Review Category : Trading Platforms

How to Compare Forex Trading Systems

forex trading systems

The popularity of the foreign exchange market has ensured that there are many forex trading systems available for both new and experienced traders. Although there are many trading systems available in the market it is important that you compare the different systems so that you are able to make a good choice and benefit from it.

You should avoid choosing any trading system in a casual manner without adequate research as you may not be able to use it to place a trade in an effective manner. You need to remember that many fraudulent brokers offer trading systems and if you make a wrong choice, you may not just lose your valuable money but also the many trading opportunities available in the market.

Tips to choose the best forex trading systems

If you want to get a better understanding of the different forex trading systems available you need to do adequate research about the various aspects of the system so that you are able to make an informed choice. It is best to choose a system offered by regulated and licensed brokers.

You can be assured of the reputation and reliability of the broker offering you the trading system if they are regulated and licensed by the Australian Securities and Investments Commission (ASIC). You should avoid choosing brokers not regulated by ASIC.

Apart from regulation, the next thing that you need to focus on is the execution speed. Although the foreign exchange market is open all through the day most of the favourable trading opportunities exist only for a few minutes. You need a fast execution trading system so that you are able to take advantage of the favourable trading opportunities available in the forex market.

Security of the trading systems that traders choose is often a top concern as important financial information is exchanged when placing a trade. The trading system that you choose should have firewalls and encryption codes so that the sensitive information is safeguarded at all times from unauthorised people trying to access the trading account.

Brokers make their money from spreads and it is best to choose brokers who provide the tightest spreads as it can help you maximise your profits from trading easily. The trading system that you choose should also be capable of being customised as per your requirements so that you are able to align it with your trading plan.

Using a demo account to choose the best forex trading systems

Most beginners are confused with the many choices of forex trading systems available in the market. You can make use of the demo or practise account to test the features and functionalities of the trading system so that you may be able to make an informed choice. You may be able to check whether the system has a user-friendly interface so that you can navigate it easily and place a quick trade.

As the demo account is similar to a live trading system in all aspects, you can place a trade without risking your money. This can help you gain adequate knowledge and experience and you may be able to trade confidently.

 

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Choose a Foreign Currency Exchange Platform

foreign currency exchange

If you want to achieve success in the foreign currency exchange it is important that you choose the best trading platform available. As you may be placing your trades using a trading platform, you need to be careful when making the choice. A wrong choice can prevent you from taking advantage of the many favourable trading conditions available in the forex market.

Top things to consider when choosing a foreign currency exchange trading platform

When choosing the best foreign currency exchange trading platform, you need to ensure that it is easy to use. If you choose a platform that is difficult and complicated you may not be able to execute a fast trade. This can affect your ability to take advantage of the profit making opportunities available in the largest financial trading market in the world.

If the platform has a user friendly interface it can help save a lot of time and effort. You may be able to go from one interface to the other easily and this can enable you to save valuable time. As most of the favourable market conditions exist only for a few minutes, it is important that you place a trade during this period to make consistent profits. When you choose simple trading platforms you may be able to trade better.

A top trading platform should enable you to place various types of orders like stop loss orders, profit taking order and trailing stop order. As the forex market is open all through the day for trading the platform should be able to provide real time price quotes so that you can make important trading decisions.

The best platform should provide a safe and secure trading environment for the trader. There should be sufficient safety measures like encryption and firewall protection, so that hackers do not access the financial information of traders. When good security is provided by the platform it can help prevent any unauthorised access to the trading account.

Advantages of choosing the best foreign currency exchange trading platform

When you choose the best foreign currency exchange trading platform you may be able to trade anytime you want as per your convenience. As the best platforms offer good customer service and support you may be able to solve any trading problem that you have immediately. This ensures that you do not miss any trading opportunities.

Before you make the choice of trading platforms you need to understand that not all of them may allow you to trade currency pairs of your choice. When you choose the best trading platform you may be able to access and trade different pairs of currencies. This enables you to choose and trade currency pairs that are popular and actively traded in the forex market.

You may be allowed the use of a demo platform when you choose the best trading platform and irrespective of whether you are a beginner or experienced trader you may be able to gain knowledge and experience using it. This can enable you to make consistent profits when you start trading with a real account.

 

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Swing Trading On the Foreign Exchange

foreign exchange

If swing trading has been suggested to you by experienced traders then it is likely that you are considering whether to utilise it or not. In order to make a proper decision, you have to make sure that you have dissected swing trading in terms of its advantages and disadvantages.

