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What is Forex Leverage and Why it Matters

Most traders know more or less what is forex leverage. Because it impacts their buying power and risk, in their accounts. Leverage is simply trading on margin.

What is Forex Leverage Used for

If you wonder what is forex leverage used for, it is simply used as a way to trade on margin. Or in other words, to trade on borrowed funds. These funds are provided at an interest rate. And in currencies you get paid interest when you are long. And you pay interest when you are short. Directional traders and Carry traders know what is forex leverage used for, and how it impacts their accounts. The vast majority of traders are directional traders. And these simply want to know how the effect of leverage will impact their trading. Leverage increases their buying power, so that both risk and reward are increased many times. Many traders use 100 to 1 and even 200 to 1 leverage. Which means their funds go a long way, but so does risk too. Leverage also determines the amount of money risked per currency pip. So pip value will vary from account to account based on the leverage used. Forex trading strategies range from simple to very complicated ones. Most of these are directional, and leverage can have a huge impact. Both bad and good. That’s why anyone who really knows what is forex trading all about, spends a great deal of time devising a good money management system. In fact, money management is just as important as picking entry points in the market. Beyond that, there are some traders who have more than one account, utilizing different levels of leverage. They use one or the other, depending on the quality of the expected trade. Typically, short term traders need high leverage, much higher than long term traders who simply engage in investing in foreign currency. Nonetheless, one can find a balance, and use the same leverage for both concepts.

What is Forex Leverage to a Beginner?

Beginner traders are delusional about some aspects of forex trading, and what is forex leverage all about. Many of them want to use the highest possible leverage available. Thinking that more buying power will bring in more profits, and that their trading will be profitable from day one. But that rarely ever happens, most of them who use very high leverage end up blowing their accounts far too soon. This is because even tiny mistakes and misconceptions in trading, magnify into massive losses through leverage. And this relates back to overall account size and available funds in the bank account. If the trader doesn’t have a viable money management system in place, the funds can be lost in no time. So it’s best to start with no more than 100 to 1 leverage, and see how it goes before going any higher. Overall however, leverage is a good thing to have. Since it makes it possible for wise beginner traders to finally trade and profit from the markets in an affordable way. Especially in commodity trading, where it would have been way too costly to deal without leverage.

Pursuing a Trading Online Career

The Forex Trading Platform Online You Should Use

(deThe dream of a trading online career can become quite elusive and very costly, because of all the misleading information there is out there. It takes courage.

A Trading Online Career Takes Unbelievable Courage to Develop

Many people pursue a trading online career, yet most end up failing sooner or later because they cannot handle complexity and stress. And sometimes failure actually comes after having made millions of dollars trading, the trader simply loses it all back to the market. To develop a serious trading online career, the pursuing trader must be absolutely strategic in their planning, and even ruthless while trading if necessary. They must be willing to break many rules too. Trading is very similar to military academy and fighting, so as to want to win a war. The problem is that if the general sticks to military academy rules, he will be predictable to the enemy and he will have no chance of winning the war. The forex market for example is indeed a battlefield of the financial markets, and institutional traders do all kinds of deceptive trades so as to fool traders of other competing investment banks. Deception tactics involve misleading announcements, to the effect of ‘we believe this or that currency will do such and such’. While in fact they are planning to trade in the opposite direction. Other tactics are about direct misleading action, so that actual trades are purposely opened in the wrong direction, so as to leak out misleading information. There is no collective conspiracy in the markets, by the institutional traders against small retail traders, it’s just that the bankers themselves are always acting against each other. So there goes the myth of the so called tip that you as a retail trader must follow the smart money. Nobody knows where the smart money is! If it was possible to detect it, then it wouldn’t be smart money at all. These deception tactics are often reflected on the charts, and do confuse even institutional traders, it should not be a wonder then why retail traders, and beginner traders are fooled too. So, in a nutshell there is no smart money you can detect and follow and build your trading career upon. Even the COT report is totally misleading, and cannot predict market direction any better than a coin flip.

