Forex Trading Made Easy

For a first-time trader, it can be daunting to select a reliable forex trading broker to trade with. Since there are hundreds of brokers running the business of trading forex, they do vary in account specifics, services and policy. Today, we will look at a list of broker services you might want to consider when selecting a forex trading broker.

Forex Trading Broker Services

1. Online Trading Platform

Online trading platform is a norm in almost all services offered by brokers. This platform allows traders like yourself to conduct currency trading such as executing orders over the internet.

You may want to examine the dealer’s trading interface. Ideally, the interface should be be too cluttered and disorganized. If it looks too complicated to you, it probably is not user-friendly.

Make sure there is a bar chart of the currency pair you are monitoring, an account summary of your trading account balance with realized and unrealized profit and loss. The margin that is available for trading should be displayed clearly as well. You should be able to quickly see your currently held positions.

2. Charting Services

Several dealers provide integrated charting and technical analysis with their platform. These are valuable services since you probably have to pay a premium getting similar information and tools from other independent services.

3. Demo Forex Trading Accounts

More and more forex trading brokers are offering trial demo accounts. These are great for doing paper trading which does not involve real money. This is a risk-free account to test currency trading in a real-time environment. This gives the trader a chance to try things out.

4. Mini Accounts

Mini accounts are popular nowadays. For as little as $50 to 100, you can open a mini-account. In fact, this amount of money is so small that mini-accounts of this size are often called micro-accounts. The beauty of such small accounts is that it allows you to experiment with forex trading and put your learning to test. The amount of loss you can make is also significantly reduced. By the way, forex trading brokers like Easy Forex do offer such accounts.

5. Online Support

While this is not exactly a must, you may want to see if the forex trading broker does provide some form of training and education to their clients like yourself. It helps to open an account with a trader that offers learning opportunities. An example would be to provide useful reading materials. You can find a free ebook here.

6. Online Chat Rooms

Chat rooms are good places for exchange of trading strategies, tips and ideas. Just be more careful and selective in learning from the experienced traders there. Not every tip is worth picking up.

7. Miscellaneous Services

These are not exactly necessary but forex trading brokers do provide value-added services at times like a multi-lingual platform, advanced charting tools, detailed fundamental and technical analysis, daily and weekly forecasts.

In our next post, we will learn about forex trading broker policies that you may need to scrutinize.

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Before you go about signing for a forex trading account with an online broker, I have a piece of good news and bad news for you. The good news is, there are well over 100 established brokers online which means many choices for you! But the bad news is, selecting one ideal one can be a big headache. This is why we came up with a check list to help you.Checklist When Selecting a Forex Trading Broker:

1. Ask for references with whom you can communicate with.

2. Check the regulatory agencies if the broker is regulated.

3. Go to Forex discussion groups such as forums and see if the broker you intend to sign up with is reputable. Just your gut feel and judgment.

4. Requoting. This is ONE big problem with many online brokers. Basically, what it means is that the trading platform does not give you the rate you see and select on the screen. For example, if you choose to buy Currency Pair A at this quote, they may sell it to you at a higher rate. Sometimes, the difference can be as much as 10 pips!

So be careful here. Many online brokers requote, and some do it almost all the time. This is why Easy Forex is a top choice for many dealers because there is NO requote. It is a real time “What You See Is What You Get” quote. You buy and sell at the rate you choose. Fair deal?

5. Send a list of questions via email to your prospects. The whole objective is to get answers and test their responsiveness. Do the same for their LIVE chat if they have one.

6. Contact the customer support and see how long it takes for them to respond to you. Also, ask questions to know if they are professional as well as knowledgeable enough.

7. Compare account specifics: Account minimums, margins, leverage, bid/ask spread, commissions and so on. Typically, the spreads would vary for different currency pairs. Use EUR/USD as an example as this pair which is the most popularly traded has the lowest spread. Look out for brokers who charge a “lot fee”. So be sure to ask them when you check them out. A good way to ask is to tell them to explain to you what all the costs involved, item by item are. A broker that charges a low spread does not end up being the “cheapest” to go for if there are hidden costs.