Here are some pros and cons of swing trading which should help you make a choice as a foreign exchange trader.

Risk to Reward Ratio vs. Market Exposure

Swing trading is mainly about foreign exchange trading in a smart manner. This means that swing traders always try to maximise their returns while evading as much risk as possible. For this, swing traders tend to use risk to reward ratios.

Established wisdom about swing trading is that no trader should open a trade that does not, at least, have a risk to reward ratio of 1 to 2. This means that if there is a risk of losing 70 pips then there should be a chance to make 140 pips.

In fact, the higher the chance to make profits above 140 pips, the more attractive the foreign exchange trade should be for the swing trader. This dependence on risk to reward ratio is important because trades are left open through multiple days by swing traders. This means that there is always the danger that while the trader is sleeping, the position takes a turn for the worse.

Learning Curve vs. Spreads

Because a swing trader does not place many trades in the foreign exchange market, the chances to learn are less. Thus, the learning curve for a swing trader is usually extremely steep.

However, one thing that goes in favour of the swing trader is that even though he has to work hard to learn about his style, he does not have to focus on spread fluctuations that much because his large targets and loose stop loss placements make foreign exchange spreads redundant.

Logistics vs. Discipline

One of the best parts about swing trading is that the foreign exchange trader does not have to spend the whole day in front of his or her computer. Instead, he can spend two hours every day to analyse the market and place his trades or manage his active trades.

However, as these two hours every day are extremely crucial a certain level of discipline is required to maintain them. Many swing traders, unfortunately, fail to instil this level of discipline which is why they end up failing.

Stress vs. Emotional Control

Swing trading is much better than scalping because it is not as stressful. Because a swing trader does not have to spend hours in front of his computer and is under no pressure to place multiple trades on the foreign exchange within a small period of time, stress is a factor that is not relevant for him.

However, emotional control is still relevant for a swing trader because the forex market can still spring some surprises that require the trader to be balanced, moderate, and objective to make the right decision.

 

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FX Factors That Hold You Back In Scalping

FX

Every coin has two sides to it. This is especially true for the FX market which economists describe as the only free market in the world. The free nature of the forex market means that the factors that influence it are beyond the control of any individual entity.

Resultantly, even though numerous trading styles have been proven to be highly effective in drawing out profits from the FX market, they still have flaws unique to them.

Therefore, the job of a trader is to not only perfect the system that he has chosen but also learn about his system’s weaknesses and counter them with intelligence. If your chosen system is scalping then the following list of FX factors which are holding your system back should be of great help to you.

Net Gains Are Tough to Ensure

You are most probably placing multiple trades in the FX market. According to the law of probabilities, you cannot have all trades winning and will have to deal with some losing trades as well.

The problem that you might be facing is that the single trade that you lose after winning five consecutive trades erodes all the profits that you gained from those five trades.

This is common amongst scalpers because their stop losses are looser than their profit targets. For instance, if you target 3 pips for every trade and win five in a row but lose the sixth trade with a stop loss of 20 pips then you end up losing 5 pips at the end of the whole process.

Poor Risk to Reward Ratios

You will find it very difficult to find good risk to reward ratios in scalping because the FX market in such short time periods is full of market noise that will convolute your analysis of forex rates. Keeping stop loss placements tight should be something, however, that you should not compromise on.

Physical and Emotional Limitations

Scalping is a very time intensive trading method. You probably sit through the whole day to meet your daily financial targets and open and close many positions in that period.

This can create a lot of physical and mental pressure on you. When this pressure accumulates then you would find yourself taking more risks and, hence, incurring losses. This is something that can be resolved with a stable routine that includes regular breaks to give your mind and body the time they need to recharge.

Requires A Lot Of Experience

Scalping is the most high speed trading method you can find in the FX market. Opportunities and trades would come at you thick and fast and you will have to make related decisions very quickly. In order to make the right decisions, you need to know the FX market well. For this, experience is of paramount importance.

High Costs Per Trade

Finally, because you are placing so many trades in the FX market, you are paying a lot of money to your broker for each trade. You should make sure that your profits always outstrip the spread so that you gain more from each trade.

 

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Forex Market Size

This article focuses on the size of the forex market and the importance of certain currencies.

Forex Currencies

The forex market is different to other financial markets in that it does not have a physical location or central exchange, like the New York Stock Exchange.  It operates on electronic trading methods between parties, hence it is called an interbank market.

