Foreign Exchange Trading System - 3 Tips Every Trader

Foreign Exchange Trading System - 3 Tips Every Trader

Did you know every day in the Forex currency exchange
, that $1.8 trillion USD will exchange hands? This numbers so huge I could barely read my head around it the first time I heard it.

What if, by using three small trading tips we could increase our chances of getting our hands on even the smallest, miniscule percentage of that $1.8 trillion? I think most people could live with that, and even consider that a lavish lifestyle.

1. Learn to play stop and limit orders effectively: placing the fact of stop-orders is beneficial to a trader because it limits losses and it takes advantage of the potential for an upside breakout.

But placing limit orders it allows traders create new positions or get out of a current position at the selected limit or better price. With a limit sell order, a currency trader can place a limit sell order at above the current market price to make profits.

With a limit by order, a currency trader can place a limit by order at below the current market price, in order to buy below the current market norm.

2. Learn to use leverage correctly: what makes the foreign exchange market different than other stock markets is the ability to use leverage. Leverage in the Forex market, is the ability to control more currency pairs than the trader has deposited in to his or her trading account.

For example, if an investor wanted to control $10,000 USD/JPY, the investor would only have to have the margin requirement of the total transaction value. For instance if the margin requirement is 1% of the transaction value than the trader is expected to have $100 in his or her account.

This can be advantageous to the investor because they can control more investment than what is in his or her actual account. By using leverage correctly that investor has the potential to increase their return on investment (ROI).

3. Control the frequency of your trades: a real killer to the newbie currency exchange investor is the number of risky trades. A lot of beginner traders become excited and impatient and make way too many low probability trades.

Forex trading is about evaluating probabilities in the rise and fall of currencies. Therefore, by limiting the frequency of your trades choosing good if quality trades you will reduce your failing trades.

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FXOpen introduces incremental ECN lot trading

FXOpen introduces incremental ECN lot trading

FXOpen is one of the companies that are most responsible for Metaquotes’ (the company behind Metatrader) success simply because it introduces features that Metatrader should have but it doesn’t. Alpari is another of these companies and occasionally serves as Metaquotes’ beta-site.

FXOpen recently introduced the first ever MT4 ECN platform and also added PAMM accounts making money managers’ life much easier.

Today FXOpen announced (http://forum.fxopen.com/showthread.php?t=62155) that it completed the development and testing of another very important feature – incremental lot trading. With the exception of MB Trading small time traders could not have traded ECN style due to the very large minimal order requirements.

If opening an account with an ECN broker like Dukascopy requires a minimal deposit of $10,000 and a minimal trade size of 1 lot, with FXOpen you can start trading with 0.1 lots. For now, FXOpen’s commissions are about 30% lower than MB Trading’s.

FXOpen’s solution doesn’t mean that anyone can display any size of order inside the spread – this would obviously worsen the ECN feed with its liquidity providers. What it means is that orders less than 1.00 lot will be aggregated and processed via STP and will be filled when the market moves. These small orders have a slightly higher chance of not being filled than the large orders but it’s a small price to pay for the ability to trade ECN with as low as 0.1 lot (10,000 order size).

The minimal deposit and trade size limitations were one of the reasons why small retail traders haven’t jumped on the ECN bandwagon yet. With it being lifted it should become much easier. While it obviously doesn’t appeal to large traders, who never had problems trading at least 1 lot any way, but it does appeal to people who would like to try ECN with small amounts to see how it works and then make larger investment decisions based on their experience. It also makes the market more accessible to Martingale and Grid style traders who place large number of small sized orders in the market.

Traders can give this feature a test (I will appreciate any feedback) by using the demo or live environments which FXOpen claims to be identical.

It remains to be seen how the market will accept this new feature and FXOpen’s test would be the ability to successfully place as many orders as possible.

All in all, I think it’s an important move in the right direction for all brokers as innovation and transparency are one of the key factors driving growth in this market.

It is also interesting to see how non-US, non-NFA, brokers are giving the US industry a decent fight. With 4% of the clients already having left the US looking for a better option, some decent offshore brokers are destined to profit as they can offer more trading tools such as hedging and they also don’t have a burdensome and time consuming registration processes.

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