In this article you’ll learn the biggest differences between the stock market and Forex.
1 – Leverage: On stocks, the leverage is usually 2:1 which means that if you have $2.000 in your trading account, you can buy up to $4.000 of a stock. If your account has more than $25.000 it can be considered as a day trader account and in this case, your maximum leverage might be as big as 4:1 for day trading only. On Forex, the maximum leverage is usually up to 200:1. This means that with $2.000 in your Forex account you can purchase up to $400.000 of your favorite currency pair. Some brokers offer even higher leverages that go up to 400:1!
2 – Variety: On the US stock market alone there are over 10.000 stocks. This means you have a lot of opportunities to trade but also a lot of complexity in order to find which stock you’re supposed to trade. On the Forex market, there are only 4 major currency pairs: EUR/USD, GBP/USD, USD/JPY and USD/CHF.
3 – Commission fees: On stocks you usually pay a commission when you buy or sell stocks. This commission can be based on the number of shares you’re purchasing or it can be a fixed commission like for example $10 for unlimited number of shares. On Forex the commissions are free. You don’t pay any commission by buying or selling a currency. The only cost is the spread.
4 – Schedule: The US stock market is open Monday to Friday from 9.30am EST to 4pm EST. The Forex market is open 24 hours a day from Monday to Friday. This brings unlimited opportunities to traders worldwide.
Source by Richard M. Taylor
Always keep your trading systems simple. Too much information at one time on your trading screen could confuse and delay your decision to trade.
Broker – A lot of Forex brokers are in business only to make money from yours. Read forums, blogs and chats around the net to get an unbiased opinion before you choose your broker.
Sample the Environment – It is important to remember that many registered and online trading agents have fictitious platforms which mirror the real-time, live platform clients register and trade on. It is not only advisable, but it is also actively encouraged to initially open a ‘dummy’ account where fictitious Forex trades can be undertaken that closely reflect what real trades may be like when they are eventually undertaken. Such platforms are designed to give those that are new to Forex a feel and an idea what real trades on live markets will be like when the decision is made to begin trading.
Buy low, Sell high – Forex trading does not involve the physical purchase of the currencies, but rather involves contracts for amount and exchange rate of currency pairs. The potential for profit comes from the fluctuations in the currency exchange market. Regular daily fluctuations in the value of one currency against another give a clear advantage over conventional stock market equities and instruments. See Trading Illustration Only
Manage Losing Positions – Trades will sometimes inevitably on occasion go against you. It is important to accept them as an inherent part of trading. Cut your losses and move on having learned from any mistakes made. Always remember however that you will not be able to trade without losing some positions. It is important to manage these well.
Patience – Do not over-trade your account. Good money management practice is important and will help with profitability. This will go a long way in helping you develop a strategy which fits with your personal trading capital. Operate a trailing stop loss policy say 15 to 20 pips behind the trade. Minimize your good trades as long as you are confident.
Flexible Mindset – Don’t set yourself false targets and expectations. Experts will tell you trading is not an exact science and setting oneself unattainable targets will only lead to frustration and feeling of failure when these targets are not met. Always maintain an open mind. The market is a constantly changing environment tunes your mindset to understand this.
And lastly but definitely not least, it is most important for all market participants to remember that unique experiences and past performances do not guarantee future results. Trading results can vary in any combination of circumstances. If you do not have extra capital that you can afford to lose, you should not trade in the foreign exchange market.
Invest wisely and take advantage of the resources and technology available to you in the market.
Source by Ladi Dairo
The old saying, “A carpenter is only as good as his tools,” is true for so many things but is particularly true for trading the Forex market. Forex tools such as Forex RSS, the Forex toolbar, and a Forex widget can become indispensable in a well equipped trading arsenal. If a Forex trader is blindly trading the market on his hunches, he should be in Las Vegas because at least then he could see a nice show before he loses all his money.
The typical trader has a few screens in front of him. At least one of those screens should be displaying his Forex tools with the appropriate RSS feeds. For those unfamiliar with Forex RSS (standing for ‘really simple syndication’) it’s a method of receiving information immediately. In the kind of atmosphere presented by Forex trading, the only problem with immediacy is that it doesn’t happen fast enough. That’s how quick the market can be.
There are a couple tools that can provide the necessary information every trader needs at his fingertips. A toolbar provides links and information and is constantly displayed so there is no searching and fumbling. A Forex widget embedded on a website is a great tool and is always updated giving current quotes and information.
Many Forex portal websites offer their articles and information through Forex RSS, which means if you have an RSS reader such as Google Reader, you will be automatically updated throughout the day (and night). A Forex toolbar on any one of your screens will also do the trick.
Charts should always be only a click away and having them available easily is crucial. Whether it’s through a Forex widget, or a Forex toolbar, you shouldn’t have to spend any time searching for the information you need. Fundamental news is coming out all the time and can blow the charts away. Unless you’re connected to Forex RSS, you’re going to lag behind thousands of traders ahead of you.
Forex trading is your business, and you want your business to be well equipped. Considering that most, if not all, Forex tools are free, there is no reason not to take advantage of the situation to the full extent.
Source by Gil BZ
One thing is for sure, there is not a forex trader around who cannot get better and one way to improve your trading ability is to use automated forex trading software to add a few new tricks to your bag. Some traders believe that not only can it help them make money fast online, a software forex robot is also very good at helping you to add profitability to your good trades and decreasing your losses on the bad ones.
This software forex robot is not something to replace the trader, it is actually quite the opposite. You are still going to have to know the basics of trading and set the software within your limits, but a lot of the manual task work and guess work is taken out of the equation.
Once you get the forex software rolling, it is quite obvious that anyone involved in the forex market should want to use it. No more figuring out numbers by hand or even keeping records, the software will handle all of these mundane tasks for you.
One thing that a lot of people do not consider when they are talking about automated forex trading software is that it can not only handle the basic tasks for you, but it can ever teach ‘an old dog new tricks.’ There are different simulations or backtesting that you can run to help increase your every day skills as a forex trader. Everyone involved in forex trading should always seek to learn as much as they can at all times and this software is a wonderful learning tool.
While the automatic forex system is definitely great in most areas, it does have a few shortcomings. The most prominent of these is the software’s inability to compensate for a sudden change in the market that is based off late news. Whether it is the database information or some other reasons, the forex trader themselves will need to keep an eye on the trades when this happens to ensure that their money is protected.
As we mentioned before, this forex software is not to replace a trader, it is more of a tool than anything else. The value of it is in its ability to track and record all information and to keep an eye on your forex investments. In just about all areas it is very successful in doing just that, but this one small shortcoming will have to be watched. Regardless, this is something that every successful forex trader needs to educate themselves on and use in order to increase their level of success.
Source by Daniel S.