A few questions about FOREX trading

M

mathers7

I am thinking about starting to play around with forex trading and wanted to know more about it before i do.

I'm sure these questions have been asked before on this forum but I couldn't find my way far back enough in the posts so hope you guys can give your views again.

1. Is it true that currency trading in general is more profitable than the stock market,

or is it just better in general because it has longer open hours, no commission, no margin interest, etc...?

2. Since most forex accounts have big leverages. Is it dangerous to use these leverages if you don't know what you are doing?

3. What is the general rule on margin accounts? You have to settle within 2 days?

4. If i made a wrong bet on a margin account, do I loose out more or the broker? Can you give me an example?


thanks all.
 
Quote from mathers7:

I am thinking about starting to play around with forex trading and wanted to know more about it before i do.

I'm sure these questions have been asked before on this forum but I couldn't find my way far back enough in the posts so hope you guys can give your views again.

1. Is it true that currency trading in general is more profitable than the stock market,

or is it just better in general because it has longer open hours, no commission, no margin interest, etc...?

2. Since most forex accounts have big leverages. Is it dangerous to use these leverages if you don't know what you are doing?

3. What is the general rule on margin accounts? You have to settle within 2 days?

4. If i made a wrong bet on a margin account, do I loose out more or the broker? Can you give me an example?


thanks all.
More...
1. more dangerous. it IS better due to longer market hours - so you can plan more strategies, etc.

no commission fees, broker just takes the spread.

2. yes.

3. forget about all that - the broker takes care of it. plus there are some brokers who have instant settlement.

4. theories abound. supposedly when you lose, your broker loses too. conspiracy mongers think all brokers headhunt traders. In stocks yes I think this happens, but in forex I don't think it happens, especially not with reputable brokers.

good rule of thumb to go by: trade the broker's demo. Once you open a live acct everything should be the same. If it is not, drop that broker!

adr,

fx
 
I wanna also add that trading a pair is different than trading a stock in that, say with a pair like GBP/JPY, if you open a long trade, you draw interest, earning money by just sitting in the pair in that direction.

If you buy a stock you don't draw interest.

If your capital is in USD then you will draw more interest in GBP/JPY long than if you just let your money sit in USD at its current interest rate.

there is even a broker who pays you interest by the second round the clock.
 
The absurd notion that there are no commissions is not true, I should also point that out. There is a pip spread that is the same thing.
 
Quote from Ivanovich:

The absurd notion that there are no commissions is not true, I should also point that out. There is a pip spread that is the same thing.
More...
I dissagree, Ivan, here's why.

Take a stock broker like Ameritrade. What do they charge in commission? Like, $15 to open a trade and another $15 to close it?

$30 round ticket.

This is 30 bucks whether you buy/sell ONE share of stock or 1000 shares of stock (hypothetical - you'd have to get the exact details from them).

However, in forex you set your own spread fee.

You buy/sell 1 unit of EUR/USD at 50:1 margin - the spread is 1.5 pips - you pay less than 1 cent to open the trade and NOTHING to close it.

Or, you can buy/sell 100,000 units, in that case you pay $15 (on 1.5 wide spread) to open it and again, NOTHING to close it.

You can also pay any amount of spread fee based on how many units you buy/sell from 1 unit to 10,000,000 units and beyond.

ALL based on the spread per individual pair and on how many units your trade size is.

get your facts straight, dude.

lmao,

fx
 
Quote from FXsKaLpEr:

. . . theories abound. supposedly when you lose, your broker loses too. conspiracy mongers think all brokers headhunt traders. In stocks yes I think this happens, but in forex I don't think it happens, especially not with reputable brokers.
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The fx dealer wins when you lose. It always is the counterparty to your position. Its not brokering anything. It simply holds the other side of your bet, like a bookmaker, the only difference being that it gets to choose the final score (unlike a bookmaker). Its interests and incentives are counter to its customers'. Its stated spread is only part of the story, because a customer pays more than the stated spread when the dealer moves quotes in its favor (against net customer positions), runs prices to stops, and/or dishonors profitable limit orders.

There are no "reputable" fx dealers, only some who may treat their prey -- novices and small traders -- better than others.
 
I have been in the fx market for some time and have experience trading retail.

For smaller accounts, that is under 25k-50k, try to find the best execution and tightest fixed spreads. That pip spread on bid/ask can get expensive when trading actively and large size.

Leverage will make or break you. If you don't understand leverage and its viciousness, tread lightly.

If you are looking to trade with a bigger account, trade futures at a discount like IB (do the math, its soo much cheaper with a tiny spread and minimal commission than a 3 pip eur/usd or god forbid 5 point gbp/usd).

Also, if you want to do the cash market, look at the currenex system some online vendors offer, with competitive bid/ask and level 2 to a certain degree.

its a great market, i traded stocks and like the fx market better.

I prefer to do futures b/c better commission in fx, then also have many more markets at ur disposal, energy, metals, indices....


good luck
 
Quote from Chood:


There are no "reputable" fx dealers, only some who may treat their prey -- novices and small traders -- better than others.
More...

Sorry, Chood. I know you're still pissed at your experience with Saxo, but your above statement is simply not true. There are honest players out there. Oanda is one of them.
 
Quote from Ivanovich:

Sorry, Chood. I know you're still pissed at your experience with Saxo, but your above statement is simply not true. There are honest players out there. Oanda is one of them.
More...

Its a disservice to anyone who reads a post of mine to reinforce the hype of the fx dealer community. The dealers have shills enough to do that for them. It undercuts the credibility of this board to reinforce that hype. Those are my motives.

Retail fx dealing is unregulated. That's a fact. Every rational incentive that obtains in platform-based fx dealing operates for the dealer and against the customer. That's a fact. Oanda may refrain from acting on those incentives. It may value reputation over exploitation. I don't know that, but I take your statement about Oanda at face value. However, the general evidence is that retail fx dealing exploits customers, especially unsophisticated novices. I don't know anyone wise about trading who says otherwise.
 
Quote from FXsKaLpEr:

1. more dangerous. it IS better due to longer market hours - so you can plan more strategies, etc.

no commission fees, broker just takes the spread.

2. yes.

3. forget about all that - the broker takes care of it. plus there are some brokers who have instant settlement.

4. theories abound. supposedly when you lose, your broker loses too. conspiracy mongers think all brokers headhunt traders. In stocks yes I think this happens, but in forex I don't think it happens, especially not with reputable brokers.

good rule of thumb to go by: trade the broker's demo. Once you open a live acct everything should be the same. If it is not, drop that broker!

adr,

fx
More...


I see... Thanks for the info.

About the settlement thing though. Suppose, I just traded USD/EUR, can I trade EUR/YEN the same day? With stocks, You can't sell until it's settled. Is it the same with currency? or can I hop from one currency the the next all day with the brokers that have instant settlements?


Let's say I open an account with just $1000. That's the most I can loose even using leverage right? Because the broker will close out my account if it gets too low?


Speaking of $1000 accounts. In the stock market, it's generally pretty hard to make decent gains without large capital unless you plan to wait for a long time.
Is that the same with currency trading too?
 
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