Forex Trading

[Adam_W]

Evening all and a happy new year.

I was directed to this site by a member of another site where I posted a Forex related question. I have searched the site and theres a lot of very useful information, but no specific answer to my questions.

I have been using a Forex practice account from Forex.com for the past 3 weeks. Previous to this I had no Forex experience. I have a number of question regarding Forex before I 'go live' so to speak.

1) The practice account is deposited with £50000. This is significantly larger than what I will be willing to trade with, initially anyway. I will look to trade live with a £1000 - £2000 initial deposit. Therefore, the profit margins made when trading with £50000 are clearly much higher (50x) that of what I can realistically achieve initially. What tends to be the minimum deposit for Forex?

2) As I said I have been using a practice account from Forex.com. Although I have no prior experience in Forex, I have made decent profits during this period. It therefore raises a question as to why more people are not trading live? Is there a significant difference to a practice account and a real live account? Is the setup, transaction process, general trading exactly the same, just with real money?

3) The only difference I can see if trading live, and I could be wrong, is that there is a broker involved? How does this affect the trading? As on the practice account you can buy/sell within seconds/minutes.

Any advice or help with the questions above would be much appreciated,

Adam W

 

[Alexbabwa]

Shortsandlongs gave you a pound a point for every 53 pounds you had in your account on cable. Prospreads which i am with now offer 6.25 a point per thousand in account, so it depends on the bookie. If you talking about brokers i havent a clue.

In my (limited) experience practice accounts are only good for learning and familiariseing yourself with the trading platform. With live accounts there is slippage and delayed quotes to worry about, rejected trades etc. More importantly you won't trade the same as now you will have real money at stake. Practice accounts lead a lot of people in to a false sense of confidence. Doesnt mean you cant do it, but before trading a pound a point with 1 or 2 grand, you might try a few weeks trial with 10 ,50p a point and work up the stakes slowly.

 

[Adam_W]

Hi Alex thanks for the post. Having read your post, a lot of it is lost on me. Firstly, I will be trading from the UK, but I do not believe this will affect the actual trading platform/bookie etc?

As for your explanation 'Shortsandlongs gave you a pound a point for every 53 pounds you had in your account on cable. Prospreads which i am with now offer 6.25 a point per thousand in account' - this really goes over my head!

Could you explain this a little more?

I understand practice accounts can lead people into false sense of confidence. This is not so much of a concern for me. I understand this. Its more the actual trading and how/if it differs from the practice accounts.

For example, you say there may be rejected trades. Why is this?

 

[Alexbabwa]

Hi Alex thanks for the post. Having read your post, a lot of it is lost on me. Firstly, I will be trading from the UK, but I do not believe this will affect the actual trading platform/bookie etc?

As for your explanation 'Shortsandlongs gave you a pound a point for every 53 pounds you had in your account on cable. Prospreads which i am with now offer 6.25 a point per thousand in account' - this really goes over my head!

Could you explain this a little more?

I understand practice accounts can lead people into false sense of confidence. This is not so much of a concern for me. I understand this. Its more the actual trading and how/if it differs from the practice accounts.

For example, you say there may be rejected trades. Why is this?

No trading from the UK doesnt have any obvious differences to the platform as far as i am aware. Not sure what i said that might of implied that. Biggest thing is tax laws vary and spreadbetting isnt even legal in some countries.

Prospreads requires a higher margin. It takes more money to take a position in the market. Prospreads are recognised as a more 'professional' spread betting company so it makes more sense that they would cost more. The initial deposit is a minimum of 2,500 where as shorts and longs has no minimum (but requires at least 43 to place a bet eur/usd). Its about how much leverage you can get from your account size.

I dont know much about the reasons behind rejected trades. As far as i know its because there is a delay in the quote (or rarely perhaps because the market really is that volatile). So when u click buy/sell, that price is no longer available. This problem is more common for people who like to trade the news or during events that provoke the most volatility. Depending on the bookie it may say, requote, trade rejected or price no longer available etc.

 

[Adam_W]

Alex once again thanks for the advice.

With regards to the rejected trades I have had those experiences even with the practice account, but a second or third click of sell/buy with complete the deal. Can it sometimes take much longer when trading live then?

Prospreads requires a higher margin. It takes more money to take a position in the market. Prospreads are recognised as a more 'professional' spread betting company so it makes more sense that they would cost more. The initial deposit is a minimum of 2,500 where as shorts and longs has no minimum (but requires at least 43 to place a bet eur/usd). Its about how much leverage you can get from your account size.

2500 is more than I want to initially deposit. Not sure what the minimum is for Forex.com, will need to look into that.

Im still not 100% sure I understand the difference when trading live. Take the following scenario as an example only:

Falling market.

