Limiting your Risks while trading the FOREX

FOREX trading can be risky, but there are ways to limit risk and financial exposure. Every FOREX trader should have a trading strategy -– knowing when to enter and exit the market and what kind of movements to expect. Developing strategies requires education -- the key to limiting risk in FOREX. At all times follow the basic rule: Do not place money in the FOREX that you cannot afford to lose. Means, learn and master the money management; set your targets according to your risk appetite.

Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted. There is a vast amount of information on FOREX trading available both on the Internet and in print. If you want to be successful at FOREX, know what you are doing.

Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.

As an example, if you take a short position on USD/CAD it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CAD 1.02138/40 -- you can sell US$1 for CA$1.0238 dollars or sell CA$1.0240 for US$1.

You place an order like this:
   Sell USD/CAD: 1 standard lot USD/CAD @ 1.0238 = CA$102,380
   Pip Value: 1 pip = US$10
   Stop-Loss: 1.0248
   Margin: US$1,000 (1%)

You are selling US$100,000 and buying CA$102,380. Your stop loss order will be executed if the dollar goes above 1.0248, in which case you will lose US$100 (or a slightly more due to slippage).

However, USD/CAD falls to 1.0218/20. You can now sell US$1 for CA$1.0218 or sell CA$1.0220 for US$1.

Because you entered the transaction by selling US dollars (buying short), you must now buy back the US dollars and sell CAD dollars to realize your profit.

You buy back US$100,000 at the current USD/CAD rate of 1.0220 for a cost of CA$102,220. Since you originally sold them for CA$102,380 you made a profit of $160 Canadian dollars or US$156.55 (160 divided by the current exchange rate of 1.0220), less commissions if any.

Final rule of thumb is: Explore, learn and, or practice using a DEMO account as much as you can before placing any bids with your real money -- Is better either you seek advice from an Independent Investment Adviser, partner and, or with an Investment Management Consultant.

Please note that nothing ventured is nothing gained and that success and riches never come easy or on a platter of gold and this is the one truth I have learned from trading for our private banking clients.

Beware of the Risks involved in trading FOREX on-line

Every business has risks and the currency trading is not an exception, here instead, are a few inherent risks which all traders should not only be well aware of but must take care appropriately.

Despite the claims you may see on some FOREX web sites, the FOREX market is not risk-free. You are trading with substantial sums of money and there is always a possibility that trades will go against you. There, however, are several trading tools that can minimize your risk, and with caution, and above all education, the FOREX trader can learn how to trade profitably and while minimizing losses.

 

Scams

FOREX scams were fairly common a few years ago. The industry has cleaned up considerably since then, but you still need to exercise caution when signing up with a FOREX broker. Do some background checking – reputable FOREX brokers will be associated with large financial institutions like banks or insurance companies and they will be registered with the proper government agencies. In the United States brokers should be registered with the Commodities Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA) or a member of the National Futures Association (NFA).

Whereas, in the Europe users need to check with various regulators depending from where a broker is operating, Financial Services Authority (FSA) for UK, (BAFIN) for Germany and other European Competent Authorities in the Netherlands, Hungary, Spain, Luxembourg, France, Poland. The resident of other countries must/can check with their local Consumer Protection Bureau, the Better Business Bureau or appropriate Regulatory Authorities.

• Investment opportunities 'too good to be true': Stay away from Forex trading opportunities that claim to make you rich overnight. Do not use your hard-earned savings or your retirement fund, or resort to mortgaging your house, to invest in these types of schemes. Chances are that you may never get your money back.
• Guaranteed profits or claims of unusually high performance: Anybody claiming to give you a regular 30% or 40% return per month is promising something that cannot be delivered. These claims of massive profits are likely to be false and are basically tactics to lure in your money.
• Downplaying of the risks involved with currency trading: Always be wary of statements claiming that a company or individual will recover your loses or that your investment will remain safe. Forex trading involves a high amount of risk, and you may end up losing all or part of your investment.
• Difficulty obtaining background information: Don't deal with anyone who won't readily give you their background information.
• Remittance of monies to a third party: An investor willing to use broker's trading system to trade his monies himself or by way of a money manager or third party must deposit his monies in an account opened in the investor's name with the broker or with one of its Partner Custodian Banks. Alternatively, the investor can ask his bank to issue a bank guarantee in favour of the broker. There is no other possible way.

 

Risks

Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are still subject to unexpected rate changes, volatile markets and political events.

Break-Down Risk - is probability of a failure in the system, it can happen when one may not be able to enter new orders, execute running orders, or alter or cancel orders that were entered before. The result of such a failure may be a loss of orders or order priority.

