Both stocks and forex have advantages and disadvantages, so deciding which is more profitable – forex or stocks – or which is simpler to manage typically depends on your personal preferences and financial situation. Some argue that forex trading is better suited to short-term traders, while stocks are better suited to long-term traders. Whatever your investing type, you always need a guiding star like a book that helps you in your investing journey.
In this article, I will be exploring some concepts discussed in the book “Currency Trading for Dummies” that will help you in your trading journey or at least give you an overview of the book.
There are dozens of retail trading brokerage firms operating from all over the globe that provides online currency trading, so you have numerous options.
Here are some important questions to ask while choosing a broker:
The speed and reliability of your trade executions are critical factors in evaluating any broker. Are you consistently able to trade at the price you’re trying for? You’re probably being requoted if you’re trying to sell, your trade request fails, and you’re offered a lower price. (Essentially, requoting implies you’re trading on a wider spread than you bargained for)
Does your broker offer price improvement on limit orders? The brokerage’s execution quality for stop-loss orders is determined by the amount of slippage experienced when prices gap after data or news announcements. Slippage on stop-loss order executions is to be expected; the issue is how much.
Learn how your stop-loss and take-profit orders are filled. Is a sell stop-loss order filled when the bid price matches the stop price, such as a selling stop at 10 triggered by a 10/13 price quote? Are stops guaranteed? If this is the case, are there any exceptions to such guarantees?
What is the procedure for filling limit orders? Is it necessary for the market bid price to match the limit order price to sell, for example? A reputable broker’s website will have clearly specified order execution policies.
Variable spreads are now available from the majority of forex brokers. When market liquidity is high, spreads are at their tightest. Spreads will naturally widen under volatile market conditions and around major news events. However, the amount of variability may differ greatly amongst brokers, so be sure you understand how wide spreads can go when the market is moving fast.
Examine a broker’s website to see whether they publish their execution data, which may provide further information about their execution quality — including speed, the percent of trade requests that are successfully executed, and the opportunity for price improvement. Remember that tight spreads are only as good as the execution behind them.
Most online forex brokerages offer trade executions without charging trade commissions. Instead, the price spread between the bid and offer compensates the broker. A few brokers provide commission-based pricing with narrower trading spreads. If the brokerage charges a per-trade commission, you must incorporate that cost into your calculations to see if the spread-based commission is really a better value.
Too much of a good thing? Yes, in terms of leverage. Regulators have reduced the maximum leverage available to retail traders over the last few years. For example, in the United States, the maximum available leverage is 50:1. Outside of the United States, 200:1 leverage is available in select markets, including the United Kingdom and Australia. Firms that offer extremely high leverage (more than 200:1) are not looking out for the best interests of their customers and, more often than not, are not registered with a major regulatory body.MetaTrader 6 - When can we expect the release? — 2023
Examine all of the firm’s tools and resources. Is the trading platform simple and easy to use? What charting tools are available? What kind of newsfeeds are available? Do they regularly give live market commentary? What kind of research does the firm offer? Is mobile trading available? Can you receive rate alerts through email, text message, or Twitter? Are there any smartphone/tablet apps? Does the firm support automated trading? Is the platform capable of robust reporting, such as transaction detail, monthly statements, profit-and-loss (P&L) reports, and so on?
Because the forex market is open 24 hours a day, 24-hour support is essential. Is the customer service firm reachable by phone, email, or chat? Are the representatives of the firm licenced? Knowledgeable? The quality of support might vary greatly amongst firms, so be sure to test it out before opening an account.
Online currency brokerages in the United States are regulated by the National Futures Association (NFA), a self-regulatory body overseen by the Commodity Futures Trading Commission (CFTC). Other countries with strong regulatory frameworks include the United Kingdom/Europe, Australia, Japan, Hong Kong, and Singapore; ideally, you should trade with a broker who is regulated by at least one of these agencies.
Management knowledge is important since the end-user experience of a trader is dictated from the top and reflected in the firm’s dealing methods, execution quality, and so on. Examine personnel biographies to determine the firm’s level of management and trading experience. If the brokerage does not inform you who is in charge, there might be a reason.
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Choosing a broker is extremely important in every aspect of trading. Trading with the wrong or even an “overnight” broker that is trying to scam you is a harsh reality. Choose a broker that aligns with your needs and that you can trust with your hard-earned money!
Understanding price movements begins with understanding the fundamental drivers of currency rates. You must understand if you wish to trade currency as an investment.
Here are a few ideas:
Identifying trading opportunities and planning each trade from start to finish is essential to currency trading success. Remember to use caution while trading currency as an investment tool.
Your work has just begun once you’ve invested your time, energy, and risk capital in a trade. Managing your trade while it is active is just as important to a successful outcome. Stay alert, be flexible, but stick to your trading plan. Read our very own beginner guide here.
Here are the topics that the book covers. So potentially, after reading the book, one can grasp the concepts on: