Forex Trade – Intelligent Forex


How To Avoid Forex Broker Traps – A Question and Answer Session

Posted in Forex Brokers by intelligentforex on March 5, 2010

Forex brokers seem to be a dime-a-dozen these days. Furthermore, it seems like everyone is calling foul about his or her broker. Indeed a lot of brokers are less than honest. Here’s what you should look out for.

Q. Where can I find an honest broker offering a 1 or 2 pip spread?

A. That depends. For a mini-account or a micro-account, you can’t. The smallest spread I’ve ever seen (that was legitimate) was 1.5 pips offered by Interactive Brokers. However, they required that you have an account size of $25,000.00.

The only other broker that I know of that comes close is Oanda. They offer spreads that get very low during times of high liquidity for very small accounts. However, during other times of the day, the spread on the EUR/USD can get as high as 6 pips.

If a broker is willing to give you a fixed 2 pip spread and let you trade an account that is only $200 in size, that is a problem. I can almost guarantee you there is some shading of the price going on. In other words, you aren’t getting the real price. You’ve getting a price that will be more favorable to the broker. That means you’ll have more losing trades. The old phrase, buyer beware, has much meaning in the forex broker world.

Q. Why shouldn’t I use 400:1 leverage?

A. The higher the leverage you use, the harder it’s going to be for you to make money. The more leverage you use the more value each pip has. Since the pips are worth more, you have to risk fewer pips per trade to avoid risking your account’s wellbeing.

Here’s the problem. When you risk fewer pips, you’ll get stop too close to the market’s current price. Then any market “hiccup” will take you out with a loss. If you had lower leverage, you would have had more room for the trade, and it may have very likely become a winner.

Many new forex traders are trying to trade with these really tight stops (10 to 15 pips). That’s way too close. Decrease your leverage and give your trades some room to breathe. You’ll probably find that you have more winning trades.

Q. When I’m shopping for a new broker, what should I look for one their website?

A. Actually, you shouldn’t be looking for something. You should be looking for the absence of something. What exactly? Hype.

Anywhere on the website (especially on the homepage), do they talk about how easy it is trade forex? Do they make it sound like making money is easy? These are problems. Immediate cross that broker off your short list.

You should also look for something else. Do they make a big deal of the fact that you can open an account for next to nothing and trade at very high leverage? Those kinds of brokers are like sharks. They try to take your money. Avoid them.

In summary, avoid brokers that heavily advertise high leverage, trade with lower leverage, and lastly, avoid any kind spread that seems too good to be true. It is.

The Forex Broker Reviews – eToro

Posted in Forex Brokers by intelligentforex on March 5, 2010

A Forex broker puts the buyers and sellers together for a fee or a commission. They are the most important element in the success of a Forex trader. If you are looking to get a clear edge from your broker, you must first find a broker who can deliver. The Forex Broker Reviews will help in your selection. If you are an inexperienced trader and just getting started, choosing a broker can be very confusing and intimidating. Forex trading can provide very high profits and also very low. Choosing a reputable broker can be a critical factor in your financial success as a Forex investor.

As you master your trading skills with several training courses you will want to venture forward into the world of currency exchange. Make an informed decision and research Forex Broker Reviews. The broker’s success is tested and documented. They will tell you if you if the broker you ave chosen is a scam. They also keep a listing of brokers with reviews and the actual comments. Take a couple of days reading the reviews and checking out their websites. You’ll be able to see he lists, rankings, ratings and comparisons of the brokers in the Reviews. The more time you take to prepare can only prepare you for a strong future in the Forex trades.

There have been many horror stories of how haphazard some brokers have handled the client’s investment. Some people are ruthless and have no intention of doing what they have promised you. An example of this is giving a broker money and expecting a transaction/profit to occur, when in reality, the broker never actually made a purchase. He will then come up with some excuse and in the meantime keep your money. This actually happens quite often to newbies and is called a bucket shop. In the Forex Broker Reviews you can look for a regulated and secure environment for your trading.

If you think that you or your company have been treated unfairly you can report the broker to Forex Broker Reviews so that others will be warned. In the meantime, as you garner your courage, I recommend an entertaining and easy to use activity, eToro. This is a Forex trading platform in a game like setting. When you know it’s time for the real thing, be sure to find a broker with a spotless reputation, that you are comfortable with and can communicate clearly with.

Forex Broker Scams

Posted in Forex Brokers by intelligentforex on February 5, 2010

If you already trade the Forex market, this isn’t new to you. Although, if you are a beginner, please be aware that this is a common thing in Forex.

For trading in any financial market you need a broker. As the Forex market isn’t regulated, you have to make a better due diligence to find a good broker than in any other financial market that is regulated like stocks, futures or options.

I have encountered several things that you should avoid in a broker. All the criteria I’m going to refer have to be accomplished in order for you to have safety of funds.

