2Bull Forex Blog

The majority of the Forex brokers do not charge commissions. They are remunerated by revenues from their activities as currency dealers, including earnings from buying, selling, interest on deposited funds, converting and holding currencies, and rollover fees.

If you think that, because Forex brokers do not charge commissions, they are working for free, you need to go back to Forex school. Forex brokers make their money from you, by selling you currency at one price and buying it back from you at a lower one. The difference in the prices is known as the “spread” and it can mount in a hurry. How can you determine a “spread?”

Understanding The Spread

You may have thought a “pip” meant is a fruit seed, and you would have been right. But in the 21st century, the “pip” is far more widely known as the smallest monetary increment, usually one one-hundredth of a percent. On the Forex market, currencies are priced to the fourth decimal place, and that fourth decimal pace is the”pip.” It’s also known as a “basis point.”

Forex brokers make their livings in pips. The number of pips they charge per trade is known as their spread. Some Forex brokers charge the same spread no matter what the trade, and other Forex brokers charge a variable spread. While a variable spread can look enticingly small in a slow market, it will not be available when the Forex trading begins to fluctuate, because the Forex broker will raise his spread.

You can hook up with Forex brokers through major banks or investment firms. They are regulated by the Commodity Futures Trading Commission and they are registered with the Futures Commission Merchant. But the Internet has caused a proliferation on online Forex brokers, who will provide traders the technology necessary to trade. They have opened the Forex market to million of small investors who may lack the capital and understanding to have any chance of succeeding.

What To Expect From Your Forex Brokers

If you’re working with Forex brokers, and you should be, your have the right to expect their offices to be available around the clock. The Forex market never sleeps, and even if you are placing a trade in the middle of the day, it might be the middle of the in the hemisphere where your Forex broker’s office is located.

If you need to get out of your trade in a hurry, you should be able to depend on someone being at the other end of the phone. And by the way, always make certain with your Forex brokers that you can close a position over the phone. If not, a power outage hitting your PC, or a failed Internet connection can spell disaster.

Before you sign on with any firm of Forex brokers, take the time to do some background checking. Not all Forex brokers have the financial underpinnings to hold money in reserve if their trades go wrong and their customers want to cleanout their trading accounts. Your Forex broker should be open about his company’s financial condition and history, and be able to provide documentation of his claims. If he can’t or won’t, take your business elsewhere.

And before you commit any money to any Forex brokers, use their online sample trading features to decide which programs are best suited to your trading style. It costs nothing, and will give you confidence that in the fast moving world of Forex trading you’ll be able to keep up.

Here we will look at a simple method anyone can understand and use and a potential opportunity shaping up right now that could yield big gains with low risk for any forex trader. Let’s discuss this forex trading method and give you an example, shaping up right now.

The method is really common sense and easy to understand and is based on this equation.

This article is being written on Thursday November 1st.

Fundamentals + Investor Perception = Price.

It’s a fact that currency markets move in line with the fundamentals but it’s not as simple as just looking at the news - in fact if you try and do this you will lose.

The reason for this is the markets are a discounting mechanism.

News is discounted in a split second in today’s world of instant communications furthermore; humans have to decide what the facts mean and their not logical or sensible!

They are influenced by greed and fear and a host of other inputs.

Prices Have Gone to Far a Turn Coming

The fact is throughout history humans spike prices away from fair value when greed and fear take hold and then prices return back to fair value.

If you look at news and its influence on price and then use forex charts to spot prices being pushed to far from fair value, you can get some great contrary trades - now let’s look at a specific example.

If you have read my previous articles you will have seen how bullish I have been of the commodity currencies and with the Aussie and Canadian dollar making new multi decade highs we have cleared 1,000 pips - that’s right, a 1,000 so, not a minor profit! You can see the reasons we used in our other articles.

The above was not doing anything complicated just following the long term trend but now if you look at the news - the bullish news has pushed prices too far - here’s why.

Yesterday we had FOMC and they cut rates by 0.25% - this was expected and discounted but there was some bullish news the market ignored.

First, the Fed tempered the view that they would cut rates further but the most interesting bit of news was..

The economy expanded by 3.9%, versus calls for 3.0% GDP growth and up slightly from the previous quarter at 3.8%. This is the strongest growth since Q1 2006.

The short Term Bearish Scenario Is Peaking.

Of course, this doesn’t mean that the dollar is “out of the woods” long term - but short term the market bearish news has peaked. Many investors were looking at 3.0% in terms of GDP and 0.5% in rates so we could see a turn.

Non farm payroll on Friday could be it at expected levels or better and the dollar could rally.

The market has pushed to far from fair value and the fundamentals and a short covering rally could be on the cards. There are a huge number of speculators long, making money and the market will flush them - it’s just a question of when.

Watch The Following:

Let’s take the Canadian dollar as an example.

Were long but we can see the warning signs that it could turn and there is also another factor with this currency - Crude oil.

Crude has made a huge rise and many are talking of $100 a barrel maybe we will get one but only as a spike. Fact is there is no shortage of oil, this spike is pure emotional trading and a retreat to the $80.00 level could come any day and longer term $60 - 70, looks fair value.

With the Canadian dollar were looking closely at oil for a top which should add weight to the fall as Canada is a major exporter.

What are the charts saying?

Pull up a daily chart of the Canadian Dollar and you see new highs and no warning signs of a top - but pull up a monthly or weekly chart and you will see the “wood from the trees”, a spike that needs to correct.

When will it come? No one knows but the odds are the daily chart will show signs in the next few days on the Canada and a low risk high reward correction will occur.

There’ an old saying…

“If you can hold your head when others are losing theirs you probably haven’t hear the news”

In this instance it is simply you have heard the news - but you are stepping back from the majority view, getting your forex charts out and seeing the reality - a profit opportunity.

Watch action after non farm payroll and see what happens - don’t jump to soon, prices will tell you what to do.