Exchange Rate Risk – refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly resulting in substantial losses unless stop loss orders are used when trading FOREX. Stop loss orders specify that the open position should be closed if currency prices pass a predetermined level. Stop loss orders can be used in conjunction with limit orders to automate FOREX trading – limit orders specify an open position should be closed at a specified profit target.

Interest Rate Risk – can result from discrepancies between the interest rates in the two countries represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction.

Credit Risk – is the possibility that one party in a FOREX transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency. Credit risk is minimized by dealing on regulated exchanges which require members to be monitored for credit worthiness.

Country Risk – is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with 'exotic' currencies than with major currencies that allow the free trading of their currency.

 

Conclusion

Explore, learn and, or practice using a DEMO account as much as you can before placing any bids with your real money -- Is better either you seek advice from an Independent Investment Adviser,  partner and, or with a reliable Investment Management Consultant.

Why Trading FOREX is Better Option?

Online FOREX trading has become very popular in the past decade because it offers traders several advantages.

It's simple: Unlike the stocks and, or derivatives, you need not analyze, scan and watch hundreds or thousands of instruments; stick to 4--6 most popular currency pairs or just EUR/USD and leave the fundamental analysis to experts; most of the brokers or reporters publish these as news and, or real-time economic calender.

Low barriers to entry: You would think that getting started as a currency trader would cost a ton of money. The fact is, when compared to trading stocks, options or futures, it doesn't. Online FOREX brokers offer "mini" and "micro" trading accounts, some with a minimum account deposit of $100 or even lower as well. We however, do not recommend trading with that small an equity.

FOREX never sleeps: Trading goes on all around the world during different countries’ business hours. You can, therefore, trade major currencies any time, 24 hours per day. Since there are no set exchange hours, it means that there is also something happening at almost any time of the day or night.

No middlemen: Spot currency trading eliminates the middlemen and allows you to trade directly with the market responsible for the pricing on a particular currency pair; the FOREX market is totally decentralized.

No fixed lot size: In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5,000 ounces. In spot FOREX, you determine your own lot, or position size. This allows traders to participate with small accounts or little equity per trade.

Go long or short: Unlike many other financial markets, where it can be difficult to sell short, there are no limitations on shorting currencies. If you think a currency will go up, buy it. If you think it will fall, sell it. This means there is no such thing as a “bear market” in FOREX you can make (or lose) money any time.

Low trading costs: Most FOREX accounts trade without a commission and there are no expensive exchange fees or data licenses. The cost of trading is the spread between the buy price and the sell price, which is always displayed on your trading screen. Some FOREX brokers, however, also charge additional commissions which can rob of your hard-earned money quite quickly.

Unmatched liquidity: Because FOREX is a $4 trillion a day market, with most trading concentrated in only a few currencies, there are always a lot of people trading. This makes it typically very easy to get in to and out of trades at any time, even in large sizes.

It's immeasurable: The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank or the mighty Chuck Norris himself) can control the market price for an extended period of time.

Available leverage: Because of the deep liquidity available in the FOREX market, you can trade FOREX with considerable leverage (up to 500:1). This can allow you to take advantage of even the smallest moves in the market. Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains.

Free stuff everywhere!: Most online FOREX brokers offer "demo" accounts to practice trading and build your skills, along with real-time FOREX news and charting services. And guess what? They're all free! Demo accounts are very valuable resources for those who are "financially hampered" and would like to hone their trading skills with "play money" before opening a live trading account and risking real money.

International exposure: As the world becomes more and more global, investors hunt for opportunities anywhere they can. If you want to take a broad opinion and invest in another country (or sell it short!), FOREX is an easy way to gain exposure while avoiding vagaries such as foreign securities laws and financial statements in other languages.

In addition to above, there are a few more reasons and, or considerable facts though somewhat tenuous:

You need not count: The currencies are traded electronically, there is no need to count and re-count or transport the notes and no fear of getting or accumulating any kinds of fake bills.

The "peace of mind": Since we need not interact with the buyers and, or sellers and there would be no returns of the goods and, or refunds of the money in this FOREX or financial market trading.

Stay away from MetaTrader 4 and, or 5

It's not only strange, but devastating -- why 90-95% or most of the brokers are offering only MT4/5 platforms which does not allow merging multiple positions and, or partial close; then what's the use of offering a facility for so called hedging (allowing multiple positions on same instrument in opposite directions)?

Though I'm seasoned trader (programmer indeed), but I could not find enough of a time to fully explore MT4/5 Platforms. Moreover, on searching MT4/5 Forums, Internet and even asking a few renowned brokers I could not find any legitimate or satisfactory answers to, "How do we merge multiple/hedged positions, all buys or sells of a pair?" or, "Can we close (buy/sell) part of an open position?".

Moreover, nobody ever asked for these facilities till yet, which, IMHO, are the most important functions or features any good enough trading platform must provide.