In the first place, you should avoid forex brokers that are based offshore, in third world countries or brokers that don’t even state where they are based. I’m telling you this because of the safety of your funds. As there are many forex broker scams, you need to pay special attention to this factor. If your present broker or the broker you are thinking of opening an account with has this characteristic, my advice is to look somewhere else.

In the second place, the forex broker you choose can’t trade against you. This may seem new to you but there are a lot of forex brokers out there that are doing this. Of course, as they are stronger than you, a simple trader, they will always win and you will always lose. Please be aware of this situation.

In the third place, you should read reviews about your broker or the broker you are thinking of using. It is always important to read what other traders think about them, their executions, their spreads and even their customer support. You should read their webpage but nothing is better that asking or reading about them from someone that is already using their services.

Finally, don’t let the money and greed talk too loud. If a forex broker allows you to trade with just $100, it’s because they allow you to have a big leverage. Using big leverage is not a good idea because, if you have a small account, you can get ripped off with just a loss. Of course, you can use this leverage in your favor if it is a small percentage of your money. But if you’re trading with just $100, there’s no space for leveraging without incurring in a very high risk of losing your entire account in a single trade.

Don’t get discouraged by the fact that there are so many forex broker scams. There are also good and solid forex brokers. You just have to do a deeper search in order to find one that fits your needs and your security.

What to Look For in a Forex Broker

Posted in Forex Brokers by intelligentforex on February 5, 2010

Even though the buying and selling of currencies may sound like an easy task, this is not so when it comes to the real situation on the ground. In fact, for you to make a profit in the forex market, you need to have substantial knowledge on forex trade. However, what about those people who invest in FX as a part time job and have no time to learn about the foreign exchange business? Your answer lies with a forex broker. Similar to in the stock market where a stockbroker gives you advice on shares to invest in, a forex broker will help you trade profitably in forex. A broker will advise you on the current trends, give you vital information that will assist you in trading and if you so wish, a forex broker can transact on your behalf and with your best interests at heart – an intermediary is really the most appropriate term. Nevertheless, before you engage any services of a broker, you should examine the following issues:

Consider the fees of opening an account with the FX intermediary and as well his or her brokerage rates. This you can do by making sure you go through the contract and understand it well. If you don’t like the fees charged, then do not sign the contract until you resolve it. The brokerage fee on the other hand will be the rate charged every time you make a transaction. Such fee will normally be deducted from your account and thus you should always go for a FX intermediary who will charge low rates. Another thing to look at before taking your business to a forex intermediary is communication. Can you pick up the phone and get hold of him/her, email or communicate via live chat? If you cannot, do not settle for him or her. Still on the same matter, are there extra fees charged for this? Please don’t go to an FX intermediary who charges for just about anything.

A good forex broker will also ensure that your life is simpler and not complicated in any way. For instance, the forex broker may have various ways of settling your account fees: for example, you can use credit cards, direct deposit or any other online means of payment transfers. Finally, a genuine forex broker should be registered and should be able to give you such details upon request.

Choosing a Forex Broker

Posted in Forex Brokers by intelligentforex on January 24, 2010

Trying to decide what forex broker is best for you is a difficult one, so this article hopes to bring to light some of the things that you need to consider.

With the advent of more FOREX retail traders in the market, competition amongst brokers has led to an increase in platform flexibility and features. Therefore, each broker over the past few years has tried to provide a better and easier way into the foreign exchange market for the beginner. I will pose some of the more obvious questions you need to find out from or ask your broker.

First and foremost are ‘spreads’ and how the broker deals with them. Spreads are important as the beginner needs to minimise his risk and reduce any costs when entering and exiting a trade. Usually, spreads are quoted by the broker as being ‘fixed’ or ‘variable’ for each currency pair. I have noticed that these days, spreads are always ‘variable’ and few brokers offer truly fixed ones. Although they may say EURUSD has a 3 pip spread, what they mean is that this is the minimum spread. You can be guaranteed that in times of high volatility, when prices are moving quickly, the spread will increase. Note also, that some brokers increase their spreads if the ‘lot’ size is lower – see the types of account below. This seems a bit strange as this certainly will not encourage new business for the broker!

One point to mention is that although this point is important for the beginner trader, as you get more experience, spreads become less of an issue when choosing a broker as they become less significant and more experienced traders will choose other features over spreads when considering what broker to choose. There are lots of websites listing broker details – so do your homework before choosing!

The next thing is whether the broker offers all three of the ‘standard’ accounts – regular, mini and micro. Regular accounts deal with full ‘lots’ ($10 loss or gain for each pip movement in the currency, if trading a USD pair) and therefore require the largest amount of starting capital of around $5000. Although mini accounts ($1 loss or gain for each pip movement) are now plentiful and commonplace, they still require a certain amount of capital to open that may be beyond some new traders. Micro accounts (Only 10c loss or gain for each pip movement) deal with such small sums of money that they are better than trading demo, but the risk is low when it comes to losing capital. Consequently, they require the least start-up capital in the region of only a couple of hundred dollars.