This is an extremely popular financial market which is able to be accessed by anyone from anywhere in the world.  Individuals and huge corporations are able to trade next to each other.  You have the facility to trade with anyone, based on the prices they are offering and the reputation of that entity.

Currencies

The currency most actively traded in the forex market is the US dollar.  The Euro follows a close second, and then the Japanese yen.  There are eight major currencies in the market which make up approximately 75% of transactions in the market.  The US dollar forms part of at least half of these trades.  This means that it is vital you get to know everything you can about the US dollar and should include it in your currency pairs, particularly if you are a newcomer to this financial market.

The fact that the US dollar is included in most currency pair transactions is not the only reason why you should be aware of its place in the trading world.  There are several other reasons for it.

  • The US boasts one of the largest global economies
  • It is considered to be the world’s reserve currency
  • It has a fairly stable political climate
  • The US offers the international market one of the most liquid and the largest financial market
  • Many international financial transactions are done in the US dollar, such as oil and gold prices

Forex Speculation

There are various forms of trade that occur in the forex market.  Huge commercial and financial transactions occur on a daily basis, but the bulk of the transactions done are for speculative reasons.  This implies that the majority of transactions are undertaken by traders trying to make a profit from buying and disposing of currencies at the interbank rates.  It has been estimated that speculative trading forms at least 90% of this market.  This increases the liquidity level in the market and that is an asset to traders.  It means that you will not be stuck with a currency that you cannot buy or sell.  You will always have someone who is willing to accept your trade.

Liquidity is extremely important to investors as it has an effect on the movements in rates over particular time periods.  The liquidity in the forex market makes it possible for traders to do huge trades without any effect on the movement in price or the price of the currencies.

The market movement could change based on the currency pair you are trying to trade and the time of day you are trading.  The market comprises of three major trading sessions and it is advisable that you know the time when it is best for you to trade your particular currency pairs.

The forex market size offers traders the opportunity to make money.  You need to implement suitable trading plans, strategies and money management plans to ensure your success in this financial market.

 

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Examining Spreads on the Foreign Exchange Market

This article looks at what the different spreads available to a trader on the foreign exchange market.

Foreign Exchange Market Spreads

When entering the foreign exchange market you will be forced to learn different terminology and concepts.  In order to be effective you must understand what a forex broker is and the spreads these brokerages offer.  There are two primary spreads that forex brokers offer – the variable spread and the fixed or set spread.  It is vital that you consider the different benefits and disadvantages of each before choosing a forex broker with which to trade.

The foreign exchange market spread

Unlike the stock market, the forex market sees its brokers earning ‘commission’ for their services via a spread.  This spread is the variance between the buy and ask prices on a trade.  While this is the primary means a broker uses to make money, there are some brokerages that charge an additional commission.  These brokers are generally those that utilise the electronic communication network or ECN.  In order to determine which broker is best for you it is advised that you compare different spreads and identify which is most beneficial to your trading.

Benefits and drawbacks of the fixed spread

The fixed spread refers to the situation where a broker charges a trader a set amount on a trade.  This is not as common as the variable spread as traders, but many traders do feel that a fixed spread may be more beneficial due to their consistency in an unstable foreign exchange market.

The primary benefit of a fixed spread is the set amount.  By having a set figure you will always be aware of the exact spread charge.  This allows you to utilise any trading strategy available as the spreads will not change.  You will also be able to conduct analysis with more accuracy due to the spread consistency.

A drawback of this spread scheme is that you will not get the best spread available.  The fixed spread is generally wider than the variable, thus if you are using a strategy requiring tight spreads it may not be suitable for your needs.

Benefits and drawbacks of the variable spread

The variable spread is the more well-known and frequently used of the two types.  The variable spread is a changeable amount that alters according to the market conditions and number of online traders; the rule of thumb is that the higher the market liquidity, the tighter the spread.  Of course, this is not always the case as forex brokers do try and take advantage of these highly active conditions.

The major benefit of a variable spread is the beneficial price.  This type of spread is usually tighter than the fixed spread and is a direct reflection of the interbank market.  It also offers an insight into the forex market and its movements.

The primary drawback of the variable spread is its instability.  Unlike the fixed spread, when utilising this type of spread, you have no idea of the ultimate amount you will be paying.  This can be damaging for certain traders as specific trading strategies require tight spreads, and this cannot be guaranteed with a variable spread.