8. Trading platform – this is a crucial factor where many new dealers may miss out. Do not get too excited and fail to notice that some trading platforms are terribly difficult to understand and navigate. The interface which you trade on has to be user-friendly and charts and price movements need to be clearly and neatly presented. Forex is dynamic and you cannot waste time trying to fiddle through a complicated platform. Another thing is most trading platforms are not bug-free and do not deliver real time information!

Here is one piece of advice: There is no perfect broker. Choose one according to your needs. We found Easy Forex among so many brokers, to be reliable with a clean and easy to use trading platform as well as a solid NO requoting policy.

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Scrutinizing Each Online Forex Trading Broker

In this section of our Forex Trading Made Easy tutorial series, we want to pick up some tips on how to find the right online forex trading broker. Always read the fine print section of each broker website to understand what nuances the broker is imposing on a new trader like you. One quick tip here is to try their demo platforms if you can.

Short Summary of Specifics to Look For in Brokers

1. Low Bid/Ask Spreads

The spread is the difference between the buy and sell price of any currency pair. Having low spreads means savings as well as greater profits if you are trading short price ranges of several pips.

2. Low Minimum Account Deposits

If you are new to online forex trading, naturally, you do not have millions or tens of thousands of dollars to trade. Mini forex trading accounts that allow you to deposit a minimum of $250 to $500 are great for newbie traders.

3. Instant Real-Time Execution of Orders

This is crucial when picking an online forex trading broker. Some sneaky brokers would give you re-quotes when you click on a price. Others allow for price slippage. These are important to you as a trader especially if you are trading for small margins. Always look for a broker that transacts based on “as is” or “What You See Is What You Get” WYSIWYG. This means that the trading platform locks in at the price you decide to click on and not something else.

4. Free Technical Analysis, Charting and News Update Services

Pick an online forex trading broker who provides free technical analysis, charting and news update services. It is best to go with the platform that is easy to understand and not cluttered with loose data and information. You need to be able to decipher and interpret the news quickly.

5. Leverage

Leverage is key to making huge profits on forex trading. We spoke about leverage briefly previously. If you are just starting out, do not go for high leverage. The profit potential is huge, as is the potential for losses. One rule of thumb here is not to go above a 100:1 leverage for Standard (100k) accounts and 200:1 for Mini (10k) accounts.

Easy Forex offers one of the most comprehensive and user-friendly trading platform with some of the best analysis tools. Coupled with Forex Killer, your odds of profiting from forex trading are much higher.

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Before you start to trade forex, you need to first have an account with an authorized online forex trading broker. The broker can be an individual or company that buys and sells currencies on the trader’s behalf. They charge a commission for their services. Today, there are dozens of brokers who are offering their services online. It can be overwhelming at first but once you know some basics about how to choose the right forex trading broker, you should be ready to start forex trading in no time.

With so many choices of online forex trading broker, there is always a need to do some research. There are several aspects you are encouraged to look at.

1. Services Available

See what services are available at each online forex trading broker. It is quite typical of a broker to offer a trading platform either online or using a windows-based application. Either way, you can trade the major currency pairs like EUR/USD, USD/JPY at all brokers. There are some forex trading platforms that provide the latest updates about economic news, market trends and forecasts.

2. Fees & Other Trading Account Specifics

Compare the fees of different online forex trading brokers. They tend to vary in the fees, Bid/Ask spread, leverage, margin and minimum deposit. Here’s a tip for you. Bid/Ask spread does matter if you are trading on small price movements.

People have differing opinions about the leverage ratio offered. Having a high leverage can also mean that the potential for profits are higher with the same amount of investment. Likewise, the same goes for the potential losses. But at the end of the day, it really boils down to your risk appetite. Some allow you to start with $250 USD while others require at least a $100,000 forex trading account. We will look at this in greater detail in the next post.

3. User-Friendly Forex Trading Interface

When you first take a look at the forex trading platform’s interface, you could be shocked and overwhelmed by all the figures, charts and movements.

