2Bull Forex Blog

The forex, or foreign exchange, market is a specialized type of market in which types of currency are exchanged for other types of currency. On average, the daily trade within the forex market is more than $1.9 trillion. As the world’s largest financial market, forex involves trading among central banks, large banks, governments, multinational corporations, large banks, and other institutions and markets of a financial nature. Individuals may also participate in the forex market through banks or brokers, though individuals represent only a small fraction of those trading within the market.

The Levels of Forex

Forex is different from the stock market, which provides the same prices to all participants. With forex, the market is actually divided into various levels. The top level is the inter-bank market that consists of the largest banking firms. The spreads of the inter-market usually are not shared with those outside of this exclusive circle. As the spreads work their way down through the levels, the difference between the ask price and the bid actually widens. This is primarily because those within the inter-bank level are capable of guaranteeing larger numbers of transactions and, as such, can demand a better spread.

The level below the inter-bank market is comprised of the smaller investment banks. The next level is made up by multi-national companies that pay employees in various companies as well as some retail forex market makers and large hedge funds.

Forex Trading Characteristics

Within the forex market, there are a number of different rates, or prices, which depend on what is being traded by the market or bank. In addition, there are a number of recognized trading centers within the forex market, with the main centers being in New York, London, Singapore, and Tokyo. In addition, a number of banks throughout the world participate in forex training. With so many markets located throughout the world, the market is literally open 24 hours per day. As such, traders can make trades immediately when events occur that can impact the market.

The stock market is a very volatile trading place and choosing the right stockbroker can make all the difference to an investor/trader. Nowadays, many investors/traders are latching on to online trading and there are many stockbrokers out there who offer online trading at discounted commission fees. So, how does one pick a good stockbroker? The following guidelines will help an investor do that:

1. Brokerage fees and deposits

If an investor chooses to place his trade orders online, then the brokerage fees are very low. However, if he places his order on phone, then the brokerage fees may go up slightly. These low fees are perfect for investors and traders who have sufficient knowledge of the stock market and are clued in on what stocks to buy or sell. However, investors who do not know how to work with the market swings must choose to work with a stockbroker who supplies them with investing recommendations and trading calls. Naturally, a stockbroker who supplies investors with information will charge a higher rate of brokerage.

Every client needs to deposit some money with his stockbroker to cover the fluctuations in the price of the stocks that he buys or sells. The deposit will depend on how much financial exposure the client wants for his market trades. It is not necessary that the stockbroker who charges the lowest deposit is the best.

2. Services

Most online stockbrokers provide their clients with a range of online technical and fundamental tools that help them in making their investment decisions or trading calls. The information from these tools is streamed live and can be in the form of company news, technical buy or sell calls, favorite stock watch, chart patterns, unusually high-volume stocks, circuit breakers, etc. The stockbroker will usually charge an additional monthly fee for providing some of these tools. You must choose a stockbroker who provides you the best tools at a reasonable cost.

3. Speed

In any stock market trade, timing is critical. Prices swing in a space of seconds and it is important that a stockbroker must carry out his orders speedily and get the rates the client desires. If a stockbroker is not speedy enough in carrying out his orders, then prices may swing and an investor may not get the price he was after. Therefore, it is important to select a stockbroker who offers speed of service. This holds good for orders that are placed on phone. In an online trade, the confirmations are instantaneous.

4. Insurance

An investor must choose a brokerage firm that is a member of the SIPC (Securities Investor Protection Corporation). SIPC protects investors in case their brokerage firm faces financial hardship or is liquidated. Being a member of SIPC gives out a signal to the investor that the brokerage firm places a lot of value on its clients’ interests.

5. Reputation

A quality stockbroker has a clean reputation. He does not indulge in shelling out contradictory and manipulative information to his clients, charges reasonable brokerage, gives purchase and sale confirmation contracts in time, does not recommend stocks that his firm already holds with a view to dumping them on the clients, is conscientious and sports a solid reputation in the market. Investors must choose to work only with such quality stock broking firms.

