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Aug 29, 2008 at 03:52 o\clock

Why Demo Account Performance Is Better

by: forexgennew   Keywords: demo, account, forex, forexgen, investors, trading

Over the past several years, the popularity of online currency trading has grown substantially. Each day, online ForexGen attract new investors - each of them lining up with a glint in their eye, lured in by promises of easy money. Most of these companies allow you to sign up for a free demo account which lets you place mock trades using their trading platform to get a feel for the excitement of currency trading. In the casual world of free demo accounts - many young traders find they are able to garner impressive profits without a significant amount of effort. It almost seems too good to be true. But transferring this success from a demo account to a real account is far less common. Why is this? The actual trading platform behaves the exact same way, the market doesn't care whether you're a demo or real trader - so what is different? It's you who has changed. Not your personality, not even your trading style - but the factors that affect you are different. What is the key factor to trading success? The search for the "Holy Grail" of trading has been a common theme throughout the history of markets. There are a variety of different techniques. Those whom are inclined towards number crunching and pattern recognition may prefer technical analysis, whereas those more focused on the big picture, logical macro perspective prefer fundamental analysis. Then there are specific methodologies like swing trading, trend following or even more esoteric ideas like the Elliot Wave theory. Which one is best? There are examples of very successful traders using each methodology. Since most new traders lose money - perhaps the more appropriate question to ask is, "What is the key factor to trading failure?" Greed and Fear Trading is an atmosphere rich in the porous emotions of greed and fear. The current price of a given security or financial instrument at any point in time can be thought of as the confluence of greed (bulls) and fear (bears). These two emotions make up the core of humanity itself. When market information is released, trading can be a high intensity experience. Sensing danger, your body releases adrenaline that acts to accentuate both your greed (fight) and your fear (flight). Because these emotions are so strong, they can cause you to act irrationally, ignore your system, stated set of rules or trading plan and to act upon impulse. Indeed, this is a genetically programmed response - but it is often also the trader's downfall, especially when he's playing with much better capitalized, more sophisticated and experienced foes that know how to manipulate those emotions. When you are a trader - you are always under the influence of at least one of these two emotions, even if you don't have any trades on. Impact of fear and greed on your trading If the market's going up and you're in - greed is telling you to buy more and fear is telling you to take your profits while you still can. If it's going down, fear of being wrong makes you hold onto a losing position - and then greed sometimes convinces you to "average down" your position (and buy more) so it'll be easier for you to come back. If the market's going up and you're not invested - fear is telling you that you're missing out on easy money but it's your greed that causes you to get in just after the greatest increase (just when its about to reverse course). If the market's going down and you're not invested - greed is telling you to get in as the price is cheap, while fear reminds you that you'll miss out on this opportunity if you don't act quickly. Perhaps if we just felt greed, or just felt fear we would be able to control our emotions a little better. But when both of these little devils whisper into our ears at the same time - it is often impossible not to listen. The Thrill of Greed The first time you try FX trading - you will feel the thrill of greed. It is an ecstatic experience, your brain flush with neurotransmitters and your mind giddy with visions of untold riches about to be reaped. Greed is bold, aggressive and incredibly exciting. It can take hold of you both mentally and physically. Just imagine the possibilities! This greed is what draws us into FX trading in the first place - the dream of easy money and 100:1 or 200:1 margin rates. It inspires us and causes us to forego rational thinking in favour of reckless abandon. In the movie Wall Street, Gordon Gecko says, "Greed is good", but it is also very