GBP/USD

Sell 1.61649

Buy 1.61662

In a practice account I would choose the amount I would like to buy. To keep it simple for this scenario I will sell 50,000.

So to sell 50,000 will cost me 50,000 x 1.61649 = 80,824.50

The market falls further and to buy the rate changes from 1.61662 to 1.61612.

Therefore, when I sell it will be 50,000 x 1.61612 = 80,806

Therefore the profit made on that transaction is 80,824.50 - 80,806 = 18.50

Now, this does clearly not take into account any fee from the trading company etc.

So I guess what I am getting at is:

1) How does it differ?

2) Where does the trading fee apply (how does the company you trade with make their money)?

 

[Alexbabwa]

brokers charge a commission, but i have no experience with that. Spread betting companies theoretically take their profit from the spread. The difference between the buy and sell offer which will differ slightly from the market price (im sure you know this alreadyb ut just in case).

Problem is they dont all do that. Since something like 85 or 95% of traders fail to win consistently many just take every1s losses in one big pool. Some SB companies at least claim to hedge their bets and so they take their profits from the spread of each bet (they love scalpers for this reason).

If you do go with a spread betting company as opposed to a broker, expect to be shut down eventually should you do well. Few exceptions though, prospreads. Heard good things about fxcm and alpari (but i think alpari is just a broker?)

 

[Adam_W]

Ok I wasnt aware the Forex can be traded via a broker or via spread betting.

Ill have to do some more investigation

One other question:

1) When practicing you can complete the deal almost instant (buy then sell or vice versa in a few minutes or less) or can wait, in some cases a few days. Is this the same for live trading and do brokers take a further commission the longer you delay the deal?

 

[shadowninja]

They may charge a swap rate which can be in your favour depending on whether you buy or sell and which pair. It shouldn't form a major part of your strategy if you're holding overnight! If you're holding for several days, try "forwards" on spreadbetting bets as it might prove cheaper even though the spread is bigger. To trade "forwards" for short term trades, the spread can be 20 pips on euro (otherwise 1 pip) so it would not be a good choice.

 

[Adam_W]

Shadow, what do you mean by a swap rate?

Why should holding overnight not form a major part of my strategy? This is curious, not arguing!

I realise I need to do a lot more research but all of this is certainly more confusing that the practice account.

 

[anestelen]

I have heard a lot about Forex Trading recently and how you can start with a small amount of cash. Is there any free online courses or more information available?

 

[Daniel Webb]

Evening all and a happy new year.

I was directed to this site by a member of another site where I posted a Forex related question. I have searched the site and theres a lot of very useful information, but no specific answer to my questions.

I have been using a Forex practice account from Forex.com for the past 3 weeks. Previous to this I had no Forex experience. I have a number of question regarding Forex before I 'go live' so to speak.

1) The practice account is deposited with £50000. This is significantly larger than what I will be willing to trade with, initially anyway. I will look to trade live with a £1000 - £2000 initial deposit. Therefore, the profit margins made when trading with £50000 are clearly much higher (50x) that of what I can realistically achieve initially. What tends to be the minimum deposit for Forex?

2) As I said I have been using a practice account from Forex.com. Although I have no prior experience in Forex, I have made decent profits during this period. It therefore raises a question as to why more people are not trading live? Is there a significant difference to a practice account and a real live account? Is the setup, transaction process, general trading exactly the same, just with real money?

3) The only difference I can see if trading live, and I could be wrong, is that there is a broker involved? How does this affect the trading? As on the practice account you can buy/sell within seconds/minutes.

Any advice or help with the questions above would be much appreciated,

Adam W

1.) It is advisable to start with small deposits first - no more than $500 and emotions involved.Keep in mind that losses are unavoidable. Consider them as a down payment for the future career.
2.) Trading with a demo or practice account is the best way to get started as a new trader but don't get stuck in it. No matter how hard you try, you will not be able to accelerate to the next level of trading until you learn how to risk REAL money. That is exactly what the Forex market is all about. The key to succeeding as a Forex trader is to open a live account after a period of demo trading and start out slowly.

 

[Daniel Webb]

I have heard a lot about Forex Trading recently and how you can start with a small amount of cash. Is there any free online courses or more information available?

There is an available Beginner's forex training course on line. It is not for free but the information you will get is worth the amount you'll pay. Try searching the web for Forextradingfortune.com.

 

[pit pony]

I have heard a lot about Forex Trading recently and how you can start with a small amount of cash. Is there any free online courses or more information available?

I normaly trade futures based products, but just recently started trading forex, and like the movement it has. I use ProSpreads for this as well as my futures trading. They offer trainer accounts which is the same as the live platform, and i know that they have reduced the opening account deposit to £1000, worth a look.