Various checks will be done when you open an account, and if the company is based in another country, you will need to fill in various tax exemption forms such as a W-8BEN before the account will be opened, don’t let this put you off!

Another check you may wish to do before considering a broker is to check their performance at the Commodity Futures Trading Commission website,http://www.cftc.gov, to ensure they are listed and have the required minimum turnover and liquidity. Any significant court cases will also be listed.

If you intend to execute ‘position’ or ‘swing’ trades, such that you will be holding overnight positions, you may want to check what rates of interest will be paid/debited from your account. This is sometimes hard to find on some websites, but can be very revealing as most brokers offer poor ‘carry’ interest if you are in a trade for a long period of time.

Check to see what currency pairs they offer – again, most companies offer most of the most commonly traded pairs but it’s nice to see how ‘established’ they are by seeing if they offer other trades such as gold, S&P, futures etc.

Unfortunately, something you can’t check is the kind of service the broker offers. Most will be ‘discount’ brokers, which basically means that they offer no trade advice or general help and if you speak to anybody on the trading floor about your trade, they will be usually be brief and ‘to the point’.

Try to find a broker who has downloadable free software that you trade from on your computer. The other way is to trade ‘live’ from a website, but I find this inflexible, especially if you continually need to click between screens as this usually requires the loading of a new webpage and makes everything quite ‘clunky’ even if you have a fast broadband connection.

Some brokers offer trading platform software and separate charting software, so you can use the best looking charts from one company and the platform from another – watch for variations in price quotes though!

How Do Forex Brokers Make Money?

Posted in Forex Brokers by intelligentforex on January 8, 2010

Forex brokers are paid commissions on the outcome of your spread. The spread is measured in pips and is the difference between what you offered and the bid. Since the market moves so quickly your broker needs to be readily available to accommodate your trading, provide advice and reliable quick access to the market.

When you begin to review the various forex brokers available make sure part of their service is to provide current advice on all currency trades, the current economic environment and options available for your best spread for your trades. These services are essential for successful trading.

The broker you select should be accredited to ensure their familiarity with the terms and rules established by the exchange for currency trading. A competent full service broker will be constantly abreast of the current market conditions and currency rates available. Their advice should guide you to making viable trades.

An accredited broker should provide the flexibility in swapping currencies depending on current market conditions without charging you high or variable commissions. You should be able to swap currencies based on your trading expectations no matter what your trading platform without outrageous commissions or fees going to your broker.

When you select a brokerage firm make sure you start out trading in small quantities until you become familiar with your broker. Get to know them by constantly speaking with them over the phone to get advice and an understanding of their services and experience level.

Determine whether your forex broker understands the markets trends, stays current with economic and currency news and the world markets impact on your exchange. Make sure they stay current along with providing multiple means of advice through conversation, newsletters, email and other sources.

These are all extremely important items to determine when reviewing the right forex broker to meet your trading needs.

Know More Forex Broker Tricks

Posted in Forex Brokers by intelligentforex on January 8, 2010

You need to understand that forex brokers are above all marketing machines. Forex brokers continuously require a flow of new clients, since many retail forex traders don’t survive longer than a few months. After losing, more than 90% simply quit and give up forex trading.

For enticing new clients, vast sums of money are spent on advertising by forex brokers. You can check this fact by going on Google and typing any forex related keyword. Almost all the ads will be by forex brokers. Each click costs them around $1.

Most popular way used by brokers to make you trade more and more and burn your money is to announce monthly Forex Trading Contests. Cash prizes of $2000, $1000 or $500 are announced.

In order to win, many small traders get wiped out; losing their money. This is just a trick fx brokers use to make you trade more. The more you trade, the more money your broker makes. This trick is similar to a lottery.

Forex brokers are free to offer any price to their clients. Most of the brokers get price quotes from the interbank market with a 1 pip or even lower spread. To this pip spread they add 2 or 3 or even more pips as the price quote to their clients.

These 3 or 4 pips are the risk free profits that the brokers make for each round trip trade. You see why fx brokers are giving you free platforms and trading signals, only to make you start trading as soon as possible. Your broker will make more risk free money, the more you trade!

There is a practice used by forex brokers called Price Shading. For example, if the broker is convinced that Euro is on an uptrend and its price is going to rise, the broker will shade his price quote slightly higher to take advantage of the likely increase in Euro price.

One of the best tricks that forex brokers use is Stop Loss Tripping. If they find many stop losses at a particular level, there will be a momentary blip in the price feed to take out most of the stop losses.

You can’t do anything. It was a momentary spike, so small that it only tripped the stop losses.

