec 2015 03:05:00 +0600

Let's face it, you can't start placing trades unless you have a BROKERAGE ACCOUNT.

In today's world we have more than thousands of brokers to choose from? Have you ever wondered is this the right broker for me ? or

how well do I know the broker?

Choosing the right broker is no different than picking the right stocks or placing right trades that would ultimately give you profit and peace of mind at the end of the day.

We all want to win and succeed in life and it would be catastrophic to see our hard earned money sliding out of our pockets due to lack of common sense.

I strongly believe selecting the right broker should be the first step in FOREX TRADING JOURNEY. They are the ones who will be handling your money so why not waste some time in knowing your broker before you start building trading relationship with them.

BASIC THINGS TO CONSIDER : -

1. Regulated Forex brokers are always a safe bet.

2. Get an ECN broker -- There are mainly two types of brokers ECN And Market Markers. ECN brokers offers lowest spread than MM brokers however they do charge commission. I always prefer ECN broker as they usually never trade against clients.

3. Forex Broker with sufficient leverage.

4. Easy Withdrawal Policy.

5. Availability of Demo Accounts in order to test platform.

6. Account Types. (Variable as per Clients)

These are some of the basic guidelines that every new and professional trader should look for in any Forex Broker. But are these enough? Does it say everything about the broker ?

Well, guess what? That surely doesn't. You also have to know how your broker places your trades.

So, What exactly is A BOOK and B BOOK ?

Trading Forex market is not like trading equities or bonds because your broker can manipulate your trades if they want.

A BOOK:-

When broker transfers all your trades to liquidity providers or real market and matches with other buyers and sellers.

B BOOK:-

When broker holds your trades in the house and bets against all your trades. In other words, they don't send your trades to the real market to get better deal.

For example let's say you bought 10 lots of EUR/JPY at 140.00 so what would your broker do? Broker would sell 10 lots of EUR/JPY.

Wondering about who would win the trade?

Well, either party has equal chance of winning it but considering 95% of Forex traders lose money , you would lose the trade.

What's the benefit of B book for Brokers?

A BOOK REVENUE

Let's say a Broker has 100 clients with average deposit size of $1000 and Total deposit size of $ 100,000. Total trading monthly volume is 200 lots with commission around $ 7 to $ 8.

This would approximately generate a revenue of $ 4200 to$ 5600 for the broker considering there are 3 to 4 trades per day with a trade size of 0.1 lot per client.

We can roughly sum it up and make an average of $ 5000. So that's your broker revenue for the month from all clients.

Now, when your Broker B BOOK , most clients lose 10 to 15 percent of deposits within very first month and that would fetch your broker a revenue of $ 10,000 to $ 15,000 which is more than double if they choose A book

So It's not a rocket science why most brokers would prefer B BOOK style.

One thing we should note that bad trades that we place is not broker's fault . It's our fault. Brokers can just identify those bad traders and hold their trades to make money off them.

HOW THE IDENTIFY BAD TRADERS?

This is termed as hybrid model adopted by most brokerage firms in order to identify between winning traders and losing traders. They have specialized software to find that information.

Signs they look for to be considered as a BAD TRADER?

1. Maximization of leverage.

2. Risking more than 10 percent of Equity

3. Trades placed without Stop loss

4. Total deposit Size less than $ 10,000

These are the signs that software look for to identify a bad trader and tells a broker if the client is worth B Booking? Meaning they would not send their trades to real market and bet against them.

So how well do you know your Broker?

Thanks.

Practical definitions with different types of Forex Orders

noreply@blogger.com (Anonymous) — Mon, 1 Apr 2013 13:28:00 +0600

Practical Definitions

Trading Platform

One of the best significant tools, with the diagrams, is a trading platform where a trader or a merchant will be using it at what time the trading will be on the Forex market. A trading platform is an interchange account by means of such meanings because here you can buy and sell a currency according to the procedures.