How to Win the War of Your Trading Online Career

In your own trading online career you are bound to face the same challenges as other traders have faced in the past. Failure and failure and more failure. And you cannot win consistently because you are afraid to break established trading rules, or still believe that detecting smart money is the way to go. To really trade forex online profitably, you should take existing trading strategies and modify them so as to fit your personality. Feeling comfortable is important. Then you can bend and break many trading rules. One such old rule is about risk control and states that you should never add to a losing trade. This rule is based on the idea that new traders are not willing to take a loss, and just keep their losses open. And it is a fact, this is really what happens. But if your trading strategy is better, you can increase profitability dramatically by breaking this rule. Commodity traders and commodity currency traders do trade through CFDs and have good insights into the commodities in question, usually fundamental insights. They add to losing trades very often, and they know that the fundamental direction will prevail. It’s all a matter of maintaining sufficient margins in their CFD accounts, but CFDs are affordable enough in most cases. Going through a CFD trading guide can help you understand margin requirements, and how far can you go adding to losing trades, or hedging losing trades as well. The old saying is true, those who dare win, and in the financial markets you have to take calculated risks, and dare to break many rules. It is something the market collectively doesn’t expect you to do, because it seems to defy belief. And just like in war battles, conventional wisdom and military academy rules never worked in winning them, certainly not down at the critical point.

Forex Trading for Beginners and Amateurs

Forex trading for beginners and amateurs is a an exciting activity. Even though these people lack knowledge and experience. They have excessive enthusiasm.

Forex Trading for Beginners and Amateurs Later Leads to the Best Strategies

The major problem with forex trading for beginners is that they face older, often arrogant traders who tend to make a big deal out of their success. So as to discourage anyone new in the field, from attempting to make money. Arrogance is a bad thing, and usually leads to complacency. New and amateur traders should hear what others have to say, but nothing should prevent them from having their own, opposite opinion. In the world of forex, many experienced traders are selfish and arrogant, especially those who have committed years and years to a learning curve. Which cost them in heavy losses, and painful lessons. These traders might be still losers, or have achieved marginally small profitability. And that’s why in their minds, cannot accept that a beginner or totally amateur trader could possibly outperform and outsmart them. Jealousy takes control, and it finally makes these older traders perform even worse. The very idea of profitable forex trading for beginners and amateurs cannot sink-in in these people’s minds. It is said that people can’t handle the truth, and in many many cases this is true. People of the dark ages violently opposed the idea of a round earth. And many great thinkers such as Faraday and Einstein were ridiculed by their older peers. The better part of the academic establishment, which had much better education than these great thinkers could not accept the fact that these young people had made discoveries no one else had noticed before. It’s a fact, people don’t take you seriously when your are much younger than them, and attempting to impose new ideas in their fields of expertise. And also, there are people who cannot handle the truth by any means! Even to this day there are people who refuse to believe the theory of relativity is real, even though it is programmed into the GPS system, and makes these people’s GPS devices work.

Forex Trading for Beginners and Amateurs – What these Enthusiastic People Usually Do

Some very good thinkers exist, in the world of forex trading for beginners and amateurs. These people have the drive and motivation to try out new ideas and concepts in trading. Daring to implement new ideas is very important, even if most of these ideas are proven wrong. The fact that the trader dares to do something different, and gain valuable new insights in the process, is brainstorming of more new ideas to come. The FX exchange system, and the world of commodities allow for new trading ideas, radical new thinking and analysis. There is a margin for profitable trading in the overlooked ideas, and new traders are the ones most likely to figure them out. The fact that deniers of reality exist is good for beginner and amateur traders. If these new traders see more of the truth, they can outsmart other traders, and get those profits before anyone else. The forex and commodities market offer enormous earning potential to new curious and daring traders. Especially if they know how to add CFDs to their trading and what is CFD trading in detail. CFDs can help a great deal in implementing powerful hedging and cost effective trading, which old arrogant traders do not really understand nor use.

Forex Trading Managed Account – Facts and Myths

Everything About Forex Trading Managed Account

A forex trading managed account is usually offered by a firm to VIP clients. It offers average to low annual profitability, at moderate realistic market risk.