Seems, most of the the brokers concentrate, but more on the tactics for robbing off traders' time, effort and money. Whereas, there also exist good enough brokers who even do not charge commissions on merging opposite positions, just because you yourself are a buyer and seller for that volume, trade and, or transaction.

INFO: We are sure, you will/can lose all your money using mobile devices; please don't place your bids and, or bet your money either on free tips or signals or merely on guess work or speculation; you should know -- what you're doing as well as why market experts developed the analytic tools?

NOTICE: If your existing broker is unable to provide you good enough tools, trading environment -- merge hedged/multiple positions, merge selected, partial close, close selected, server side stop-loss and take-profit triggers or a nice, portable and programmable platform he either is not a broker at all or definitely is a fraud.

WARNING: Stay away from MetaTrader 4 and 5 or any such platform which does not allow you to merge multiple positions, partial close, but offers opening positions in opposite directions on same instrument for so called hedging.

रिश्वतखोरी या करप्शन

रिश्वतखोरी या करप्शन शुरु होती है जब रिश्वत लेने वाला बिकने के लिए त्यार हो जाता है; वह अपनी कदर भूल जाता है, भूल जाता है कि उसको इस मुकाम तक कौन लाया -- उसको इस मुकाम तक पोंहचने के कबिल किस ने बनाया, कैसे उसके माता-पिता ने उसको पढ़ाया और कैसे उसके अध्यापकों ने उसका चरित्तर निर्माण किया। भूल जाता है कि उसका यह खरीदार, यह पैसेवाला, यह रिश्वत देने वाला उसका जमीर खरीदने आया है और इस पैसेवाले ने आज तक उसको ऑफिसर बनाने में कोई सहायता नहीं की; ये पैसेवाला आज उसको रिश्वतखोर बना कर हमेशा के लिए दागदार कर देगा।

क्या किसी ने रिश्वत लेते वकत कभी ऐसा सोचा है? लगता है नहीं, कयोंके हम अपने संस्कार भूल चुके हैं, भूल चुके हैं कि हमारे पूर्वज कितने महान थे।

क्या जरुरत है, किसी अन्ना हजारे या बाबा को हीरो बनाने की?

हम सब जानते हैं कि एक मछली पूरे तालाब को गन्दा कर देती है, परुन्तु हम यह क्यूँ नहीं सोचते बाकी सभी मछ्लिएँ मिल कर गन्दी मछली को खदेड़ दें ...

क्या आप का अपने घर, मुहुले, गाँव, शहर या देश को साफ़ रखने या करने का कोई कर्त्तव्य नहीं हैं?

क्यूँ आप किसी नेता, अन्ना हजारे या बाबा आदि की पर्तीक्षा कर रहे हैं?

कब तक हम खोखले, कमज़ोर या अग्रेजी सविधान पर आधारित कानून से देश के लोगोँ को हांकते रहेंगे?

कोई राष्टरपति, प्रधान-मंत्री या मुख्य-न्यायधीश जनता के प्रति जवाब देय क्यूँ ना हो?

क्यूँ हम अपनी भारतीय संस्कृति छोड़ कर औरोँ के पीछे भाग रहे हैं? जबकि हमारे पूर्वज पूरी दुनिया को तास्ता दिखाते आए हैं.

क्यूँ पढ़े-लिखे, वकील, डाक्टर, इंजिनियर या  प्रोफेस्सर आदि के मत-दान की गिनती भी अनपढ़, मजदूर या ऐसे लोगोँ में की जाती हैं जो मत-दान का मतलब भी नहीं भी जानते?

पुरे ६३ साल से सवतंत्र हो कर आज भी हम दबी आवाज में बात करते हैं, रोटी, कपड़ा व मकान को तरसते हैं और मत बेचने को मजबूर हैं...

अपने आप को पहचानो, जागो और अपने भाई-बंदु, मित्र, रिश्तेदार व पडोसी लोगोँ को भी जगाओ...

दो बिल्लिआन और एक बंदर :P

उम्मीद है कि दो झाघेढ़ रही बिल्लियों व बंदर की कहानी आप सभी नें जरुर पढ़ी होगी. हमारे अनिल अम्बानी और मुकेश अम्बानी भायों नें भी ऐसा बहुत कुछ पढ़ा होगा, में हैरान हूँ कि ये भाई आपसी मामले को कोर्ट व पर्लिअमेंट में क्यों घसीट रहे हैं?

मैंने अर्बितुरतिओन पर जो पहली किताब पढ़ी थी, उसके प्रेफस की पहली लाइन आज भी मझे याद है, "99% of the problems are created by us. So, the first solution to solve problems is -- Don't create problems whereas the second and last solution is -- Compromise". आशा करता हूँ कि ये समझदार भाई भी जल्दी ही समझोता कर लेंगे.