Forex Myths
May 22nd, 2012
Forex is enveloped in myths and delusions. Having no idea about
currency market functioning and work mechanisms people ascribe to Forex
and trading such things that do not quadrate to facts. Let us consider
the most widespread legends.
1. Forex is a complete deception.
Another
variant of this phrase is: “Forex is a casino where nobody wins”. There
is a suggestion that it is impossible to earn on price fluctuations,
and brokerage companies are trying to put a spoke in their clients’
wheel.
A proof that this is far from being the case is brought by successful traders experience, as for them Forex has become the main source of income. We have already written that sometimes there can emerge unfair participants as well. However, their tricks can be seen through easily, if choosing the appropriate broker. There are quite many respectable companies in the market rendering good trading terms and great service – all you need is to examine the necessary information in order to take the right decision.
Worth remembering that brokerage company affords the private traders an opportunity to trade in an interbank market, offering various instruments and encouraging its customers with bonuses, campaigns etc., but that does not guarantee profit receiving finally. If you want your trading to be of success – you have to devote energies by yourself.
2. Forex requires a huge capital.
Those times when access to currency and stock markets was open for the high and mightiest only have passed. Today anyone willing may start trading and there is no huge capital required for that. No doubts that with a big deposit the work would be more effective, but you can begin with a few dollars. Modern brokers offer different account types – even cent accounts, contests and bonus programs, taking part in them it is possible to make a starting capital.
3. Forex involves a great risk.
To some extent it is really so. But it is enough to have just a little of sanity to avoid most of them. Do not put your last money into trades or the money which you borrowed. Follow the rules of money management, refine your skills, learn hedging methods and diversification risks.
4. Forex takes all the time.
Trader decides by himself how much time he is going to spend on trading. Trades can be executed 50 times a day, 5 days a week, once a year – the frequency depends on your desire, mood, trading strategy, skills etc. You don’t have to sit in front of the screen, tracking the price moves in order to be a trader. Trading can be easily combined with the main job.
5. Forex requires a special education.
Analytical skills, knowledge of maths and world economy would be useful in trading, but no special education is needed. If desired a trader can complete training at a brokerage company, attend webinars, get familiarized with a relevant Forex literature, widely accessible in the Internet and book stores.
Forex market is the youngest and fast developing financial market. For millions of people all over the world trading has become a life style and a source of income. People like to draw on imagination, but one should divide fancy from fact.
1. Forex is a complete deception.
Another
variant of this phrase is: “Forex is a casino where nobody wins”. There
is a suggestion that it is impossible to earn on price fluctuations,
and brokerage companies are trying to put a spoke in their clients’
wheel.A proof that this is far from being the case is brought by successful traders experience, as for them Forex has become the main source of income. We have already written that sometimes there can emerge unfair participants as well. However, their tricks can be seen through easily, if choosing the appropriate broker. There are quite many respectable companies in the market rendering good trading terms and great service – all you need is to examine the necessary information in order to take the right decision.
Worth remembering that brokerage company affords the private traders an opportunity to trade in an interbank market, offering various instruments and encouraging its customers with bonuses, campaigns etc., but that does not guarantee profit receiving finally. If you want your trading to be of success – you have to devote energies by yourself.
2. Forex requires a huge capital.
Those times when access to currency and stock markets was open for the high and mightiest only have passed. Today anyone willing may start trading and there is no huge capital required for that. No doubts that with a big deposit the work would be more effective, but you can begin with a few dollars. Modern brokers offer different account types – even cent accounts, contests and bonus programs, taking part in them it is possible to make a starting capital.
3. Forex involves a great risk.
To some extent it is really so. But it is enough to have just a little of sanity to avoid most of them. Do not put your last money into trades or the money which you borrowed. Follow the rules of money management, refine your skills, learn hedging methods and diversification risks.
