Tuesday, May 28, 2013

Choosing An Online Forex Broker

In the first step, you will go through some of the main questions you need ask yourself when reviewing different brokers. We have put together a pointers by taking some of the most frequently asked questions across the internet, and some via live chat frequently asked about online Forex brokers.

There are many Forex brokers to choose from, just as in any other market. Here are some things to look for:
  • Availability is key. Try hitting the company's website at different times throughout the day, especially during peak trading hours. Watch how fast their site loads and check some of the links to ensure there are no technical difficulties.  
  • Alternative trading provides flexibility. Although we all love the net, we cannot always be at our computers. Check to see what other options the firm offers for placing trades. Other alternatives may include touch-tone telephone trades, fax ordering, sending an email or doing it the low-tech way - talking to a customer service operations over the phone. Word to the wise: make sure you take note of the prices for these alternatives; they will often differ from an online trade.   
  • The broker's background matters. What are others saying about the onine broker? Just as you should do your research before trading in Forex, you should find out as much as possible about your broker.  
  • Price isn't everything. Remember the saying "you get what you pay for"? As with anything you buy, the price may be indicative of the quality. Do not open an account with a broker simply because it offers the lowest commission cost. Advertised rates for companies vary between zero and $40 per trade, with the average around $20. There may be fine print in the ad specifying which services the advertised rate will actually entitle you to. In most cases, there will be higher fees for limit orders, options and those trades over the phone with your broker. You might find that the advertised commission rate may not apply to the type of trade you want to execute.
  • Minimum deposits may not be minimal. See how much of an initial deposit the firm requires for opening an account. Beware of high minimum balances: some companies require as much as $5,000 to start. This might be fine for some investors, but not others.   
  • Product selection is important. When choosing a online Forex broker, most people are probably thinking primarily about buying and selling online. Remember there are also many investment alternatives that are not necessarily offered by every company. This includes municipal bonds, options and even gold/silver certificates.
  • Customer service counts. There is nothing more exasperating than sitting on hold for 20 minutes waiting to get help. Before you open an account, call the company's help desk with a fake question to test how long it takes to get a response.
  • Return on cash is money in the bank. You are likely to always have some money in your online account. Some online brokers will not give your money back because it is less than $100 while others won't offer you a customer service. Phone or send an email the brokerage to find out what it offers. In fact, this is a good question to ask while you're testing its customer service!   
  • Extras can make a difference. Be on the lookout for extra bonus or contest offered by online brokers to people thinking of opening an account. Do not base your decision entirely on the $100 in free trades, but do keep this in mind. 
Signing up for a Forex account is much the same as getting an equity account. The only major difference is that, for Forex accounts, you are required to sign a margin agreement. This agreement states that you are trading with borrowed money, and, as such, the brokerage has the right to interfere with your trades to protect its interests. 

Once you sign up, simply fund your account, and you'll be ready to trade! 

For more information about in our Live Account with ICM Brokers, feel free to visit our website www.ICMBrokers.com

Friday, May 24, 2013

Most Common Trading Strategies

Many times when a trader is caught up in a trade (winning or losing), this critical part of any trading strategy that works is tossed in the trash and “caution is thrown to the wind”.  Sometimes breaking your trading rules will work, but it will not work for long.

Below are some very common trading strategies as well as a few of my own; when you become a trader you will set of a trading rules and you will be following them.

1. Day Trading
Day trading is perhaps the most well known active-trading style. It's often considered a pseudonym for active trading itself. Day trading, as its name implies, is the method of buying and selling securities within the same day. Positions are closed out within the same day they are taken, and no position is held overnight. Traditionally, day trading is done by professional traders, such as specialists or market makers. However, electronic trading has opened up this practice to novice traders. 