6. Online v/s Local Stockbroker

Though online trades are fast catching up, an investor who is more comfortable with a local stockbroker can always choose to work with a reputed firm that has a local presence.

If an investor is careful in choosing his stockbroker, then he will be trading or investing with his mind at rest, comfortable in the knowledge that his money is being handled by trusted hands.

Forex Currency trading swindlers often attract customers through advertisements in local newspapers, radio promotions or attractive Internet sites. These particular advertisements may flaunt low-risk high-return investment opportunities in foreign currency trading. They may even offer high paid currency-trading employment opportunities. Be very skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks. Be wary if they claim that employment as a Forex currency trader will make you wealthy quickly.

Avoid opportunities that sound too good to be true. Forex currency trading that involves get rich quick schemes are generally swindles. Retired folks with access to their retirement funds are attractive targets for fraudsters. Once your money is gone, it is almost impossible to get it back. Be very careful of companies that will guarantee you a profit. Be careful as well, if they flaunt extremely high performance. These types of statements are generally false.

If the company tells you that written risk, disclosure statements are routine formalities imposed by the government, stay away from that company! Forex trading is very volatile and can be a huge risk for the uneducated and uninformed. If you cannot afford to lose money then do not get into the Forex currency trading market. Do not use your retirement funds for Forex currency trading; that would be extremely foolish.

Be very wary of online trading, it can be impossible to get a refund but it is very easy to transfer your funds. The internet is an easy way for fraudsters to reach potentially millions of people. The internet also can hide where a Forex trading company resides. If you transfer your money to a foreign location, it may be impossible to get it back.

You must get the background of the company you are dealing with. You should ask for all information in written form. Check with the Better Business Bureau as well. Do not rely strictly on information you here verbally. If you are not completely satisfied or comfortable with the information you find out then just do not deal with that company.

You may here the term ‘interbank’, it refers to a loose network of Forex currency transactions that are negotiated between financial institutions and other large companies. These are usually the only ones investing in the interbank market. So, be careful of a company that indicates that you should trade Forex in the interbank market. This can be a sign of an unscrupulous trading company.

Another term you may here is Margin trading. Margin trading can make you responsible for losses that are greater than the dollar amount you deposited. Many Forex currency traders will ask customers to give them funds, which they sometimes refer to as “margin.” These sums can be in the range of $1,000 to $5,000. Those dollar amounts actually control a far larger dollar amount of trading and customers are not aware of this sometimes. So, in essence do not trade on margin unless you fully understand what it means and what you are doing. You must be prepared to accept losses that can exceed the margin amounts you have paid.

In this article I want you become more familiar with Day Trading thoughts. At first, what is Day Trading? “Day trading” means that a trader tries to make money buying and selling stocks during the day taking advantage of the daily price movement. Day traders end the day flat (with no open positions).

It is commonly stated that 80-90% of day traders lose money. Also price movements in a day are few, so why people trade only in a day? What are advantages of being a day trader?

Advantages of Day Trading:

Less Stress (Zero Overnight Risk)

To avoid the risk of price gaps (differences between the previous day’s close and the next day’s open price) day traders close all their positions at the end of a trading day. Because of this, day trading is less stressful than holding stocks overnight. After market closed you are not worried what will happen until tomorrow and what news will distribute. You never ‘lost sleep’; in the morning have a nice feeling because you don’t care what the market’s doing at the open.

Cheaper Commission

One thing that makes day trading potentially profitable is commission structure. Day traders pay ‘per share’ instead of ‘per trade’ structure . If you pay about $10 per trade now when you become a day trader, you may pay about $0.01 per share.

Increased Leverage

Day traders could have 4 times their equity as intra day buying power. This great margin can increase your profits if used wisely. This increased leverage makes day trading very risky, especially if one has poor discipline, risk or money management.

Profit in any market direction

Day trading often will utilize short-selling to take advantage of declining stock prices. The ability to lock in profits even as markets fall throughout the trading day is extremely useful during bear market conditions.