dangerous - especially if you are unable to recognize when greed is the one doing the talking. Greed is also one of the most common techniques used to manipulate people. Every get rich quick scheme, promising untold riches for no money down takes advantage of your natural predisposition to throw all logic and sense out the window when greed pays a visit. The argument starts to appear very compelling and you ignore what would otherwise be clear warning signs. Like drunk goggles, greed can mislead you and when you eventually wake up you are often in a very precarious position. The Fear of Losing Fear can be equally as dangerous. The most potent and easily manipulated form of fear is your fear of admitting that you are wrong. Fear of having your precious ego bruised. This fear can cause people to do incredibly stupid things. The funny thing about this world is that everyone thinks that they are right. Most people would rather lose thousands of dollars than admit they are wrong. It is easy to feel ashamed of trading losses and live in denial but this is self-destructive behavior. By denying the problem exists, you fail to take steps address it and only ensure that it will continue in the future. Demo Trading Demo trading is a great way to get started in foreign exchange trading. It is identical to real trading, except that you're using "pretend" money. Demo trading allows you to get a taste for what type of events move markets and how they move. It encourages you to learn more about geopolitics, macroeconomics and global finance and these are all incredibly positive things. Demo trading also introduces you to the rapture of greed. Trading is a means to one of the purest, most raw and potent forms of greed. The whole point of trading is to make money and the more money you make - the stronger the pull of your greed becomes. It is intoxicating and can take complete control of you. But demo trading does not introduce you to fear. There is no fear when you are demo trading. It is like you have a perpetual get out of jail free card. If you start losing badly on a demo account - simply start a new one. There is no accountability for your trading failures and only recognition of your trading success. So your demo account does not teach you how to handle the emotion of fear. This emotion is most likely going to lead to your downfall. Greed may get you overextended, but fear will stop you from cutting your losses. You may think that fear of losing money would cause you to cut your losses, but the stronger emotion is fear of being wrong and that causes you to hold on to your losing position - until it's all gone. There is also the issue of account size. Many demo accounts give you $50,000 to play with. This type of capitalization allows you to buy 5 lots (500K) of EURUSD pretty easily. If goes up 20 pips you've made $1000. Nice one. But when you open your real account - it's more likely that you put $5000 or $10000 in there to begin with. Now you're dealing with a 50K lot, which means you'll take $100 out of a 20-pip movement. But mentally you are used to getting $1000 for that movement so you usually end up risking more. Next thing you know - your 200K position has turned against you 50 pips and you've lost $1000. That's real money you just lost. You can't just start another account. The capitalization of the demo account is sufficient to sustain losses and still come out on top. But your real account is likely to be undercapitalized and if you're trying to achieve returns similar to what you got on your demo account - you are going to blow up very quickly. Being honest with yourself Ultimately, while providing an excellent introduction to FX trading - demo accounts do not accurately predict whether you'll be successful trading real money. Markets are dominated by psychology and often go against what fundamental logic or technical indicators suggest should happen. The single most critical factor in your trading success will be your ability to control your emotions of greed and fear. These emotions cloud your judgment and cause you to trade recklessly. Demo accounts introduce you to the emotion of greed, but by their very nature they are risk free and therefore there is no fear involved. They are also likely to be better capitalized than your real money account, which misleads you with respect to the amount of returns you can expect to earn. For all of these reasons, demo accounts allow you to avoid being honest with yourself and this is perhaps the most important factor of all. You need to know your edge and your limits and in order to know these - you must be honest with yourself.

