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Discussion about forex trading leverage

Sunday, February 28th, 2010

Forex Trading Leverage


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.

5. Do not trade on news. 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. It will determine the outcome of your forex trade.

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. 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. Regardless of whether you are a novice or an experienced trader, the automated forex system will increase your Forex trading leverage return.

One of the big reasons that forex trading is an entirely different animal than stock trading or futures trading is leverage. Forex trading leverage can be enormous, as high as 400:1, and in most cases you get to choose the amount of leverage or gearing you want to trade with.

Super high leverage is a selling point for many online forex brokers

This article neither encourages nor discourages forex trading at super high leverage. One of the fundamental terms of forex trading is PIP. You will see that XYZ Broker charges 3 PIP per deal, or that the XY currency pair has an average daily range of 100 PIP. At 200:1 leverage the PIP value doubles to $15.72. For forex traders with different gearing a 100 PIP move means entirely different things to their account equity.

The three most common leverage ratios available from online forex brokers are 50:1, 100:1 and 200:1. The K Factor for the 100:1 leverage ratio is 1. The K Factor for the leverage ratio of 50:1 is .50, and the K Factor for the leverage ratio of 200:1 is 2.

The first is using the K Factor to calculate the value of a PIP for the currency pair you are trading.

Since 100,000 individual currency units (usually dollars or euros) is the normal size of a single lot you can calculate the value of a PIP with this formula:

(100,000/current price with no decimal) * K Factor = PIP

Here’s an example: The EUR/USD current price is 1.2723 and your leverage is 100:1.

The value of a PIP is $7.86. If your forex broker executes your trade at a spread of 4 PIPs you are paying $31.44 for executing the trade whatever euphemism the broker happens to be using for ‘commission’. If your leverage or gearing is 200:1 that execution will cost you $62.88.

12850 – 12723 = 127 PIP * 7.86 = $998.22 – execution cost.

If you objectively set your stop loss at 1.2715 what amount are you risking in this trade?

12723 – 12715 = 8 PIP * 7.86 = $62.88 + execution cost.

If losses from current open positions cause the equity in your account to fall below that required to maintain the total number of open positions, the broker’s trading platform will immediately close all your open positions, even when the unrealized loss on any individual position is quite small. Your loss is the aggregate number of PIP per position * K Factor + execution costs. The formula is:

(Starting Balance – Open Position Losses) / (($1,000/K Factor)* No.

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Posted in Forex Trading | 5 Comments »

A place for discuss forex trading hedging

Saturday, February 27th, 2010

Forex Trading Hedging


Exchanging currency on the forex market is an activity that is practiced throughout the world by thousands of people. financial managers, individual investors

trading through brokerage firms online.

Because forex trading

This device mitigation of risk is a sell order at a price below the original selling price. Regarding the forex trading, another technique of good money management is to use hedging. Traders can hedge their currency positions in several ways, but the most popular is the use of futures and options. With these investments in financial futures, you pay some money to buy an allowance money at a future date at a fixed price. Traders buy these financial instruments to hedge a long position, with the value at which the long position was taken and the currency that was used to buy the original position. In reversing the order of values, a fall in the long position will lead to a currency gain of money on the financial instrument futures trader and by offsetting the initial loss.

The mantra that good traders on the forex trading is to follow to cut losses short and let the gains. We are going to cover what we regard as the most challenging part of Forex trading: – When to exit a Forex trade

In preceding articles in this series on no stop, hedged Forex trading we covered “Currency trading without stops” and “Currency trading not caring which way the price moves”.

How often have you exited a Forex trade positively and then looked on as the price travelled another 100 pips in the same direction? When you enter a Forex trade all the trading signals are aligned and you can tick all entry criteria on your checklist. Negative deals make things even worse. You are 30 pips down. Many Forex traders can identify with this.