Since, there is no central exchange to compare moment by moment prices, your broker can offer any excuse like there was sudden large order in the market or the broker feed is much faster and reflects true interbank rates.

What is an ECN Forex Broker?

Posted in Forex Brokers by intelligentforex on January 8, 2010

The ECN in ECN Forex Broker stands for “Electronic Communications Network ” or ECN broker and is not the common in forex trading. An ECN broker does not have a fixed spread, as the buying and selling rates vary depending on market conditions. There are many fx brokers that offer a fixed spread, many of which are less regulated than ECN brokers. An ECN offers a flexible spread but with better prospects of success. In addition, orders from customers on a commission basis. The trading cost is still cheaper than in a forex broker with a fixed spread. Forex Broker fixed spreads usually take the opposite position of customer orders, while Electronic Communication Network brokerage transmit orders to the interbank trading. An ECN brokerage is a middleman, a fx brokerage with a fixed spread the terminus of the order.

With an ECN broker you can see the true market depth, so know what the supply and demand really is for the market. You will see the number of buy orders and sell orders at specified price thresholds of the ECN broker that it joins. In addition, the trading is anonymous, as we see not who made the buy and sell orders coming.

Electronic Communication Network brokers are one or more channels connected directly to the interbank trading. In addition, to open an account with an ECN forex broker is usually starting from 5000 U.S. dollars, with the headquarters of the company of an ECN brokerage mostly in the U.S. or Britain. Deposits and withdrawals by bank transfer only possible with credit card and do not like the whole Forex brokers with a fixed spread. As mentioned these brokers do not trade against their clients, but will forward orders to the interbank trading. Stop Hunting and strong extensions of the spread do not occur as there is a real interest in ensuring that you get on the Forex market continuously gains.

Important Aspects to Look For When Selecting the Best Forex Broker

Posted in Forex Brokers by intelligentforex on January 8, 2010

Today, investment in the Forex market is the best method to earn money quickly. If you too intend to invest in Forex market, then taking the help of a Forex broker is a wise decision. Hence, selecting the best broker is crucial to invest appropriately and earn profits.

The most significant factor to consider while selecting the best Forex broker is to check the reputation of that broker in the Forex market.

Factors to Consider for Selecting a Best Forex Broker:

Always check the web site of the Forex broker to know about the risks involved in Forex trading. If there is no information on risk, probably the broker is just interested in your money rather than helping you to make money. Remember that the best broker will always cover your investments with good margin and if funds are exhausted, the broker will close your trading.

Forex trading is done on the basis of leverages. Traders opt for 100 to 400 leverages to attain maximum profits. It implies that you are playing with 100 to 400 times the money invested. However, bigger the leverage, bigger is the risk. You can make huge profits or can suffer from losses and this depends on your experience and knowledge in the Forex market. Thus, the broker needs to be familiar with these aspects.

To pick the best Forex broker, you need to check the range of services offered by that broker. The services should include Forex signals and technical analysis through the Forex platform of traders. Compare the Forex charts offered by different brokers that will help in knowing whether the broker would be beneficial for long term or not.

Look for a broker, who trades with lower spreads, as this reduces the amount of money you have to share with the broker.

The Forex markets operate 24×7. Hence, brokers offer 24 hours services that act as great help for keeping a tap on your investments.

Try to find the professional history of the broker, as it will help you determine the reliability of that broker. In addition, check the commission charged by the broker.

Fast execution time of brokers enhance the chances of tapping opportunities that pop-up in the Forex market. This is one of the most important criterion for selecting the best Forex broker.

These aspects will help you select the best broker for ensuring secured investments and maximum profits.

How Do You Find a Good Forex Broker?

Posted in Forex Brokers by intelligentforex on January 5, 2010
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Trading Forex profitably is not easy and one major factor in this is the quality of the Forex broker that a trader uses.

Unfortunately, the FX marketplace in not regulated and Forex brokers actually act as market makers. That means that brokerages are actually pretty much free to act as they like. This results in some firms manipulating the trading market against their customers, to their own favor.

It is vital to be able to recognize these companies and avoid them at all costs. The two major areas in which a brokerage can affect a trader, is with slippage and the currency spread.

Slippage is when a trader tries to enter or exit a trade at a specific price. A broker may adjust the price that the trader can actually get, leaving them in a less advantageous position.

The spread is the difference between the bid and the ask price, or basically what a currency can be bought or sold for, at any given time.

Brokers can set this price. Traders need to look for a firm that offers competitive spreads and also more important one that does not vary them wildly, especially during periods of high volatility in the markets.

This can have the effect of stopping out, or triggering buy orders for certain positions artificially, as a broker increases their spreads to cover their positions and protect their own assets.

Finding a broker that will act fairly and ethically is absolutely vital for ordinary traders to have the opportunity to trade successfully and profitably.