This being said, demo accounts are still very entertaining and educational and I highly recommend opening one to anyone who's interested in getting a taste of the exciting world of FX trading. It's a great way to learn more about economics, global politics and yourself.

 To open a free Demo Account, Please Apply Online

Aug 29, 2008 at 03:00 o\clock

Trading on Margin With ForexGen

by: forexgennew   Keywords: forex, forexgen, margin, average, investor, traders

 
The key to FOREX popularity is margin. Without margin, the FOREX would be beyond the reach of the average investor. So, what exactly is margin and how does it work?

Margin accounts allow FOREX traders to control large amounts of currency with a relatively small deposit.

Establishing a margin account with a FOREX broker enables you to borrow money from the broker to control currency lots which are usually worth $100,000. The amount of borrowing power your margin account gives you is the leverage. Leverage is usually expressed as a ratio – a leverage of 100:1 means you can control assets worth 100 times your deposit.
What this means in FOREX is that with a 1% margin account you can control standard lots of $100,000 with a $1,000 deposit. Trading on margin increases both profits and losses, and the potential exists for the trader to lose more than his original deposit. With proper safeguards, however, loss can be limited, and usually brokers will terminate a transaction that extends beyond the margin deposit.

As we mentioned above, trading on margin gives you more buying power and the potential for more profits (and losses). How does this work, exactly? A 1% margin account allows you to control a currency lot of $100,000 for $1,000. When dealing with $100,000 small changes in the price of the currency can result in large profits or losses.
FOREX currencies are traded in much smaller units than cash. The American dollar, for example, is traded in units down to 4 decimal places. Instead of $1.32 FOREX quotes are seen as $1.3256. The smallest unit in FOREX currencies is called the pip, and when you have a $100,000 each pip of your total lot is worth $10 (when trading American dollars).
If the price of American dollars changes from 1.3256 to 1.3356, that's a difference of 100 pips which represents a profit or loss of $1000. Without margin, if you had $1000 of currency, the price change from 1.3256 to 1.3356 represents a difference of $10. Significant to the tourist, perhaps, but not the investor. 
So the benefit of margin is increased profit potential.

Risks

As there is increased profit potential, there is also increased loss potential. If you are not careful, your entire margin account could quickly be wiped out. If your margin account is 1% and the currency moves just one cent against you, you lose $1000.

FOREX trading, however, has several methods to limit loss. Stop loss orders automatically close your position if the value of the currency crosses a pre-determined point. Stop loss orders allow you to limit your losses to a specified amount while still allowing potential profit taking.
An often overlooked risk is the possibility that your broker may close your position if your potential losses approach the balance of your margin account. You may be riding out a down trend with the expectations of a market reversal, but unless you replenish your margin account you may find your position has been closed. If this happens, you lose all of your margin.

For example:

You sell EUR/USD at 1.2144 (sell 100,000 Euros and buy 121,440 US dollars) with the expectation that the euro will fall in price. You have a 1% margin account which means the required margin is $1,214.40. You have $1250 in your margin account, so to enter this position your margin account is left with $35.60.

You have not specified a stop loss order, and after you enter this position the euro suddenly rallies, gaining 0.0263 for a price of 1.2407. 100,000 Euros are now worth US$124,070 and your 1% margin requirements have risen to $1,240.70. Depending on the policy of your broker, your position may be automatically closed or the extra funds in your margin account may be used to make up the difference. In any case, if the euro continues to gain value and you wish to ride it out (bad idea) you will have to add more funds to your margin account or risk losing everything.

Another example:

You buy USD/CHF at 1.2623 with the expectation that the US dollar will gain against the Swiss franc. You buy a standard lot of 100,000 American dollars for 126,230 Swiss francs with a margin requirement of 1% or $1,000.

As expected, the US dollar rises to 1.2683 at which point you close your position. You sell 100,000 American dollars for 126,830 Swiss francs for a profit of 600 francs or US$473.08 (600 francs divided by the exchange rate of 1.2683).

Aug 25, 2008 at 01:22 o\clock

System strategy | ForexGen

by: forexgennew   Keywords: forex, currency, exchange, market, trading, strategy, economic

 
There are several external factors affecting Forex currency exchange. These factors include reports on trade, GDP, unemployment, international trade, manufacturing etc. The growth or decline of these factors affect a country's currency. The change is a global market, providing 24-hour market access to its players. As it is open only 5 days a week, so weekend is the period of closure. Although change is the most liquid of all markets, the fact that this is an international market and trading 24 hours a day, time of day can have a direct impact on liquidity available for an exchange of currency. Major shopping centers and time zones are as Sydney, Tokyo, London and New York. Therefore, alerts exchange must take into account players who are on the market, as in the interconnected world financial events that occur at any time, anywhere in the world, can affect some or all parts of the investment community.