Entry Stop

Only an entry stop is applied just the once the exchange ratio break through a precise price and then the trader or the consumer using a stop entry order. He is sure of that once the market’s wave breaks through a precise price, the ratio will continue in that specific trend besides the enactment of a stop entry order may implicate a substandard unit of slippage, typically two pips otherwise less.

Entry Limit

An entry limit is always applied just the once the exchange ratio reaches but not breaks a precise price and then the trader or the consumer using a limit entry order. He is sure of that once the market’s reaches at a precise price, the ratio will hit in the reverse trend of its preceding wave.

Types of Orders

The term <order> mentions only how you will enter otherwise exit a trade. Here the different types of orders are discussed that you can be used in the Foreign Exchange Market. But before, you have to sure that which types of orders your broker is accepted because different types of orders accept by different brokers.

Order types:

Market Order

A market order where an order or you can buy otherwise sell a currency set at the best available price.

For example, at this time the bid price for EUR/USD is at 1.3242 and besides the ask price is at 1.3244. If you want to place a buy order for EUR/USD at market, at that moment it would be sold to you as the ask price of 1.3244 otherwise if you want to place a sell order for EUR/USD at market, at that moment it would be bought from you as the bid price of 1.3242. Whatever you click buy or sell, the order will be executed at the exact price.

Limit Entry Order

A limit entry where an order or else you can place to either buy below the market otherwise sell above the market while it reaches a certain price target.

For example, at this time EUR/USD is trading at 1.3040. You want to place an order for going short if the price reaches 1.3060. You can wait for it to hit 1.3060 and so you would click a sell market order otherwise you can fixed a sell limit order at that price. If the market price crosses up to 1.3060, your setting execution order will automatically perform a sell order at the best available price. But remember one thing, you have to use this type of entry order once you will be sure fully that the price will reverse upon touching the price you stated!

Stop-Entry Order

A stop-entry order where an order or else you can place buy above the market otherwise place sell below the market at a certain price.

For example, at this time EUR/USD is trading at 1.3050 and it is going to up. If you dam sure on this trading that the price will continue in this trend and it will hit 1.3060, you can step to place this type of order. You can go this way with strong believe: wait patiently and buy at market once it hits 1.3060 otherwise set a stop-entry order at 1.3060. Remember one thing; you will use stop-entry orders if you feel hardly that the price will move in one trend.

Stop-Loss Order

A stop-loss order is such type of order that is connected to a trade and it is used for the intention of avoiding other losses once the price goes in contradiction of our prediction. A stop-loss order will not be affected until the price touches at this setting order price. So, remember about this type of order.

For example, you set a buy EUR/USD at 1.3060 and for avoiding additional losses you also set a stop-loss order at 1.3040. This means that if the market price drops instead of moving up and touches at 1.3040; your setting execution order would automatically work as a sell order and close out this position with a 20-pip loss.

This type of order is very useful if you don’t want to sit all day in front of your trading. It is better to use stop-loss order than worried of thinking that you will loss all your money. So, you can merely use a stop-loss order on your any open position.

Trailing Stop

It is one kind of stop-loss order that attached to a trade and it moves as price oscillates.

For example, you have decided to use a short EUR/USD at 1.3050 using a trailing stop of 20 pips. This means that your stop-loss is at 1.3070. Once the price will go down and touch at 1.3020, the trailing stop would move down to 1.3040. If price touches this trailing stop, a stop-loss order will be worked then and the trade will be closed. This trade does not move in contradiction of your setting executed order by 20 pips.

Good ‘Till Cancelled (GTC)

Up until a person take decision to cancel it, a GTC order can keep active in the market. Then, our broker will not cancel this order at any time but have to remember one thing that it is our responsibility to keep the order scheduled.

Good for the Day (GFD)

Up until the end of the trading day, a GFD order can keep active in the market. As the foreign exchange market is a 24-hour market, this order can keep 5:00 pm EST that’s the U.S. markets close. So far, have to confirm schedule, we have to double check with our broker.

One-Cancels-the-Other (OCO)

This type of order is a mixture order: two entry order and/or else stop-loss orders. Two orders are kept using price as well as time variables and after that it has to place above and below current price. If among them one of the orders is implemented (either two entry or stop loss), the other remaining order is canceled (either two entry or stop loss).