4. Forex takes all the time.
Trader decides by himself how much time he is going to spend on trading. Trades can be executed 50 times a day, 5 days a week, once a year – the frequency depends on your desire, mood, trading strategy, skills etc. You don’t have to sit in front of the screen, tracking the price moves in order to be a trader. Trading can be easily combined with the main job.
5. Forex requires a special education.
Analytical skills, knowledge of maths and world economy would be useful in trading, but no special education is needed. If desired a trader can complete training at a brokerage company, attend webinars, get familiarized with a relevant Forex literature, widely accessible in the Internet and book stores.
Forex market is the youngest and fast developing financial market. For millions of people all over the world trading has become a life style and a source of income. People like to draw on imagination, but one should divide fancy from fact.
Added by Alexandr Petryanin,
InstaForex Clients’ relationship manager
InstaForex Clients’ relationship manager
Do Swaps Make Sense?
May 8th, 2012
The easiest definition of swap term is assets retained or added
to a trading account for prolongation (carry over) of a position to the
next day or a fee for carrying a position over midnight.
Swaps
can be either positive or negative. Interest for a position carry over
in a currency market is paid or deducted for every open trade at 17.00
EST (Eastern Standard Time) for every trading day. Trades opened before
17.00 EST and retained after this time are considered as carried over
till next day and are charged or credited with an interest depending on a
trading position opened by trader.
The currency of one country bought/sold by trader versus the one of another determines if it is going to be positive or negative swap. The swap rates are set by currency rates composing a currency pair. In case the loan rate exceeds the deposit one, the swap is written off from a trading account. Positive swap is credited when the active rate of bought currency is higher than the one of sold currency.
The target of Forex traders is to derive profit running speculative operations with currency contracts. Practically, a currency delivery does not take place. Working through a brokerage company, trader may apply to leverage and hold positions open for as long as he wants. In case a factual currency delivery is expected, it should have been accomplished within 2 days.
In most cases a position carrying over to the next day is implemented automatically by broker. It is required for prolongation of a current open position and avoiding a real accrual of purchased currency to a trading account. Swap combines with buying or selling of two contracts with different settlement dates on equal terms. If a position remains open by the end of the day, it will be closed and opened immediately, but with a small gap. During trade execution a currency purchased by trader is conditionally deposited into bank at interest, and the sold currency is taken as a loan at interest rate as well. For instance, you open a trade with USD/JPY pair, buying dollars for yens. In case at that time the interest rate in the USA is higher (for example, at 1%) than in Japan (0.3%), then you will have the difference between them (0.7%) accrued. If you would sell dollars buying yens, then you would have to pay the difference between the rates.
From Wednesday to Thursday a triple swap is added or deducted. Why? As trade calculations and currency delivery would have been completed on the second day (in our case it is Saturday), when world banks are closed, the settlement date shifts to Monday and the swap is calculated for 3 days.
Positive swaps allow trader to raise additional profit. Currencies with huge interest rate difference are actively applied in carry trade operations for gaining only due to rate fluctuations and swaps.
Some brokers provide their customers with swap-free accounts, if standard trading terms run counter to their religious convictions. On swap-free accounts (also called Islamic) any currency pair trades can be executed, but if they are carried over midnight, trader gets no profit or loss.
Swaps
can be either positive or negative. Interest for a position carry over
in a currency market is paid or deducted for every open trade at 17.00
EST (Eastern Standard Time) for every trading day. Trades opened before
17.00 EST and retained after this time are considered as carried over
till next day and are charged or credited with an interest depending on a
trading position opened by trader.The currency of one country bought/sold by trader versus the one of another determines if it is going to be positive or negative swap. The swap rates are set by currency rates composing a currency pair. In case the loan rate exceeds the deposit one, the swap is written off from a trading account. Positive swap is credited when the active rate of bought currency is higher than the one of sold currency.
