Forex Brokers

In the 90's trading Forex came at a high cost to individuals who wish to venture into the market. However with the rapid increase of the internet it has brought Retail Forex to everyone's finger tips. With the increase in retail Forex trading, Brokers increased dramatically too. Some being legitimate while others are less than honest. Brokers essentially are intermediaries between a Forex Trader and the Various liquidity partners and central Banks that exists.

Types of Brokers

There are two major classification of Forex Brokers. They are either Dealing Desk Brokers or Non Dealing Desk Brokers. The difference between each category is laid out below.


(Image courtesy of babypips.com)

Dealing Desk Brokers

Dealing Desk Brokers also called market makers make their money from spreads in currency prices. The spread is the difference between the buying and selling prices of a specific currency pair. they also make money when a client loses a trade. If a client of a dealing desk broker opens a trader the broker will sometimes take the opposite side of the trade if it cannot be fulfilled by another client or the market immediately. These broker provides both buying and selling opportunities so taking the other side of the trades doesn't provide any conflict. Normally the Dealing Desk broker provide a fixed spread which is useful when doing risk management and profit margin calculations.


(Image courtesy of babypips.com)

Non Dealing Desk broker

A Non Dealing Desk broker does not take the opposite side of the clients trade. In fact they allow the trade orders to be filled by their liquidity partners who has direct access to the interbank market. There are two sub-categories to Non Dealing Desk Brokers, STP or Straight Through Processing and ECN or Electronic Communications Network


(Image courtesy of babypips.com)

What is an STP broker?

STP brokers will make their money through an increased spread from the true market rate. essentially STP brokers will take the quote for the currency pair from their liquidity partners and use the lowest quote from these partner to present to their client. However they generally add 1 pip to the quote to present to their clients. This 1 pip difference would be their payment for locating the lowest quote for their clients.

What is an ECN broker?

An ECN broker connects you directly to the interbank market and as such you get the price directly from the source. ECN brokers make their money by charging each client a commission.



Non-Dealing Desk brokers are generally preferred by traders across the world. research your broker to see what they are. 

Choosing your Broker

Now that we have an idea of what type of brokers exist it is down to some specific criteria to choose an actual brokerage house to open your account and start making your profits.

First you want to ensure that your broker of choice is licensed by a regulatory body such ASIC in Australia, FCA in the UK, CFTC and NFA in the USA and other regulatory bodies in other territories such as Germany, Switzerland, France and Canada. By ensuring your broker is regulated it gives you a sense of security and somewhere to report to if you are having issues with your broker.

Secondly you will want to check transaction cost. You wouldn't to open an account with a broker that's gonna charge you an arm and a leg to open one order. You are trading to make a profit not pay out every dollar earned.

Select a broker that will provide you with efficient and effective withdrawal and deposit options without a high cost or fee to you. Also ensure that execution time for both withdrawal and deposits does not take forever or has a long execution time for each trade.

Two other important criteria to look out for is the trading platform the broker uses and whether or not the broker provides any form of customer service. You don't want to use a broker that provides a trading platform that you will have to spend a year learning to use or it isn't compatible with your computer. Brokers should provide a way for them to be reached by their clients in order to settle any issues or address any concerns.

Based on what you will be trading you can check if the broker offers commodities and indices, the leverage the broker provides and their minimum lot size. Low the lot size is better for beginning traders.

For additional reading and reference you can click here or here.

Look out for our next blog as we discuss Demo and live trading accounts.
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Trading Platforms

On this post we will discuss platforms used by traders around the world to get their work done and make money on the Forex market. With a huge diversity on getting started in trading, the platform or software you use will help to increase your profitable and thus your longevity in the Forex money game.

Not all softwares are created equally. Some are more user-friendly than others, some have more technical information as opposed to others that have added fundamental information. Other software can only be maximized when used in collaboration with another. I have gone through a number of softwares and found particular preferences with some. I have also heard from other traders that have tested different trading platforms to see which they are most comfortable with. Below I will discuss some of the ones I've encountered starting with the most popular and widely used metatrader from MetaQuotes Software Corp.