 

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Breaking Your Bad Foreign Currency Exchange Habits

This article looks at the ways that you can break your bad foreign currency exchange trading habits.

Foreign Currency Exchange Bad Habits

When you trade on the foreign currency exchange you could be using a number of bad habits.  Bad trading habits will lead to losses on the foreign currency exchange.  It is important that you are able to identify what these habits are and how you can break them.  If you don’t then you will suffer losses on the market that could easily have been avoided.

Identifying the Bad Habits

There are actually a lot of different bad habits that you could be using when you trade.  It is important that you know what these are.  Many of these bad habits could be formed when you are trading on the demo account.  The differences between the live and demo accounts can create a number of bad habits from diverting from your plan to using too much risk.  To identify the bad habits that you have you need to look at your overall trading.  You have to consider what you are doing with your trading and what you should be doing.  This is considered the best way to determine what your foreign currency exchange bad habits are.

The Definition of Success

To break your bad habits you need to consider what you term as success on the market.  Are you looking for a profit only or are you looking for a more long-term consistency?  There are a lot of traders who define success by the amount they are able to make on the market.  This can be good, but you should consider combining this with a more process driven approach.

The process driven approach will have you look for consistency in your trading.  When you are consistent you are going to follow your trading strategy and plan.  The greater your consistency on the market the greater the chances of long-term success are.  Shifting your idea of success from money to process is a good way to break many of the bad trading habits that you might have.

Having a Reward System

Breaking your bad habits is a lot easier if you are using a reward and punishment system.  When you have one of these systems you are going to reward yourself for doing something good and punish yourself when you use your bad habits.  This is much easier to control when you are looking at a process driven success plan.

With a process driven success plan you can clearly see when you are doing something good and something bad.  The bad habits will be the times when you divert from your trading strategy.  When this happens you should punish yourself in some way.  There are many traders who feel that it is better to stick to a purely reward based system.

This means that when you divert from your trading strategy you do not punish yourself.  However, you are not going to give yourself a reward either.  This will only come when you are trading according to your trading strategy.  The reward that you give yourself can be anything that makes you feel good.  It does not have to be related to the forex market at all.

 

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All You Need To Know About Forex Trading Strategies

forex trading strategies

Discretionary trading has never been considered as a good way to profit in a market as volatile as the forex market. Instead, most seasoned traders and industry experts state that the best way to counter the volatility of the market and walk away with profits is through planning.

This is where the use of forex trading strategies comes into the picture. Devising or even acquiring forex strategies can allow a forex trader to make sure that everything they do is planned well in advance with all contingencies having been considered.

If you are going to be a forex trader as well then you will need to learn all about foreign exchange trading strategies. Here is a small primer which should get you started on such a vast subject as this.

What Do Forex Trading Strategies Comprise?

Different forex strategies comprise different elements. However, components which are almost always found as a part of forex strategies include methods of analysing the market, specification of trigger conditions, defined entry point rules, details of trade management techniques, and exit techniques.

In addition to this, sometimes traders also choose to include other crucial aspects of forex trading into their forex strategies such as money management techniques, position sizing methods, and even the use of alternate analytical processes.

Different Types of Forex Trading Strategies

Forex strategies differ greatly. For instance, a forex trading strategy can be devised on the basis of any trading method. Therefore, there could be as many forex strategies as there are traders in the market.

Moreover, there are forex strategies for all types of trading styles including position trading, swap trading, swing trading, and even scalping. In addition to this, forex strategies can be both manual and automated.

Acquiring or Developing Forex Trading Strategies

There are two ways through which traders make use of forex strategies. One is where they acquire it from another trader in the market while the other is that they devise their own.

Typically, the best foot forward in this regard is for the trader to learn the trading strategy of another experienced trader and subsequently work on it to make it more suitable to his needs. It is important to note that whether forex strategies are acquired or self-devised they should be tested thoroughly before being put to work.

The Execution of Forex Trading Strategies

If the forex strategies come through the tests well then they can be implemented in a live market. The execution of forex strategies is a sensitive area because many traders go wrong at this stage.

In fact, a strategy can work wonders for one trader but cause losses for another because of the latter trader’s inability to execute the strategy well. This is why execution is as important as any other facet of forex strategies.

Improving Forex Trading Strategies Regularly

It is also important to constantly review the performance of forex strategies so that they can be improved. This would allow the trader to keep his forex strategies up to date with changing market conditions.