Personally, I have seen and used quite a decent number of forex trading platforms. When trading forex, the last thing you want to worry about is figuring out the confusing charts and price movements of various currency pairs. When planning your buy/sell orders, you need to be able to see the past price movements clearly as well as read the charts easily. I would not mention names here but some interfaces are really a turn-off. Either they are too cluttered and suitable only to the eyes of a robot and a very experienced forex trader.

Easy Forex has a pretty impressive forex trading interface that is user-friendly. It is quite simple to navigate around and make your market and limit orders while having full view of what is happening to the currency pair price movements.

4. Registration and Regulation

The Forex market is an interesting market in that it is an unregulated market. Regulation is reactive in nature. Only in the case of misdeeds will something be done. In US, a broker has to be registered as a Futures Commission Merchant with the Commodity Futures Trading Commission (CFTC) and member for National Futures Association (NFA) before it is considered an authorized broker. These two bodies were set up to protect the investing community from investment fraud, market manipulation and other illegal or unethical trading practices.

You can always verify the membership status of a broker with CFTC and NFA before opening an account with them. Call NFA at (800) 621-3570 or simply go to their broker information section of NFA’s website at http://www.nfa.futures.org/basicnet.

Always seek to find those with clean records with the regulating bodies and strong financials. Non-regulated firms are best left alone! The NFA are making concerted efforts to educate investors about retail forex trading so if you are a retail trader, get a hold of their brochure “Trading in the Retail Off-Exchange Foreign Currency Market”.

5. Customer Service Support

Since the Forex market is active round the clock, you have to make sure that your broker provides round the clock customer service support. The customer support staff handling their customers must be knowledgeable. This is one big difference between different brokers.

What you can do is to contact the customer support of a few brokers and then find out how fast they respond to your queries. At the same time, make sure that their replies are to your standards. After-sales service is always key to choosing a good broker.

Easy Forex does well in these areas we have looked at. This is why many users are using their forex trading platforms and hold accounts there. Did you know that they have an international presence as well?

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Forex Trading Order Types - Market Orders and Limit Orders

In this part of our Forex Trading Made Easy tutorial, we will discuss about forex trading order types. As a trader, you need to understand what some of the order types that forex trading brokers provide are.

Market Order

A market order is an order executed to buy or sell at the prevailing market price for the currency. Let us use the EUR/USD currency pair as an example. For instance, it is trading at 1.2121. If you intend to buy at this exact currency price, you just click the “BUY” icon and your trading platform would instantly lock in this price and execute a buy order.

Limit Order

A limit order is an order that is placed to buy or sell at a particular set price. There are two components to the limit order – the price and the duration. Again, we are using EUR/USD currency pair as an example which is trading at 1.2121 now. You want to take a long position (remember what we learnt earlier) on this currency pair and anticipate that it will reach 1.2150 where you will take profit. There are two ways to achieve this.

One of them is of course to monitor your computer until it hits 1.2150 and then you execute a market order or you can simply set a Sell limit order at 1.2150. That way, your trading platform would automatically execute a Sell when it hits 1.2150. It is pretty much hands-free as you can do your own thing once you set a limit order. Likewise, you can use a limit order to set a Buy limit order at certain price.

So in short, you predetermine what the price you wish to buy or sell for a specific currency pair. You also specific clearly how long you want the limit order to stay active (GTC or GFD).

Stop Loss Order

A stop loss order is actually a limit order linked to an open position to limit losses should the prices fall instead of an expected rise. Naturally, if you are taking a long position on EUR/USD at 1.2215, you also have to decide at what price you should sell if the prices fall instead. This is called loss cutting.

Say you can only stomach a small loss of 15 pips, so you decided that you should set a stop-loss order at 1.2200. Assuming that the market does work against you and EUR/USD drops to 1.2200, the trading platform would automatically execute a SELL limit order and close out your position.

Stop loss orders are useful if you do not wish to face your computer screen for the entire day. I encourage you to set stop loss orders for each trade you make so that you need not have to monitor it all the time. Traders also make multiple trades a day so it can get all confusing if you do not make use of stop loss orders.