In Forex Trading, you are not ignorant as a rest in stock for a considerable period of time on the news affecting the liquidity of a title. In scholarship, you just know inside the negotiation, review of the results after the market reacted to that. But in exchange for currency exchange, this is not the case. You'll find various signals forex. The important information that affect a particular currency known to everyone in trade instantly. It is not anything as the insider trading in forex market. There are many online currency trading strategy sites. They all maintain a global economic calendar. The calendar shows the next major economic, financial and business-related events throughout the world and which may have important implications on the foreign exchange market. What you have to do is keep track of all important events and news.

While it will not be an easy task to constantly look at all factors affecting trading foreign exchange market. They change in importance over time and condition. But information is accessible to all and for use in its profit. A currency trader had the chance to react immediately to any new information. Unlike stock market, another important advantage Forex Trading offer is that you can do currency trading almost anywhere in the world. There are so many Forex Trading online signal platforms available for instant information and act in time. The largest GDP figures which have an impact on the exchange of currencies USA, Japan, Canada, Australia and Great Britain. China should also be a major force in commercial paper online in the near future. Central banks play an important role in the foreign exchange market because they are responsible for the development of the country "core" rate of interest.

A central bank should maintain the growth of the economy under inflation, which creates a good balance of interest rates. The bank decisions on whether to raise, cut or hold interest rates fuelling speculation on the FOREX market, where the value of a currency or a group of currencies, changes in real time. Natural disasters, terrorist attacks and military actions in a sensitive region can have a significant impact on the Forex market as they create a disturbance in the world.

Aug 22, 2008 at 00:44 o\clock

Risk aversion helps yen, Swiss franc | ForexGen

by: forexgennew   Keywords: currencies, currency, dollar, economy, euro, financial, forex, forexgen, investors, losses, pound, prices, risky, Swiss, franc, trade, trades, yen



Fears about more losses due to the current credit crisis helped the yen and Swiss franc to gains Thursday on the theory that investors will be less inclined to seek out risky currency trades funded with the low-yielding currencies.
In late morning trade in New York the yen traded at ¥161.1536 to the euro, at ¥108.3350 to the US dollar and at ¥95.1723 to the Australian dollar, while the Swiss franc was at SFr1.0860 to the greenback and at SFr1.6154 to the shared currency.
Meanwhile, the US dollar declined versus the euro on concerns that there will be more write downs among financial firms, on fears that new gains in oil prices will further hurt the US economy, and on new data from the Philadelphia Fed that manufacturing in that region contracted again in July.
At shortly before noon in New York, the dollar traded at $1.4875 to the euro.
The pound was also weaker against the euro on a government report showing that UK retail sales were up only 0.8 percent in July and after Deutsche Bank (FWB: DBK; NYSE: DB) predicted that the Bank of England will cut interest rates by 1 percentage point next year.
At late morning in New York the pound traded at 79.25p to the euro while it took $1.8755 to buy a pound.
The Australian and New Zealand dollars and the Canadian dollar all gained on the greenback as commodities prices rose, with the Aussie worth 87.85 cents US, the kiwi at 71.76 cents US, while the loonie traded at C$1.0461 to the dollar.

Aug 22, 2008 at 00:43 o\clock

EUR/USD Pair Experienced a Highly Volatility | ForexGen

by: forexgennew   Keywords: depreciation, dollar, economic, EUR, EUR, USD, finance, forex, forexgen, fundamental, indicator, market, pair, prices, traders, trading, trend, USD