 

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Establishing A System For Using Forex Signals

forex signals

Trading in the forex market is fraught with a wide array of dangers. However, most traders who are new to the market fail to recognise these dangers, which is why they do not really establish a system for using the forex signals that their technical analysis yields.

However, the importance of having a system for using your forex signals cannot be understated in any way. For one, just establishing such a system would give you a clear understanding of how the market works and what the pitfalls are. Apart from this, there are numerous benefits of such a system. Consider the following.

Avoiding Overtrading

If you scour the internet regularly for forex tips then you would have come across the concept of overtrading on numerous instances. Overtrading is, essentially, having too many trades active in the forex market at the same time.

Overtrading results in overleveraging, higher risk of margin calls, increased levels of stress, and a lot of demand on your time. If you have a system which governs your use of forex signals then this system would focus on which signals you should use to enter the market. This is a form of a screening system which would help you evade bad signals and to use the good ones.

Entering Trades

Your system for using forex signals would also define the process which you will use to enter trades. This involves everything from deciding the size of your positions to the placement of special orders on your positions.

Half the time, traders lose out in the market because their entry strategies were not defined. Having a system for using signals can help counter this kind of danger.

Exiting Trades

Up until you actually close a trade in the market, your profits remain unrealised. While the previous component of your system of using forex signals would involve the use of special orders, sometimes a judgment call also needs to be made.

The exiting component of your system would allow you to decide when to make an exception and even whether to make an exception or not depending upon various conditions.

Risk Management

Entering and exiting trades also involves risk management but the importance of this component requires a special mention. Risk management relates to managing risks on individual trades on the basis of your forex signals.

Ideally, this component of your system would involve assessing the kind of risks each trade poses and the kind of rewards you can gain from them. On the basis of this, along with special order placements, your system should allow you to change your position sizes.

Putting Rules In Place

Your system should be as objective as possible because leaving out subjectivity from major decisions would prevent your emotions from affecting your decision making process. For this reason, you should have strong rules within your system for assessing and implementing forex signals.

Furthermore, this system should also have an inbuilt routine which will force you to stick to it through various situations in the market and even in your personal life.

 

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Elements of Foreign Exchange Trading Strategies

foreign exchange trading

Strategies are indispensible when it comes to foreign exchange trading. If you do not use forex strategies then you would find it extremely difficult to profit from the forex market because your entire trading process would be based on subjectivity as opposed to objective analysis of the market itself.

On the contrary, forex strategies would allow you to add a semblance of order to a largely volatile, chaotic, and unpredictable market. However, you need to make sure that you have good foreign exchange strategies because flawed strategies can lead to massive losses in the market.

This is why, whether you are acquiring forex strategies or devising your own, there are certain elements you have to have. What are these elements? Consider the following.

Choice of Currency Pairs

The first thing that your forex strategy would focus on is the currency pairs that it will be targeting. It is a well-known fact that some foreign exchange strategies tend to be better suited for some currency pairs while others can be used for trading other pairs.

The reason why the choice of currency pairs is important is that all currency pairs have their own unique nature and strategies have to be devised to take into account their specific behaviours.

Analysing the Market

There are various methods that strategies can incorporate for analysing the market. For instance, one of the simplest types of foreign exchange trading strategies you will find in terms of their analytical process would be those that are based on price action analysis.

Type of Charts, Indicators, And Time Frames

Even if the analytical component has been specified, there are other related things to consider. Consequently, foreign exchange trading strategies would specify what types of charts they will use, which indicators will be used on these charts, and even how many and which time frames the charts will be plotted on.

Triggers for Entries

With setups established in the analytical aspect of the foreign exchange trading strategies, the next step would be to specify the kind of triggers that will yield forex signals that the trader can use to place trades in the market. These triggers are crucial because they essentially show the projected movement of forex rates.

Trade Management and Exits

Foreign exchange trading strategies would also contain details that would guide the trader in terms of trade management. This mainly relates to taking care of the trades while they are open in the market.

Furthermore, this component also helps the trader decide when to close his open positions in the market or place special orders that will close them when predetermined conditions are met.
Improvement and Improvisation

Every foreign exchange strategy would also have a component which would be designed to help the trader improve it as and when required and make improvisations possible for unique situations also.

This is important because as market conditions change foreign exchange trading strategies must also change with them to continue making profits from the trader in question.

 

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