Pros and Cons of Having a Forex Trading Managed Account

Having a forex trading managed account may be somewhat beneficial to busy people who also can afford to deposit significant amounts of funds to these accounts. The performance of these accounts is relatively low, and usually between 8% and 30% at best. Traders who undertake the task of trading these accounts have to trade at very low risk. The typical low risk forex trading managed account yields no more than 15% per year, more or less. Even if we assume a safe 15% return per year, for the long term. And after all commissions and fees have been paid, it still certainly doesn’t look impressive. Only the well-off can afford to deposit so large amounts of funds, so that 15% per year profit makes a difference to their lifestyle. By comparison, independent investors and traders, even those not trading full time, expect to make 10% to 15% a month (200% to 430% per year). And they usually come close to reaching these goals, through online CFD trading. Independent forex traders are often asked to work for these firms that offer forex managed accounts. It is not as if they have proprietary strategies and irreplaceable traders. There are many traders who can make 15% per year, at almost no risk, it really is peace of cake! The problem with many independent traders is that they have come out of long learning curves, and have lost money to learn trading. So they are trading their own accounts, which are very small ($20,000 on average). Where a 15% a year return would be very small. So these independent traders look to make more, perhaps 5% to 10% a month. It’s not about having the best forex trading platform and 7 computer screens. Independent CFD forex traders know that they have to do more with less. But the fact that many of them are offered jobs at firms who offer managed account services… Means only one thing, a shortage of competent traders in these firms. The good news is that anyone who works hard enough and has the courage to manage market risk and tricky trading. Can in fact match the skills of these independent CFD forex traders, which is remarkably good.

Why a Forex Trading Managed Account is Not Really a Good Deal even for Rich People

A forex trading managed account is simply a low yielding investment. Sure it helps rich people save time, but it still carries risks. There is the risk that the firm may not have good traders for years, resulting in very low profitability. If the firm is a serious one, there is no risk that the funds will ever be lost, but poor trading performance is bad. 15% per year return is by no means good. This kind of return can be achieved by the rich people themselves, dealing in the antiques market. On items such as collectible stamps and classic paintings. The antiques market is very illiquid and slow, but the rich can afford to wait for years. On the other hand the beauty of forex trading, and the whole point of financial trading, is to achieve more with less. And the forex market allows this to happen, when one has done their homework in-depth. The market allows you to profit asymmetrically in relation to the risk you take. And this allows you to make more with less indeed. This means faster profits, profits that are large enough to make a difference. And above all, the market is highly liquid, allowing you to buy and sell at any time. That’s why ambitious people will always consider becoming independent forex traders rather than considering classic investments.

The Reality Regarding Forex Trading Reviews

Forex trading reviews are found around brokers, advisory services, Expert Advisor sellers and just about anything to do with forex. So, are they really useful?

Forex Trading Reviews and How the New Trader Should Treat Them

Forex trading reviews, when written by real traders who are also clients and users of these services and products, are useful. Most honest forex trading reviews are actually realistic and the reviewer goes to the length of disclosing actual risks and benefits. This applies to brokers, signal providers and many more. The review can really inform the end user or trader as to what they should expect. This is because many traders are street smart, and hard to fool or sold on cheap promises. The most misleading category of products sold today are Expert Advisors. This is the only exception in our list, because actual risk is not fully disclosed to the customer. All traders know that online trading comes with significant risks. Forex brokers disclose these risks in full, signal providers also do, and they are also rated accordingly by their clients. The forex market is risky and not forgiving any mistakes, we all know that. Most if not all Expert Advisor developers-marketers are not so honest, they try to make it appear as if trading is very easy. Expert Advisor software is tricky itself, because it can actually beat the market for 4-5 weeks straight, and with amazing results. Some traders actually use such Expert Advisors to participate at trading competitions, and they do usually win. After all nobody can trade manually, non-stop, for 5 weeks. The problem is that these Expert Advisors begin to fail catastrophically after several weeks or months. And this risk is not disclosed on the sales page. In addition, many of the related reviews are biased, and not to be trusted by any means. There is 10% truth, and 90% misleading information in most of them. After all, if the software really could work for many years, nobody would offer it to you for $299 or $99. Even the price format is a marketing trick in itself.

Forex Trading Reviews on Brokers and Signal Providers

Forex trading reviews on brokers and signal providing services are far more objective, because the market here is very competitive (unlike the software market of EA). The FX exchange is a very competitive market itself, and this is what makes Expert Advisor software fail after few weeks. But brokers and traders providing manually-inferred trading signals, have stood the test of time. Brokers have because their job is to provide a top notch service and facilitate trading, this can go on for years and many decades, no big problem there. Signal providers work hard to come up with trading recommendations, and they do stay ahead of the markets most of the time. It has become second nature to them. And above all, brokers and signal providers are not in for a quick buck, they both want to retain their clients for many years. This is high contrasted with EA software developers. And this is why reviews on brokers, signal providers and market analysts are far more objective. And much more impartial than on any other forex related service. The bottom line is that the deceptive marketing and misleading reviews don’t last long. Whereas true and realistic products and services. Where risks are properly disclosed, without making big promises, have stood the test of time. Remember that trading success is always down to the individual trader, and never served on a silver platter.