Metatrader

This is an excellent trading software that can be used on multiple Operation Systems. It is the most popular trading platform out there and is used by the majority of Forex Brokers. It incorporates technical analysis tools along with historical chart data to provide the trader with all they need to make informed trades and develop their own trading strategies. To get the full potential of this software will take a little practice as it provides you with a wealth of tools such as indicators, expert advisors (trading robots) and technical charting tools.
The newest version of the terminal is version 5 which is commonly called MT5. However, I use MT4 (version 4) to execute my trades. it seems majority of brokers are still using version 4. This software is extremely customizable and will take you a far way in your trading experience. I would suggest you download the standalone copy and start experimenting with it so you can get use to the interface.
It also comes with the ability for you to write your own program (coding) using its proprietary programming language to execute trades on your behalf based on your own trading strategy. You can also get signals as well as additional expert advisors and indicators from its code base here.  This terminal can also be used to trade commodities if companies offer it.
The picture below shows a snapshot of the MT4 terminal in use. You can get an in depth introduction to the terminal by clicking here. There's a lot to learn with this software but you don't need to learn it all at once to become profitable. You can take it in stages.

If you intend on starting your own Forex trading business they also provide the terminal that you offer to your customers.

WBP Online Terminal

This is an excellent program that i have recently added to arsenal of Forex tools. This is an excellent program that will assist you making profitable trades. The magnificent thing about this terminal is that it provides you with market sentiments or fundamental analysis along with technical analysis. these two branches are the foundation of the market works. If you can master both fundamental and technical analysis you are on your way to a lucrative Forex live. The terminal along with the metatrader is an unstoppable force for profitable trading. The WBP terminal does not execute trades, if it did it would probably be the only program i'd use. The provides historical data, chart analysis tools, studies, economic calendar, quotes on indices, commodities, Forex and Bonds. The terminal keeps you up to date with current news which is an integral part of being a good trader.

The snapshot below shows the interface of the terminal. You can download for free by clicking here. It is extremely user friendly and provides real-time market data.

Other Software

Almost all other software are proprietary as most companies develop their program to do something specific that they would want it to do.

You can create a Demo account with Oanda to test their fxtraderpro terminal or hotforex to test their mobiletrader, etoro has a good online terminal and have been doing some updating. TDAmeritrade also provides their own trading platform that can me used on all devices. There are a plethora of trading programs to use and trade from. Find one you are comfortable with and that you can be profitable from. Use your strategy and test it in the program of your choice.However, if you are trading based on principle then the software is a mere formality.  Almost all brokers provide a demo account so you can practice before going live and risking your own money. This demo account can be used on the MT4 or the broker software.

I have also been informed about the MTI (Market Traders Institute) software which i was told is an excellent program to trade with. There indicators are unlike any other, they provide you with live trade recommendations and they coach you while trading. However all of this comes at a cost but it pays to learn. You can check them out and sign up for a trial run to compare their platform. Along with that MTI provides an online university for you to attend and improve your skillset.

Look out for our next blog as we discuss choosing a broker to trade with.
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Forex Currencies

What is a currency Pair?

This is essentially a quotation of currencies traded on the Forex market. When two currencies are paired it gives the price or exchange rate between both currencies. The base currency is normally written first in the pair while the second currency is called the quote currency. So for example the EURUSD currency pair is between the Euro Dollar (EUR) as the base currency and United States Dollar (USD) as the quote currency. Any currency can be paired with another and be traded. However not all currency pairs are traded openly on an international scale.

Major Pairs

Major pairs are the currency pairs that has the USD paired with the EUR, GBP, CHF, JPY, CAD, AUD and NZD.