For example, presumed that the EUR/USD market price is at 1.3060. You want to place a buy order at that price. Besides, you want to set two entry orders and /or stop-loss order; you could place an OCO order. If your OCO order at 1.3090 over the resistance level until a breakout or else start a selling position once the price falls back below 1.3030. This market position understands that if the market is reached at 1.3090, the executed order will be activated and the other selling positing which is at 1.3030, will be automatically canceled.

One-triggers-the-Other (OTO)

An OTO order is simply puts once the main order is activated. We can set this OTO order at what time we want to set profit and stop loss levels. But the problem is that it is a time consuming order because it will be gone for an entire week.

Noted: Before executing a trade, you have to make sure of that you understand fully and you are so comfortable with your broker’s order entry system. Please do not trade with your real money until you can understand how to keep control your trading and avoid losses in the market. Better than, you can more and more practice in your demo trading before starting with the real money.

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Ebook on Forex Market: Introduction 32

Forex Currency Symbols & Explanations

noreply@blogger.com (Anonymous) — Wed, 27 Mar 2013 18:29:00 +0600

Forex Currency Symbols

Example: GBP/USD = British Pound/US Dollar

Explanations

Pip

Pip’s full form is Price Interest point. It is the word that is used in currency market to symbolize the least price growth in a currency. This one is frequently mentioned to by way of signals or else hints in the market. In GBP/USD, a measure as of 1.4251 to 1.4252 is one pip. In USD/CHF, a measure as of .8095 to .8096 is one pip.

Average trading range

Pip Prices – as stated by your trading stage as of $7.00 to $10.00 USD.

Pip Spreads – as stated by your trading stage as of 3 to 20 pips.

Volume

The trading capacity quotas on this “how much money is used for trading”. In a number of categories of bulletin breaks besides once the New York’s exchange remains open, the capacity or volume is perceptibly higher. The capacity shows us more changing things. Around there is no factual solid link for capacity, earnest trades is being technologically advanced even once the Forex capacity or volume is comparatively short.

Buying and Selling short

Buying = word to practice while buying a currency duo/set opening a trade.

Selling short = word to practice while selling a currency duo/set opening a trade.

Equally these words, mention to effects we prepare for opening a trade.

Conversely, leaving a trade, you will have to process the words SELLING and BUYING-BACK. The word SELLING mentions to what we do leaving a trade that firstly in progress using BUYING. The word BUYING-BACK mentions to what we do leaving a trade that firstly in progress using SELLING-SHORT.

Typically the word SELLING-SHORT can be mentioned to the stocks and commodities market. As the approach of buying an earth to plant vegetal that will mature in the upcoming time stands the matching object than buying a currency and to forecast that this one will ultimately drive little.

Bid/Ask Spread

A spread is the variance amongst the bid and the ask price. The bid price remains the price upon which you possibly will sell your currency duo/set. The ask price remains the price upon which you have to buy the currency duo. The ask price stands at all times upper than the bid price. Returns in the market are prepared as of indicting the ask price for a currency set and buying this one as of a name different at the bid price.

The bid/ask spread rises once there is insecurity nearly what is going to chance in the market.

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Ebook on Forex Market: Introduction 31

Major/Foremost currencies (Page 3)

noreply@blogger.com (Anonymous) — Tue, 26 Mar 2013 21:38:00 +0600

Swiss Franc – The Swiss Franc stands the lone currency of a foremost European nation that fits neither to the EMU (European Monetary Union) nor the G-7 nations. Even if the Swiss budget is comparatively trivial, the Swiss Franc remains one and only of the four foremost currencies, meticulously approximating the strong point as well as excellence of the Swiss budget and economics. Switzerland had an exact nearby financial correlation with Germany, and therefore to the Euro sector. So, in bonds of party-political qualm in the East, the Swiss Franc is preferred usually over the Euro.