2. Position Trading

Position trading uses longer term charts - anywhere from daily to monthly - in combination with other methods to determine the trend of the current market direction. This type of trade may last for several days to several weeks and sometimes longer, depending on the trend. Trend traders look for successive higher highs or lower highs to determine the trend of a security. By jumping on and riding the "wave," trend traders aim to benefit from both the up and downside of market movements. Trend traders look to determine the direction of the market, but they do not try to forecast any price levels. Typically, trend traders jump on the trend after it has established itself, and when the trend breaks, they usually exit the position. This means that in periods of high market volatility, trend trading is more difficult and its positions are generally reduced.

3. Swing Trading
Swing traders buy or sell as that price volatility sets in. Swing trades are usually held for more than a day but for a shorter time than trend trades. Swing traders often create a set of trading rules based on technical or fundamental analysis; these trading rules or algorithms are designed to identify when to buy and sell a security. While a swing-trading algorithm does not have to be exact and predict the peak or valley of a price move, it does need a market that moves in one direction or another. A range-bound or sideways market is a risk for swing traders.

4. Scalping
Scalping is one of the quickest strategies employed by active traders. It includes exploiting various price gaps caused by bid/ask spreads and order flows. The strategy generally works by making the spread or buying at the bid price and selling at the ask price to receive the difference between the two price points. Scalpers attempt to hold their positions for a short period, thus decreasing the risk associated with the strategy. Additionally, a scalper does not try to exploit large moves or move high volumes; rather, they try to take advantage of small moves that occur frequently and move smaller volumes more often. Since the level of profits per trade is small, scalpers look for more liquid markets to increase the frequency of their trades. And unlike swing traders, scalpers like quiet markets that aren't prone to sudden price movements so they can potentially make the spread repeatedly on the same bid/ask prices.

Conclusion to this topic, lower commissions and better execution are two elements that improve the profit potential of the strategies. Significant hardware and software purchases are required to successfully implement these strategies in addition to real-time market data. These costs make successfully implementing and profiting from active trading somewhat prohibitive for the individual trader, although not all together unachievable. 

For more information about trading products with ICM Brokers, feel free to visit our website www.ICMBrokers.com


Thursday, May 23, 2013

Positive Thoughts of Trading Forex

Any successful trader will tell you that he has made the mental decision to be as positive as possible in thinking, acting and doing, and that having a positive mind is critical in overcoming the setbacks brought on while trading.

So what can you do to become a better positive thinker?
  • Start off by, observing your negative thoughts and understand that you can change them. Once you start ridding yourself of those thoughts, you are thinking positively, and also creating a positive attitude.
  • Next, think and visualize yourself as already being a successful trader. Imagine that your trading experience allows you to easily notice changes in the market and react to them by making profitable trades. 
  • Imagine only positive results, Imagine the wealth you've created and the lifestyle it affords you. This type of thinking will help reinforce the ideas that first led you to the currency market and motivate you to stick with it.
  • Another easy method is to surround yourself with a positive environment. This can be your work space or the people around you. The world is filled with doubters and people who want to "help" you by destroying your dreams or shooting you out of the sky. Make it easier on YOU by surrounding yourself with other positive thinkers who reassure and support your Forex trading. 
  • Liven up your trading space so it's inviting and makes you want to be there. Maybe it's time to replace this crusty keyboard?
  • Help yourself by being a positive talker to others and about yourself. Speaking positively fills your head with positive thoughts and ideas. Negative self-talk only helps to hinder your potential as a trader and keeps you from growing.
  • Do your best to welcome the currency market's obstacles and view them as your opportunities for profits and success. Dealing with these obstacles will only help you to create a better trading experience. 
  • Small changes in the way you think about yourself, think about others and think about trading will go a long way in your overall success as a trader.