EUR/USD	Euro zone / United States	“Euro Dollar”
GBP/USD	United Kingdom / United States	“Pound”
USD/CHF	United States/ Switzerland	“Swiss Dollar”
USD/JPY	United States / Japan	“Yen”
USD/CAD	United States / Canada	“dollar loonie”
AUD/USD	Australia / United States	“Aussie”
NZD/USD	New Zealand / United States	“Kiwi”

More about Pairs

These pairs are the ones mostly traded and are most volatile. All other currency pairs are influenced in one way or another by the major currencies.

Currency Crosses

All currency pairs that do not contain the USD is considered a cross-currency pair. There are a number of cross currency pairs that are traded daily. the Major cross currency pairs are called minors. The minors will contain either GBP, EUR, AUD, NZD, CHF or CAD. All other cross-currency pairs are called "crosses".

Influence of Major Currencies

As stated before all of the Major currencies will influence all the other currencies is one way or another. With the USD being the mostly widely used currency any movement in the USD and its market will influence to some degree the trading price of all other currencies. The other Major currencies will affect the USD but not large basis. Due to price fluctuation in the Major currencies all other currency pair will reflect a particular change.

Why are they paired

Well it's a market place for currencies and in every market place there is buying and selling taking place. The currencies are paired to give faster quotation between the two currencies. For the euro dollar (EURUSD), if it's at a price of 1.3654 it means that for 1 euro (EUR) you will get 1.3654 dollar (USD).

What does the quotation mean?

Quotations for a given currency pair normally has two values, one for buying and one for selling. There will be a difference in the values, this difference is referred to as the spread which will be explained in more detail in a future post. So for example EURUSD quote 1.3654/1.3649, the higher quote (1.3654) is what you as the trader would pay for buying the EUR and the lower figure (1.3649) is what you get if you sell the currency. The spread for this particular quote is 0.0005 (1.3654-1.3649). Spreads will change from day to day depending on market conditions, volatility and broker.

Join us next time when we speak about different trading platforms.
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Getting Started

Trading

There are multiple ways to get started in trading in order to earn additional income or even making it your main income. This blog is dedicated to three ways of trading which will be covered step by step with each post. I will seek to cover
Forex
Stocks
Stock Options

What is Forex?

Forex stands for Foreign Exchange and it is essentially the buying and selling of different foreign currencies. So when someone mentions Forex they are speaking of the global money market. The Forex market is extremely huge with about USD$1.49 Trillion being traded on average daily. The NYSE (New York Stock Exchange) pales in comparison to the Giant Forex Market.

Some Advantages of Trading Forex

The monster Forex market is opened 24hrs, 6 days per week giving each trader flexibility in making money from buying and selling. With such huge volume of money being traded daily it creates what is called liquidity which enables speedy execution of trades at any point within the trading days. The Forex market doesn't limit the amount of cash you start trading with or the amount of each currency that you can buy and or sell. A lot of leverage is involved that allows you greater buying or selling potential.

Market Times

The Forex Market opens Sunday evening with the Australian Market taking first watch then follows the Japan mark. The Euro and Swiss market opens before the London market and the USA market completes the loop. For specific times please see the Forex clock on this blog or you can visit the following link

Market clock

With the overlapping of the markets as shown on the clock it gives the Forex world a continuous run for six days straight and closes out Friday evening.

Forex vs Stocks

Due to the opening times of each market forex give you more time to trade. the stock market such as NYSE only opens for a few hours throughout the 5 day work week. the only day that the Forex market is close is Saturday. With the stock market you have to purchase a minimum amount of each company shares which limit your starting capital while with Forex there's no minimum amount to purchase. With Forex all orders are filled instantaneous while orders on the stock market will take some time. The Forex Market if so Huge that there's no one entity controlling everything as opposed to the stock market where there are particular major influences of stock movements.

Risk

Please keep in mind that due to the liquidity of the Forex market it makes it pretty risky which is easy for you to lose all your invested capital and as such you should proceed with caution but still proceed. No risk = no reward. It would be in your best interest to get a demo account going and be comfortable trading before you risk your own hard earned cash. After all a demo account is risk-free trading on a live market.