Normally, this one is supposed that the Swiss Franc is a steady currency. In fact, as of a foreign exchange perspective, the Swiss Franc nearby looks like the shapes of the Euro, but shortages its liquidness. By way of the request for it surpasses stock, the Swiss Franc can be supplementary unpredictable than the Euro.

The Canadian Dollar plus the Australian Dollar are as well portion of the currencies traded on the Fx market but do not reckoning as being portion of the foremost currencies because of their lacking capacity and flow. They can merely be traded in contradiction of the US Dollar.

Canadian Dollar - Canada agreed to practice the dollar in place of a Pound Sterling method owing to the omnipresence of Spanish dollars happening North America in the 18th century plus initial 19th century as well as due to the calibration of the American dollar. The Region of Canada stated that all financial records would be reserved in dollars from January 1, 1858, besides instructed the matter of the first authorized Canadian dollars in the matching time. The groups that would come in the same time in Canadian Association increasingly accepted a fraction method over the following a small number of years.

Australian Dollar - The Australian Dollar was presented happening February 14, 1966, not only substituting the Australian Pound but also presenting a fraction method. Next the starter of the Australian Dollar happening 1966, the value of the home currency sustained to be coped in consensus using the Bretton Woods gold typical by way of it had been since 1954. Basically the worth of the Australian Dollar was coped using mention to gold, even if in exercise the US dollar was used. The Australian regime hovered the Australian dollar in 1983, connotation that it no lengthier coped its worth by mention to the US dollar or else some new overseas currency. Nowadays the worth of the Australian Dollar is coped using nearly elite mention to native actions of worth, for example the Consumer Price Index which is known as the CPI.

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Ebook on Forex Market: Introduction 30

Major/Foremost currencies (Page 2)

noreply@blogger.com (Anonymous) — Sun, 24 Mar 2013 17:52:00 +0600

Japanese Yen – The Japanese Yen remains the third best transacted currency in the territory and this one partake a considerable lesser universal attendance than the US dollar or else the Euro. The Yen stands much liquefied all over the place in the territory, virtually nearby the timepiece. The regular request to trade the Yen focused typically amongst the Japanese keiretsu, the fiscal as well as economic parent companies. The Yen is considerably other profound to the fortunes of the Nikkei alphabetical listing, the Japanese stock marketplace and the real estate marketplace.

British Pound – Up until the finale of the World War II, the Pound stood the currency of mention. The currency remains seriously traded in contradiction of the Euro and the US dollar, nonetheless invents a speckled attendance in contradiction of the additional currencies. Preceding to the impression of the Euro, equally the Pound promoted starting slightly suspicions near the currency junction. Next the impression of the Euro, Bank of England is endeavoring to convey the great U.K. charges nearer to the inferior charges in the Euro sector. The Pound possibly will link the Euro in the first 2000’s, only if the U.K. plebiscite is optimistic.

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Ebook on Forex Market: Introduction 29

Major/Foremost currencies (Page 1)

noreply@blogger.com (Anonymous) — Sat, 23 Mar 2013 18:01:00 +0600

US Dollar – The United States (US) dollar is the territory’s foremost currency – a worldwide extent to assess any additional currency traded on Forex. In all currencies are commonly cited in US dollar terms. In circumstances of global fiscal and governmental turbulence, the US dollar is the foremost innocuous-port currency, which stood verified predominantly fit for the period of the Southeast Asian crisis of 1997-1998.

By way of this one was pointed to, the US dollar turned into the most important currency in the direction of the finale of the Second World War beside the Bretton Woods Accord, as the additional currencies were almost pegged compared to it. The synopsis of the Euro in 1999 condensed the dollar’s prominence merely a touch.

The additional foremost currencies traded counter to the US dollar are the Euro, Japanese Yen, British Pound and the Swiss Franc.

Euro – The Euro was premeditated to turn into the foremost currency in trading using just being cited in American terms. Similar to the US dollar, the Euro has a robust universal existence stemming starting fellows of the European Monetary Union. The currency is beset by unfit evolution, great redundancy, as well as regime confrontation to fundamental alterations. The duo/set was as well evaluated in 1999 and 2000 using outflows starting overseas savers, mainly Japanese, who were enforced to liquidate their down savings in euro-denominated possessions. Furthermore, European cash superiors rebalanced their collections and condensed their Euro coverage by way of their wants for equivocation currency hazard in Europe deteriorated.

