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Forex Trading Articles

Leverage The Expertise of a Forex Broker to Reduce Trading Risks

Forex trading involves lot of risks. The best way to ensure that the risks are minimized is to get the advice of an expert in the field. Experience is a critical factor in deciding the success rate in Forex trading. A person who has witnessed the ups and downs of currency exchange rate and interest rate is in a better position to decide what the right time to make a trade is. This expertise of a Forex broker becomes relevant in this context.

Since Forex trading involves huge investments, the credibility and the work history of the Forex broker needs to be analyzed in detail before selecting one. The Forex broker should be capable of deciding when to enter the market and when to exit. The Forex broker should be able to anticipate the currency fluctuations that happen in the international market.

To arrive at the right decisions, the Forex broker may need to analyze various statistical data and charts. A combination of theoretical knowledge of the concepts involved in Forex trade and years of experience in the field makes an ideal profile of a Forex broker. The success of many investment and trading decisions in the Forex market depends on the results and findings arrived upon after analyzing the charts and data. It would be difficult for any new entrant to arrive at the right trading decisions in minimum time. As Forex trading is highly fluctuating, the trader needs to arrive at the investment decisions quickly to reap the maximum benefits. The role of a Forex broker becomes important in this context.

The experience and knowledge of an efficient Forex broker is leveraged to ensure that the profits are maximized at minimum risks.

Although, online Forex trading tools are specifically designed to make this highly risky trade easy and promising. But the success of trading using these tools depends on the expertise to use them correctly. The experience of a Forex broker in using these tools can be leveraged to reap maximum benefits. An efficient Forex broker can easily foresee the market fluctuations and decide the investment portfolio based on these fluctuations.

General Forex

Understanding The Benefits And Risks of Leverage in The Forex Market

In the Forex market, it’s important to understand both the benefits, and risks, of trading with leverage. Leverage is expressed as a ratio and is based on the margin requirements imposed by your broker. For example, if your broker requires you to maintain a minimum 2% margin in your account, this means that you must have at least 2% of the total value of an intended trade available as cash in your account, before you can proceed with the order. This is where margin-based trading can be a powerful tool. With as little as $1,000 of margin available in your account, you can trade up to $50,000 at 50:1 leverage.

Forex margin trading allows you to minimize your financial risk, but the flip side of the coin is that if the value of your trade dropped by the $1000 you put forward it would be automatically closed out by the broker. This is called a ‘margin call’. When trading on leverage, you are in effect “borrowing” money from your forex broker. The funds in your account (the minimum margin) actually serve as your collateral. Therefore, it is only logical that your broker will not allow your account balance to fall below the minimum margin.

Individual brokers may handle margin calls differently. For example, you could receive a request to add more funds to your account, or your broker may simply close your open positions at the current Forex market price to limit further losses. In either case, you could end up losing the entire balance of your account and may even owe additional funds to cover your losses.

Although it’s impossible to eliminate all the risks associated with trading on margin, there are ways to better manage and reduce your overall risk and exposure to the Forex. It’s common for traders especially beginners to think they must win on every trade executed but in fact this is the very mindset that leads to the failure of 95% of those who trade Forex.

The most important element of trading when using leverage is protecting your trading account. While it’s impossible to predict the currency exchange rates it’s not impossible to prepare for the worst. As a general rule of thumb, Forex traders should attempt to protect each trade with a stop loss of no more than 2% of the total account value. Trading Forex is about playing the odds, having a plan and respecting leverage. Risking no more than 2% on each trade will allow you to increase your odds and chances of being successful.

Forex trading utilizing margin is risky business, but by getting the balance right between your level of risk and how heavily leveraged your account is you can gain an advantage. This advantage could be the difference between success and failure. Knowledge is key… learn from techniques and tips of other experience traders. Be mindful of economic news that affects the trade and be sure to take well calculated and well planned steps in pursuing your success in the Forex market.

Forex Trading Articles

Forex Margin Trading – Employing Leverage to Maximize Profits

Forex margin trading is a way of applying leverage to the purchasing power of your money to increase profits. Leverage simply means using a small amount of money to control a much larger sum. This is possible because it is unlikely that the value of a currency will change by more than a certain percentage over a short time. So you can place a few hundred dollars in your brokerage account to trade on margin – the amount you think the price will fall. Your broker will effectively lend you the balance.

Trading on margin is also known in the stock and futures markets, but because of the special nature of currencies, you can apply much more leverage in the Forex market. Depending on the broker’s terms, you may be able to control 50, 100 or even 200 times your account balance.

This can lead to big profits if you are successful, but it could also mean considerable losses if not. Generally, the more leverage you use, the more risky your trading is.

We understand leverage and margins by considering an example.

Imagine that the current rate on the British pound to US dollar Forex market is shown as GBP/USD 1.7100. So to buy one British pound you would need $1.71. If you expected the value of the dollar to rise against the pound you might decide to sell enough pounds to buy $100,000. If your broker used lots of $10,000 each, this would be 10 lots. Then you would sit back and wait for the price to go up.

A few days later you might find that the price had moved to GBP/USD 1.6600. Sure enough, the dollar has risen and the pound is now worth only $1.66. If you sell your dollars now and buy back into pounds, you will have made a profit of 2.9% less the spread. 2.9% of $100,000 is $2,900, so that would be an excellent trade.