Yesterday the EUR/USD pair experienced a highly volatility and finished trading session with mixed results versus its major rivals. The EUR/USD bounced up and down during most of the day, finally closing at 1.4773 level, unchanged from the day prior. Overall, it lost 0.2% vs. the EUR yesterday when it declined to $1.4773 from $1.4747. The greenback may fall to $1.50 per EUR in a few days should it weaken below $1.48.
Expectations for the near future look to hold unclear characteristics as the upcoming US calendar doesn’t look to have much that can help revive USD bulls once again. Yesterday’s slightly bearish dollar trend was especially concerning due to the lack of market moving economic events both from the US and the Euro-zone. As it seems now the greenback light depreciation comes mainly on the heels of traders fearing the US economy woes are not over.From the fundamental point of view, the only economic release that deepened USDs’ falling trend yesterday was the Crude Oil Inventories. The indicator printed a much higher than expected result of 9.4M. Due to the unexpected figure, Oil prices rose sharply, which helped to further tumble the US currency.The dollar also weakened on speculation credit- market losses in the U.S. will deepen. Fannie Mae and Freddie Mac shares tumbled in New York trading to the lowest levels since at least 1990 as speculation increased that the U.S. Treasury will have to bail out the mortgage-finance companies.The U.S. economic outlook darkened in July for a 3rd consecutive month as Philadelphia Fed Manufacturing report today may show another contraction.The Philadelphia Fed’s general economic gauge due at 14:00 (GMT) is projected to come in at -12.6. If the final figure will indeed print such a low result today, we may see the dollar continuing its falling trends vs. the rivals.The leading index is also due today at 14:00 (GMT) from the New York-based research group. The Conference Board’s index of Leading Indicators, a measure of the economy’s direction over the next three to six months, is expected to decline by 0.2%, according to the median forecast. The previous measure fell 0.1% in JuneOverall, given today’s pessimistic fundamental forecasts, the USD may find itself falling deeper into a bear’s cave during the day.

Aug 22, 2008 at 00:41 o\clock

Euro hurt by contracting German economy | ForexGen

by: forexgennew   Keywords: dollar, economy, euro, forex, forexgen, indications, inflation, pound, risk, trade

The euro and the pound both weakened versus the US dollar Wednesday after new data showed that the German economy contracted by 0.5 percent in the second quarter and the minutes of the latest meeting of the Bank of England showed a three-way disagreement on where interest rates should go.
There were also indications in the Monetary Policy Committee’s meeting minutes that the risk of inflation could be slowing in the UK.
In morning trade in New York the dollar traded at $1.4750 to the euro and at $1.8619 to the pound.
The euro also declined in relation to the Canadian dollar and the Mexican peso, to C$1.5688 and 14.944 pesos.
The Canadian dollar was stronger after new data showed that retail sales were up 0.5 percent in June.
The yen, meanwhile, declined versus the US dollar before taking back some losses, with the Japanese currency worth ¥109.7700 at nearly 11 a.m. in New York while at the same time the yen traded at ¥161.9108 to the euro


Aug 22, 2008 at 00:40 o\clock

Dollar Goes Down on Credit Market Losses|ForexGen

by: forexgennew   Keywords: analysts, currencies, currency, dollar, euro, forex, forexgen, investors, Japanese, market, pair, pound, rates, risk, traders, USD, JPY, yen

The U.S. dollar declined at a fastest pace in a month against the Japanese currency today as the credit market losses extended and the Federal Reserve probably won’t be able to raise the rates by the year’s end.
The dollar also fell against the euro and the Great Britain pound today as the previously expected rate difference decline became not so obvious to the Forex traders. Yen’s growth against the dollar was strong because the Japanese currency rose against other major currencies too as the carry trades unwound.
The concerns about the state of U.S. credit market turn investors to risk-aversion, thus stimulating conversion from USD to yen. According to some analysts dollar may drop to 1.5000 against the euro and 107.00 against the yen during the next trading week.
USD/JPY went down from 109.85 to 108.84 as of 7:46 GMT today — the fastest daily drop on this currency pair since July 15. EUR/USD rose from 1.4744 to 1.4796 with a daily high at 1.4833. GBP/USD gained from 1.8610 to 1.8661 with a daily maximum at 1.8702 so far.

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