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Ebook on Forex Market: Introduction 28

Currency pairs/Currency sets

noreply@blogger.com (Anonymous) — Sat, 23 Mar 2013 17:45:00 +0600

The currencies are all the time transacted in sets. For instance, GBP/USD, which means British Pound over US dollar, would be an archetypal duo/set. In this example, the British Pound, presence the leading currency can be known as the base currency. The following currency, by default USD, is known as the counter or quote currency.

As stated, the leading currency stands the base; consequently in a duo/set you can mention the volume of that currency by way of being the volume requisite to buy one component of the following currency.

Consequently, if you need to purchase the currency duo/set, you have to purchase the British Pound and vend the USD happening at the same time. In contrast, if you are thinking about to vend the currency duo/set, you have to vend the British Pound and purchase the USD.

The best significant object to comprehend in a currency duo/set, or else supplementary exactly in a Forex transaction, is that you will be vending or purchasing the equal currency.

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Ebook on Forex Market: Introduction 27

Advantage of Forex Trading vs. Equity Trading (Page 4)

noreply@blogger.com (Anonymous) — Fri, 22 Mar 2013 19:06:00 +0600

Equivalent access to market info

Specialized traders besides predictors in the equity market have a conclusive reasonable benefit using good point of that circumstance that they have first right to use to significant commercial data, for instance pays approximations and the media issues, in advance this one is released to the common community. In difference, in the Forex market, relevant data is similarly available, confirming that all market contributors can receipt benefit of market affecting update once it turns out to be accessible.

Return possible in both escalating and dropping markets

A saver is extended in one currency and shorts the new in each exposed FX position. A small position remains one in which the trader sells a currency in expectancy that this one will denigrate. This means that would-be subsists in an escalating in addition to a dropping FX market. The aptitude to sell currencies without a few limits is one separate benefit in excess of equity trading. It is greatly more problematic to found a small position in the US equity markets, wherever the Uptick law inhibits savers starting shorting stock if the instantly previous trade was equivalent to or inferior than the worth of the small sale.

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Ebook on Forex Market: Introduction 26

Advantage of Forex Trading vs. Equity Trading (Page 3)

noreply@blogger.com (Anonymous) — Thu, 21 Mar 2013 19:21:00 +0600

Inferior transaction prices

This one is greatly supplementary cost efficacious to finance in the Forex market, in expressions of equally commissions and transaction charges.

For stock trades, directives/commissions sort starting a short of $7.95 to $29.95 each trade using connected dealers/brokers to over $100.00 each trade using customary dealers/brokers. Usually, stock commissions are openly correlated to the equal of service presented by the dealer. For example, for $7.95, clienteles accept no access to market statistics, study or additional pertinent records. At the great conclusion, customary dealers/brokers deal complete access to study, predictor stock references, etc.

In difference, connected Forex dealers/brokers charge pointedly inferior commission and transaction dues. A number of, similar to FCStone FX, charge SHORT dues, though still proposing traders access to totally pertinent market info.

Overall, the size of the spread in a FX deal is not more than 1/10 as extensive as a stock deal, which naturally comprises a 1/8 extensive bid/ask spread. Let's say, if a dealer will buy a stock at $22 and sell at $22.125, the spread matches .006. On behalf of a FX trade using a 5 pip extensive spread; wherever the dealer is eager to buy EUR/USD at .9020 and sell at .9025, the spread matches .0005.

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Ebook on Forex Market: Introduction 25

Advantage of Forex Trading vs. Equity Trading (Page 2)

noreply@blogger.com (Anonymous) — Wed, 20 Mar 2013 18:28:00 +0600

Liquidness

Using a day-to-day trading volume that remains Fifty times greater than the New York Stock Exchange, there are every time trader/broker/dealers eager to buy or sell currencies/monies in the FX markets. The liquidness of this flea market, mainly those of the foremost currencies, aids guarantee cost steadiness. Savers can constantly open or close a position, besides other prominently, obtain a reasonable market worth.