The target of Forex traders is to derive profit running speculative operations with currency contracts. Practically, a currency delivery does not take place. Working through a brokerage company, trader may apply to leverage and hold positions open for as long as he wants. In case a factual currency delivery is expected, it should have been accomplished within 2 days.
In most cases a position carrying over to the next day is implemented automatically by broker. It is required for prolongation of a current open position and avoiding a real accrual of purchased currency to a trading account. Swap combines with buying or selling of two contracts with different settlement dates on equal terms. If a position remains open by the end of the day, it will be closed and opened immediately, but with a small gap. During trade execution a currency purchased by trader is conditionally deposited into bank at interest, and the sold currency is taken as a loan at interest rate as well. For instance, you open a trade with USD/JPY pair, buying dollars for yens. In case at that time the interest rate in the USA is higher (for example, at 1%) than in Japan (0.3%), then you will have the difference between them (0.7%) accrued. If you would sell dollars buying yens, then you would have to pay the difference between the rates.
From Wednesday to Thursday a triple swap is added or deducted. Why? As trade calculations and currency delivery would have been completed on the second day (in our case it is Saturday), when world banks are closed, the settlement date shifts to Monday and the swap is calculated for 3 days.
Positive swaps allow trader to raise additional profit. Currencies with huge interest rate difference are actively applied in carry trade operations for gaining only due to rate fluctuations and swaps.
Some brokers provide their customers with swap-free accounts, if standard trading terms run counter to their religious convictions. On swap-free accounts (also called Islamic) any currency pair trades can be executed, but if they are carried over midnight, trader gets no profit or loss.
Added by Andrey Misyuk,
InstaForex Clients’ relationship manager
InstaForex Clients’ relationship manager
Forex Rebate
April 30th, 2012
While
making deals on Forex a trader pays the spread to a brokerage firm. A
spread is the difference between the bid and ask price of an asset.
There are several types of spread: fixed spread, fixed spread with
extension, floating spread. For different currency pairs there are often
different types of spread that can vary depending on the market
situation.
Spread is the main source of broker’s income. In
fact, a spread is a fee charged for carrying out a transaction. But you
can easily regain the part of the spread by using various
rebate-services.
Rebate service offers consumers cash back on the
purchase price of a good or service. Having performed the settlements, a
seller offers a certain discount to the customer. This service is
widely used not only on Forex but also in marketing in order to promote
sales.
On currency market rebate-projects enable traders to
receive a refund from each executed deal. As a rule brokerage firms
provide that kind of services not directly but via special services
targeting at paying off a spread (but not always). If you want to use
this service, you need to register your trading account in the rebate
system or open a new brokerage account with the help of a referral link
on the rebate-services website.
The interaction between a trader, broker and a rebate
service can be described as follows: a broker pays to the company
providing rebate services, a fee for acquiring a new client. Rebate
service gives the part of this fee to a trader. Thus, we can say that
the spread is divided into three parts of certain proportions.
The rebate services are provided for free. Trading
conditions and the size of a commission fee remain unchanged. You will
simply be partially refunded – monthly or weekly regardless of whether
you trades were profitable or not.
The registration in rebate projects is quite simple
and does not take much time. The only thing you need is to find an
appropriate service and choose a broker, then open a trading account and
begin to take a profit for each deal.
The size of a rebate commission depends on the
amount of trades and the size of commission fee set by the broker and
the service.
Such operations allow traders to reduce losses and
get additional profit while making deals on Forex. Whatever your
professional experience is, you will be able to use rebate-service and
make your trading strategy more effective.
InstaForex cooperates with a number of projects
aiming at returning part of the spread – for example, InstaRebate. The
participants of the project receive 1.5 pips rebate for each deal, the
highest refund rate on the brokerage services market. The rebate
payments are accrued automatically on a trading account and the only
thing a trader needs is to register in InstaRebate program.
Added by Tatyana Makhina,
InstaForex Clients’ relationship manager
InstaForex Clients’ relationship manager
ShowFx Asia - Jakarta, 2010
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