Learning through a Forex Trading Tutorial

Educate Yourself with Forex Trading Tutorial

Learning to trade through a forex trading tutorial is a pleasant way to learn some of the basics. Because beginners get to see how other traders think and act.

Learning to Handle Price Action through a Forex Trading Tutorial

Learning to trade profitably through a forex trading tutorial is not really easy at all. And most beginners actually fail to become profitable. If it was that easy, everyone would have become rich shortly after attending a forex trading tutorial. What the tutorial does is simply encourage young and beginner traders to take initiatives in the market. It’s more of a psychological boost rather than a source of effective knowledge. They all want to learn how to trade forex but they are not willing to accept some parts of the methods that their mentors use. Forex training is usually presented through a series of rigorously defined steps and rules. And young traders don’t like to be disciplined to such an extreme level. And rightly so, since too much discipline kills creativity and imagination. If one wants to be inventive, in any field, they will have to bend or break many rules. There’s no such thing as unbreakable rules. Beginners will find a lot of inspiring ideas in a forex trading course, but each person will deviate from the material taught. Real life has showed time and again, that the most inventive and creative students are the ones who are not disciplined. They are however hard working and curious to explore new things. The forex market is a very competitive place, and even the mentors teaching these courses will have to answer difficult questions. Questions such as how much money they have made. Why they are not working for an investment bank. And the predictive power of their indicators. And mentors tend to answer using trading examples, where risk and rewards are presented in a realistic way. The bottom line is that many of these course do have something to offer, mostly in term of building confidence. The knowledge itself is not proprietary or super effective in anyway.

The Best out of a Forex Trading Tutorial

The best you can gain out of a forex trading tutorial is a confidence boost, and learning how other traders think. The average forex trading course does help beginners see how other traders think and act. Generally, those who are very disciplined and lack courage, will tend to become momentum traders. Traders who simply follow price up and down, lacking the courage to sell into a rally or buy into a plummeting market. Bold traders on the other hand will break a series of rules. They will buy into a plummeting market, if the believe the conditions are good. And they will even add to a losing trade. Bold traders believe that there is a massive inertia among 1000s of disciplined traders in the world. And this inertia keeps them on the losing side of the market, every time a sudden reversal takes place (contrarian indicators confirm this very well during surprise market reversals). Inertia is a bad thing in the forex market, and is all down to the refusal of traders to accept they are wrong. All because they cannot accept that their in-depth analysis, which took many hours, is wrong and useless. Well, any analysis methods relying on extreme discipline are not analysis methods at all. Many times, opposite market forces are massive in magnitude, and exactly equal. The market could tip one way or the other as result. Momentum traders and over-disciplined fundamental analysts cannot see this risk.

Learn how to trade forex

By now it should be clear that to learn how to trade forex, a newbie must acquire a variety of skill sets, elements of self-discipline and basic knowledge of international finance. Of all these components, the least intuitive and most critical is the mindset of a trader, best illustrated in the aphorism of the great economist John Maynard Keynes who in 1936 likened the (stock) market to a beauty pageant, where judges must choose not the prettiest contestant, but the female most popular with the set of those who could vote. The way to profit in the short term is to anticipate whether the mass of traders will be buying or selling, directing the market upwards or downwards, not only the fundamentals behind the underlying reasons. In short, understanding the Freudian death wish is no less important than mastering Milton Friedman’s theory of monetarism.

So, by now you are ready to practice with a demo account, a key step as you learn how to trade forex. You will find that no two trading situations are exactly alike. Furthermore, you will never be 100% certain of the correctness of your judgement (All that matters is the market-determined price). And finally, even though your last, for example, five out of six trades were profitable, your ability to infer statistically about the profitability of your next six trades is limited.

Other veteran advice to absorb as you learn how to trade forex relates to herds and mass behavior:

Be wary of proferred advice.Expert accepted wisdom is just that, “accepted.” Anyone agreeing with the stated opinion/analysis has likely already acted upon it and few remain to further move the currency pair in the purported direction
The trend is your friend.The focus-obsession on 50- and 200-day moving averages has a statistical basis. The laws of physics do prevail in markets. Motions and direction ten to continue.
Relatedly,it is better to be late to a party than early. Scalping (wherein you benefit from price movements over short-time (intra-day) periods) or even day-trading are for professionals with greater knowledge, concentration and resources than what stands at your disposal.