With Grid trading you don’t have that problem. You would divide the expected trading range for a particular currency for the next say 6 months (say 4000 pips) into grid levels with gaps of say 200 pips. The guesswork of when to cash in your Forex deals has been eliminated. You cash in your positive deals every time the price touches a grid level. How simple can trading be? You trade price levels, with no stops (Because each price level has a buy and sell active) and you don’t care about which direction the price moves.

The question of when to enter a Forex trading transaction is also answerred. You would use the same price levels that you use to exit profitable deals (as determined above) as the entry levels for your no stop, hedged, Forex trading grid system strategy. The process of determining the price levels is very important as some trading groups are reporting gains of one thousand percent a year on capital employed using this Forex trading technique.

For more information (which is freely available) on this great trading system why not search the web for “no stop Forex trading”.

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Posted in Forex Trading | No Comments »

Anything about forex currency trading systems

Friday, February 26th, 2010

Forex currency trading systems


Forex currency trading is one of the most lucrative businesses you can get into these days. Forex currency trading is one of the fall backs you can count on if you have the right knowledge to back you up. Forex currency trading is lucrative but it is also tricky especially for beginners. Forex Currency Trading’s Basics

Before anything else, you might as just want to ask – what is this forex currency trading thing anyway? This business works through a buy and sell process of various currencies. Players operating in this business game rely on exchange rates to know if it’s a good or bad time to sell their specific currencies. When you engage in forex currency trading, you do both the buying and selling of currencies. The Popularity of Forex Currency Trading

One of the reasons why it has become popular is because it offers safe and fast transactions. Eventually, forex currency trading became popular because of its volatile nature. Currencies never really stay in their current amount. Anything can happen, which is why most of the forex players have their own tracking system to effectively scout the forex market for good buys. You need to have a constant feel of the market when it comes to forex currency trading.

Forex currency trading is creating quite a buzz these days. Forex is actually short for Foreign Exchange, a currency market in which one currency is traded for another. The market consists mostly of currency traders who speculate on movements in exchange rates. The market has a 24-hour trading day that operates throughout the week, which makes it convenient for some traders to work during the day and trade at night.

In the Forex market, every pair of currencies makes up an individual product and is normally marked as XXX/YYY, where YYY refers to the ISO 4217 international three-letter code of the currency into which one unit of XXX’s price is expressed. Unlike stock markets and future exchanges, when you engage in Forex currency trading, you engage in a form of international bank and an over-the-counter market; this means that in the Forex market, you can’t find any single universal exchange for a specific currency pair. Throughout its operation, individuals trade with Forex brokers, Forex brokers with banks or financial institutions, and financial institutions with financial institutions. Once the European session end, the Asian session or the US session will start; this ensuring that all the currencies of the world can continually trade. What is the trading of foreign currencies online or offline? It is whats called Forex currency trading.
This market is open 24 hours a day unlike the stock market. Not so far in the past forex currency trading was not allowed by individuals. Only large banks were equipped and had access to necessary systems to trade the forex.

With the advancement of technology, today it is possible for any investor to delve his/her hands into forex currency trade. If one goes ahead and does buying or selling using the this platform for trading, he or she will come across a total of four major “currency pairs”, which are US Dollar vs Japanese Yen, Euro vs US Dollar, US Dollar vs British Pound, and US Dollar vs Swiss Franc. These four rule the percentage of trades.

When you make an investment in forex currency trade, the goal is to hold a currency that will appreciate in value over other currencies you trade them against. There were some rigid financial requirements earlier that used to keep an individual investor from making an entry trading into fx currency trading. A FX broker is similar to a stock broker except that he deals with forex platform trading.

You must realize that the forex currency trade in not the new york stock exchange or the NASDAQ. The forex currency trade had made it possible for investors to buy or sell any quantity that would suite that particular investor. You should, however, always know your forex basics or go through a trading tutorial before you open any forex trading accounts.

To make an informed decision on whether or not the forex currency trade is for you be sure you know what you are doing.

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Posted in Forex Trading | 4 Comments »

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