There are forex trading software that help you to place stop loss orders so that even if you take losses, it is limited. One such powerful software is the Forex Killer which works well no matter if you trade at Easy Forex or other forex trading platforms.

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We will leave the fundamental analysis to later but for the time being, let us look at a simple forex trading buying and selling logic. Let us presume you are into EUR/USD and want to trade in this currency pair only.

If you believe the US economy will weaken relative to the European economy, then it would be good to buy EUR/USD. In this case, you are buying euros (the base currency) in anticipation that sooner or later, the Euro will rise against the US dollar (the quote currency).

On the contrary, if you subscribe to the opinion that US economy is growing and the Euro is likely to weaken, then you execute a SELL EUR/USD order to sell Euros. If the euros (the base currency) truly fall in value, then you are profiting.

Let us use another currency pair USD/JPY as an example. In this case, the US dollar is the base currency and if you feel that the Yen dollar is going down as a result of their government’s involvement to boost their export business. Then you will execute a BUY USD/JPY order to buy US dollars.

Likewise, if you watch the news and hear that the Japanese investors and fund managers are pulling out of US financial markets and converting their US dollars to Yen, this is bad news for the US dollar in such a sell down. So in this situation, it would be wise to execute a SELL USD/JPY order. When you do that, you have just sold US dollars expecting it to depreciate against the Japanese Yen.

Learn how Forex Killer can help you to make easy and quick decisions in buying and selling forex.

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Pips, Margin and Leverage

In this tutorial of “Forex Trading Made Easy”, we are going to introduce a few more forex trading jargons to you.

They are the Pips, Margin, Leverage and Transaction Cost.

What are Pips?

A pip also called point is actually the smallest unit of price of any foreign currency. Almost all the currency traded in forex comprises 5 significant digits and the majority of currency pairs have the decimal point immediately after the first digit. For example EUR/USD = 1.2807 where a single pip equals the smallest change in the fourth decimal point which is 0.0001. In other words, for any pair using USD as the quote currency, the 1 pip = 1/100 cent.

You may wish to note that one currency pair is quite different from the rest. USD/JPY = 107.17 Yen where the smallest change is 0.01. In this case, a pip here is $0.01.

Margin & Leverage in Forex Trading

When an investor like yourself decides to open a margin account with the forex dealer or broker like Easy Forex, you need to deposit a minimum sum of money with the forex broker. This amount of money you deposit varies depending on the requirements of each broker. It can be as little as $100.00 to as much as $100,000. If you have limited cash or simply want to try things out, go for those that allow small deposits.

Margin is the minimum required sum in your margin account before you can place a trade. The deposit you placed when you open your new forex trading account is your margin or collateral for trades. Typically, this margin or deposit is 1% of the value of your trade position. When a trader suffers a loss to an extent where he or she can no longer meet the margin requirements, they can either “top up” their accounts or “close” their positions.

In forex, margin is the minimum required balance to place a trade. When you open a forex trading account, the money you deposit acts as collateral for your trades. This deposit, called margin, is typically 1% of the value of the position.

What is Leverage?

Leverage works like this. It is the ratio of the amount required for a transaction to the required collateral or margin. Basically, leverage allows you to buy a large sum of currency with a small amount of capital. Different forex brokers allow different leverages. Some allow a 10:1 (a more conservative) while others allow 100:1 (more aggressive) leverage. In financial terms, you can call it gearing.

Leverage = 100 / Margin percent

Take for instance, Easy Forex offers you a 100:1 leverage. In other words, you can buy $100,000 worth of the USD/JPY currency pair with $1000 only. Your margin percent is 1%.

But here is a tip from “Forex Trading Made Easy”, having a high leverage can mean a higher risk and high losses. Always make sure you monitor your account closely and make use of stop-loss orders whenever you hold an open trading position to prevent unforeseen losses.

With the professional interface and tools at Easy Forex, forex trading is made easy for you.

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