On account of the inferior trading volume, savers in the stock market as well as former exchange-traded markets remain additional susceptible to liquidness hazard, which outcomes in a broader trade spread or higher worth actions in reaction to either comparatively huge dealing.

50:1 Leverage to 400:1 Leverage

Leveraged interchange/trading, similarly known as margin interchange/trading, lets savers in the Forex market to perform trades up to $250,000 using a preliminary margin of only $5000. Nevertheless, it is vital to recall that whereas this nature of leverage lets savers to make the most of their return possible, the possible for loss is similarly great. A supplementary practical margin trade for somebody fresh to the FX markets would be 5:1 or even 10:1, but eventually be contingent on the saver’s craving for hazard. Conversely, a 100:1 leverage would be the leading recommended margin trading to practice for the finest hazard and remuneration return.

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Ebook on Forex Market: Introduction 24

Advantage of Forex Trading vs. Equity Trading (Page 1)

noreply@blogger.com (Anonymous) — Tue, 19 Mar 2013 23:02:00 +0600

• 24-hour trading

• Liquidness

• 50:1 Leverage to 400:1 Leverage

• Inferior transaction prices

• Equivalent access to market info

• Return possible in both escalating and dropping markets

24-hour trading

The foremost benefit of the Forex market over the stock market as well as additional exchange-traded tools remains that the Forex market is a factual 24-hour market. Whether it’s 6pm or 6am, someplace in the land there are every time buyers and sellers actively trading Forex with the intention of savers can react to contravention bulletin instantly. In the money markets, your collection won’t be pretentious through next hours earning news or forecaster session calls.

Lately, next hours’ interchange has converted accessible for US stocks - through numerous limits. These ECNs (Electronic Communication Networks) are to get together buyers and sellers when potential. Nevertheless, there is not any assurance that every single trade will be implemented, nor at a reasonable market cost. Rather often, stocks brokers must pause up until the market opens the next diurnal with the intention of accept a harder spread.

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Ebook on Forex Market: Introduction 23

Advantage of Trading FOREX on the Internet (Page 2)

noreply@blogger.com (Anonymous) — Tue, 19 Mar 2013 18:14:00 +0600

Immediate trade implementation and validation

Scheduling is everything in the hasty-strode Forex market. Connected trades are implemented and long-established within seconds, which guarantees that traders do not miss market chances. Moreover the incremental spare time it takes to complete a deal over the telephone can mean a huge variance in return possible.

Inferior business outlays

Merely, implementing trades automatically decreases manual exertion, thus dropping the prices of doing trade. Connected brokers are then capable to pass alongside the reserves to their consumer base.

Actual turnover and cost breakdown

The hasty-strode nature of the Forex market forces traders to implement manifold trades day after day. It is important for every single customer to have actual info about their existing station with the intention of create knowledgeable swapping decisions.

Complete access to market info

Ingress to timely and pertinent info remains acute. Specialized traders recompense thousands of dollars every single month for access to foremost info benefactors. Nevertheless, the self-same nature of the Internet gives users open access to consistent market info from a diversity of bases, plus actual cost figures, universal news, government-issued fiscal signs and reports, as well as biased info for example proficient annotation and breakdown, trader chat forums etc.

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Ebook on Forex Market: Introduction 22

Advantage of Trading FOREX on the Internet (Page 1)

noreply@blogger.com (Anonymous) — Sun, 17 Mar 2013 21:25:00 +0600

• Contract openly starting live worth quotes

• Immediate trade implementation and validation

• Firm and effectual implementation of contracts

• Inferior business outlays

• Actual turnover and cost breakdown

• Complete access to market info

Contract openly starting live worth quotes

Actual insufficient connected brokers are capable to bid their clienteles instantaneous bid/ask quotes, which helps immediate contract implementation - no lost market chances. Instantaneous values also let savers to liken a connected broker’s dealing spread with that of additional pricing amenities, to make sure they are being paid the finest probable price on entirely their Forex dealings.