But most of us do not have $100,000 extra money that we want to trade on the currency market. So here is where the principle of Forex margin comes into play.

Because you are buying and selling currencies at the same time, your money just has to cover any losses that may occur if the dollar falls instead of rising. And you would put a stop loss in place to minimize losses, so $1,000 can be all you need to have in your account to make this $100,000 purchase. Your broker guarantees the other $99,000.

In fact, many brokers now operate limited risk amounts, and the account will automatically close the deal if whatever funds you have on your account are lost. This prevents the margin calls that could be disastrous for a trader, because they mean that you can lose more than you have. But with a limited risk Forex account that is not a possibility. Broker software that you use to manage your account will not let you lose more than your account balance.

Using leverage in this way is so common in currency trading that you will do it without even thinking about it. Still, it is important to consider the risks. Lower leverage is always safer, and you may never want to go to the maximum Forex margin your broker will allow.

Forex Trading Articles

How-to Use Forex Trading Leverage

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Forex trading leverage is used to significantly increase the returns that can be provided on an investment. In Forex, investors use leverage to profit from the fluctuations in exchange rates between two different countries. The forex trading leverage yields one of the highest returns that investors can achieve in the investment market.

Although the ability to earn significant profits by using forex trading leverage is substantial, leverage can also work against investors. Here are 7 tips to achieve success with forex trading:

1. Do not trade without stop loss point.

2. Do not focus too hard on achieving a certain target. Nobody knows which way the price is going.

3. Always use 3% of money management at most.

4. Try one strategy at a time and strict to that rule for at least 6 months. If you are really strict to the rule and the number of win is less than the number of loss, don’t use that strategy anymore.

5. Do not trade on news. It’s really unpredictable.

6. Do not quit after a few losses or a low profit margin.

7. Don’t trade when you are not in a good condition. Your physical, mental and emotional state will have a direct impact on your Forex trading result.

The last tip has a significant influence on forex trading leverage but is frequently overlooked and underestimated. A unique approach to trading must be used for you to achieve success with forex trading.

You must understand the psychology that can affect the result of the forex trading leverage. You should know how to handle the moments of doubt, when following the opening of the trade, and the market goes awry. It will determine the outcome of your forex trade.

When you see the market moving against all odds and logic, your emotional self cries for an immediate position reversal (‘short’ from ‘long’ and vice-versa), in a complete disregard of your own trading plan.

Even though all of your training books, videos and mentors have pumped the “trading plan supremacy” into your brain, your basic instinct is to be cautious and change course.

Experienced traders have a sixth sense, an ‘unseen analyst’. The ‘unseen analyst’ is based on experience. Yet every experienced trader also is aware that conditions can and will change in a heartbeat.

Over time, every forex trader learns how to juggle the contradiction of their emotions with their brain in order to maximize their forex trading leverage return. They also utilize the many options available to maximize their Forex trading leverage, instead of keeping all of ‘their eggs in one basket’.

To lessen the ‘pain’ of the learning curve of the becoming a successful forex trader, an automated forex system can have significant advantages over discretionary trading.

The automated trader removes the fear and greed you will experience when trading live manually. Or if you are an experience forex trader, you will appreciate the benefit of adding an automated system to maximize you forex trading leverage. One of the many benefits is an automated forex trading system allow your trades to be made at any time of the day or night, regardless of your presence.

Pick your systems carefully to maximize your forex trading leverage return and you will increase the chances of making the profit you would like to make. This is due to the fact that these automated computer programs can make completely objective decisions when it comes to trades – unlike humans. Regardless of whether you are a novice or an experienced trader, the automated forex system will increase your Forex trading leverage return.

To learn more about automated trading programs visit theautomaticforextradingsystem.com now.

General Forex

Currency Trading Margin – Forex Margin Trading As a Method of Leverage

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Currency Trading Margin

A forex margin account is used by a forex trader when he wishes to invest into a position which requires a much higher financial investment than that which is currently available in the account of the trader. This is one of the unique advantages of the forex trade market wherein the traders are able to conduct transactions in currencies of worth which is much higher than the amount available in the forex account. Unlike the stock market and the equity market which offer little or no leverage to the trader, the forex market offers a leverage of 100:1 to its trader, implying that if a trader who has $1000 in his forex account decides to trade with a forex margin of 1% then he would be in a position to trade up to $100,000.

Forex margin trading is usually carried out through the broker and in order to indulge in this form of trade one needs to entail the services of a forex broker who offers margin trading as a part of a bigger package deal. This is owing to the fact that the concept of trading on forex margin is based on acquiring a short term loan from the broker for the purpose of indulging in trade and in return paying him a certain percentage of profits. Therefore, one first needs to open an account with the broker, deposit a certain amount of finances in it and then use forex margin trading to gain leverage and make a foray into the actual forex market. Currency Trading Margin

Although forex margin trading is considered to be an advantage of forex trading, a word of caution here would be pertaining to the proverbial two sides of the same coin. This implies that a forex trader might well be aware of the fact that if he can use the leverage option effectively, he stands to make phenomenal profits but at the same time if his investments turn out to be loss making then the extent of financial losses which would be incurred would also be manifold. This is evident from the fact that there are many people who complain of having lost out heavily due to forex trading and this is usually the case when people are misinformed about the market and make an educated use of the forex margin option. Currency Trading Margin