Choosing Your Trading Strategy

As a trader, why are we focusing on medium-term forex trading? Why not long-term or short-term strategies? To answer that question, let's take a look at the following comparison table:

Type of Trader Definition Good Points Bad Points
Short-Term (Scalper) A trader who looks to open and close a trade within minutes, often taking advantage of small price movements with a large amount of leverage. Quick realization of profits or losses due to the rapid-fire nature of this type of trading. Large capital and/or risk requirements due to the large amount of leverage needed to profit from such small movements.
Medium-Term A trader typically looking to hold positions for one or more days, often taking advantage of opportunistic technical situations. Lowest capital requirements of the three because leverage is necessary only to boost profits. Fewer opportunities because these types of trades are more difficult to find and execute.
Long-Term A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors. More reliable long-run profits because this depends on reliable fundamental factors. Large capital requirements to cover volatile movements against any open position.
Now, you will notice that both short-term and long-term traders require a large amount of capital - the first type needs it to generate enough leverage, and the other to cover volatility. Although these two types of traders exist in the marketplace, they are often positions held by high-net-worth individuals or larger funds. For these reasons, retail traders are most likely to succeed using a medium-term strategy.

Active traders can employ one or many of the aforementioned strategies. However, before deciding on engaging in these strategies, the risks and costs associated with each one need to be explored and considered.

For more information about trading products with ICM Brokers, feel free to visit our website www.ICMBrokers.com

Wednesday, May 22, 2013

Fx Options Trade Sample

FX Options Trading are used to express a view on the current market – like trading Forex, but instead of placing a Sell order or a Buy, we use Call or Put. If you purchase a Call option, you expect price to rise, while buying a Put option, means your view on the market is for it to go down –  you expect price to drop.

Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital.

Participants in the Options Market 
There are four types of participants in options markets depending on the position they take:

1. Buyers of calls
2. Sellers of calls
3. Buyers of puts
4. Sellers of puts

Key Terms to be remember:

Holders -people who buy options

Writers -people who sell options

Buyers - have long positions

Sellers - have short positions

Strike price - the price at which an underlying stock can be purchased or sold.

Premium – is the total cost of an option, which is determined by factors including the stock price, strike price and time remaining until expiration.

LEAPS - known as Long term options. 

The Important Distinction between buyers and sellers:
-Call holders and put holders (buyers) are not obligated to buy or sell. They have the choice to exercise their rights if they choose.
-Call writers and put writers (sellers), however, are obligated to buy or sell. This means that a seller may be required to make good on a promise to buy or sell.

Advantages of Trading FX Options with ICM Brokers

  • Investors can limit their downside risk to the option premium (the amount paid to purchase the option).
  • Profit potential may be maximized during correct market moves on the underlying instrument.
  • Often the price of the up-front price of the option may be less than a regular Spot FOREX position.
  • Investors can set their desired strike price and expiration date.
  • Options can be used to hedge against open spot positions in order to limit risk.
  • Spot Traders can use options to predict market moves before the fundamental events take place, without risking a big capital outlay. 

Calculation Examples

Call Option
Investor buys a EURUSD Call option contract from ICM Brokers. The Option contract parameters being:

Notional Amount   EUR 1.000,000
Currency Pair        EURUSD
Option Type         Call/Put
Strike Price          1.4300
Expiry Date          1 month
Premium              $ 5,350
- On Expiry Date -

  1. If the spot market is above 1.4300 at maturity, the option will be exercised and investor will have a buy position of Euro 1 Mio against USD at 1.4300
  2. If the spot market be at or below 1.4300, the option will expire worthless.

Put Option
Investor buys a EURUSD Put option contract from ICM Brokers. The option contract parameters are same as table above:

- On Expiry Date -

  1. If the spot market is below 1.4300, the option will be exercised and investor will have a short position of Euro 1 Mio against USD at 1.4300
  2. If the spot market be at or above 1.4300, the option will expire worthless.

I hope this has given you some insight into the world of options. Once again, we must emphasize that options aren't for all investors. Options are sophisticated trading tools that can be dangerous if you don't educate yourself before using them. Please use this as a guide and intended as a starting point to learning more about options.


To know more about our ICM Brokers Contract Specifications please click the link: ICMBrokers Contract Specifications