Numerous connected Forex brokers necessitate their clienteles to appeal an amount as the price before dealing. This is detrimental for a number of motives, mainly for the reason that it meaningfully increases the implementation procedure from just a few seconds to probably as long as a minute. In a hasty strode market, this could create an important variance in a saver’s turnover probable. Similarly, selected of the additional unprincipled brokers may practice the chance to appearance at a saver’s existing position. The minute they have strong-minded whether the saver is a buyer or a seller, they ‘shade’ the amount to upsurge their personal turnover on the deal.

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Ebook on Forex Market: Introduction 21

Advantage of Online Capitalizing

noreply@blogger.com (Anonymous) — Mon, 28 Jan 2013 17:30:00 +0600

Online trading has initiated a foremost exemplar modification in capitalizing. Next to the turn of the millennium, there are in excess of 6 million online investment accounts, up and about beginning 1.5 million in 1997. Consequently, startup corporations at present contend openly with economic organizations to work for savers in the fresh Budget, and the pure champ is the client. The race amongst the brick and grout organizations and the Internet-based businesses has radically dropped the costs of capitalizing, and authorized the separate saver to take control of their individual investment tactic.

Connected trading will transfigure the money markets by creating it available to the trivial and average sized saver. For the starting time, these savers have the capability to perform dealings of amongst $100,000 and $10,000,000 at the similar values the Interbank market bids for transactions sound in excess of $10,000,000. This paybacks equally those who bidding to take risks on the road of the money markets for return, as well as the cash superior or else commercial treasurer observing to hedgerow contrary to unsolicited disclosure to upcoming price oscillations in the money markets or currency markets.

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Ebook on Forex Market: Introduction 20

The Market Times

noreply@blogger.com (Anonymous) — Sun, 27 Jan 2013 13:12:00 +0600

Officially, the trading activates as soon as the markets are open in Tokyo, Japan at 7:00 PM Sunday, New York time.

Subsequently, at 9:00 PM EST, Singapore as well as Hong Kong opens next the European markets in Frankfurt at 2:00 AM and in London at 3:00 AM.

At what time the timepiece touches 4:00 AM, the European markets remain in the burning spot and Asia just settled its trading diurnal.

Time Zone	EST	GMT
Tokyo Open Tokyo Close	7 PM 4 AM	0:00 9:00
London Open London Close	3 AM 12 PM	8:00 17:00
U.S. Open U.S. Close	8 AM 5 PM	13:00 22:00

The US markets opens in New York whereas Europe is gradually going down nearby 8:00 AM on Monday and Australia will take the central position round 5:00 pm as well as when it remains 7:00 PM once more. Tokyo is prepared to wake up.

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Ebook on Forex Market: Introduction 19

Aspects Moving the Market

noreply@blogger.com (Anonymous) — Sat, 26 Jan 2013 17:31:00 +0600

Currencies prices are pretentious using a diversity of fiscal and parliamentary circumstances, utmost prominently interest rates, price rises and politically aware stability. Furthermore, regimes occasionally partake in the Forex market to impact the worth of their currencies, either by inundating the market using their native currency in an endeavor to inferior the price, or equally buying with the intention of increasing the price. It is identified as Central Bank intercession. Any of these aspects, as well as fat market orders, can reason great volatility in currency prices. Nevertheless, the dimension and capacity of the Forex market creates it difficult for any one object to <effort> the market for any span of time.

Additional aspect moving the market, using an upshot as significant as the supplementary aspects stated above, is the bulletin. Once out, the bulletin have a straight result on the currency price according to bulletin are continuously openly correlated to the fiscal stability of the market. Here’s a list of canals which will deliver you valuable info on currency update:

Bloomberg TV – EUR News

CNBC – USD News

Rob TV – CAD News

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Ebook on Forex Market: Introduction 18

Circadian or Position Trader, their fortes and flaws

noreply@blogger.com (Anonymous) — Fri, 25 Jan 2013 15:56:00 +0600

Circadian-trading overview

Circadian-trading means Day-trading, which was formerly the elite domain of the bottom trader, remains at present impartial game for all risk-takers. Enthused in some measure by big intraday worth swings, prompt accessibility of quotations, reasonable high-powered supercomputers and competitive commissions, the innovative groundswell of circadian-trading techniques and schemes has involved thousands of traders in current years. The irrefutable thrill of trading contained by the time length of one day is, nevertheless, a two-edged blade: one and only that can offended as well as reconcile. To be efficacious, a circadian-trader must have the chastisement of a mechanism, the natures of a fox, the sensations of a rock, the expertise of a specialist and the endurance of a saint. (And a tiny fluke wouldn’t miff either.) The circadian trader works more using the sensations together with the fundamental analysis.

Meaning

Actual lively currency trader who grasps spots for an exact short time as well as creates a number of trades each day. Circadian traders are those who are seeking to make a line of business out of buying and selling stocks very rapidly, every so often creating dozens of trades in a particular day and usually concluding entire positions at the close of every single day. Circadian trading can be expensive, since the commissions and the bid/ask spread combine at what time there are so many dealings.

Position Trading Overview

Position Trader searches for infrequent important moves that may elucidate speedily or else over time. This one tolerantly delays for perfect trade formats to happen throughout trivial as well as main trend reversals in definite segments, directories or all-inclusive broad markets. Willpower of these would-be formats remains derivative from procedural indicators, chart patterns, theme and symbol charts and central news proceedings. Just the once a move appearances mark of growth, hourly and intraday diagrams are checked for optimal access.

Meaning

Currency trader who, distinct maximum traders, takes a durable, buy and hold tactic. In legal tender (c) trading, “durable” mentions to holding up until the provision time is close, typically 5-7 months near about.

Mostly, a position trade tactic is to move in the markets single in times of fundamental reversal possibility with the intention of captivity great moves as they steadily or rapidly elucidate. This one is designed for traders who errand a steady, buy and hold tactic at what time perfect trade circumstances be existent for high-odds achievement.

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Ebook on Forex Market: Introduction 17

Performers in the Forex Market (Part 7)

noreply@blogger.com (Anonymous) — Thu, 24 Jan 2013 14:12:00 +0600

Investors and Speculators - In all proficient marketplaces, the speculator has a significant character taking over the jeopardies that a marketable partaker hedges. The restrictions of speculation in the overseas interchange market are indistinct, for the reason that a lot of the directly above pointed out performers as well have notional wellbeing, even principal banks. The overseas interchange market is pervasive with savers owing to the outsized volume of leverage that can be attained and the liquidity using those points can be moved in and moved out. Taking improvement of two currencies interest rate variances remains a different standard tactic that can be proficiently assumed in a marketplace using great leverage. We have entirely perceived values of 30 day onwards, 60 day onwards etc. That the interest rate is variance of the two currencies in interchange rate conditions.

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Ebook on Forex Market: Introduction 16

Performers in the Forex Market (Part 6)

noreply@blogger.com (Anonymous) — Tue, 22 Jan 2013 18:51:00 +0600

Hedge Funds - Hedge funds have grown repute for hostile currency conjecture in current years. There is no hesitation that using the growing sum of cash selected of these investment vehicles have below supervision, the dimension and liquidity of foreign exchange markets remains actual alluring. The leverage obtainable in these markets similarly lets such a reserve to take risks using tens of billions at a time. The flock nature that is very ostensible in hedge fund loops was perceived in the past 1990’s with George Soros as well as others hugging the GBP on show of the European Monetary System.

This one is improbable, nevertheless, that such funds would be efficacious if the fundamental investment tactic was not sound. That one is similarly debated that hedge funds in fact do a positive amenity to foreign exchange markets. They are capable to feat fiscal faintness and to expose states untenable monetary quandary, therefore pushing rearrangement to more genuine ranks.

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Ebook on Forex Market: Introduction 15