« Attahasam Asianet Plus host Sabu banned from Leela Kovalam !! | Main | MetaTrader (MT4) Expert Advisor - How To Change Color of Moving Average Lines (SMA, EMA) »
Forex Trading - My First Steps
September 27, 2006
During the past few weeks I have been studying foreign exchange trading (forex for short). Forex trading involves buying and selling of currencies. Forex trading is similar to stock trading in many ways but there are a few very important differences too.
In forex trading there are currency pairs, for example EURUSD - that is the Euro/USD. If you think that Euro is going to appreciate against the USD, then you buy EURUSD now and sell it later. You buy EURUSD for a price that is often quoted something like 1.2782 - This means that you need to spend 1.2782 USD for buying one Euro.
When Euro appreciates, this number will go up to say 1.2792. Now you can sell the Euro that you bought and get back more USD that you originally spent. That way you make a profit.
Now the value could have also gone against you to say 1.2772 and then you get less USD that you originally spent and thus you make a loss.
One important fact that you should be aware of is that for Forex trading, the brokers available are still now well regulated by governments and so you should be careful in choosing a broker. First of all you should go with a well known firm. The other consideration that you should be aware is that there are what are called "Dealing Desk" brokers and "Non Dealing Desk" (NDD) brokers.
Dealing desk brokers are very similar to bucket shops that operated in the early 1900s for stock trading. The problem here is that the broker does not always pass on your trade to the actual market and is in effect betting against you. And when they have all the control, it does not take much to figure out who will win the bet! So you should try to find out an reputable "Non dealing desk" broker. I am trying out COESfX with a demo account.
Posted by liveit at September 27, 2006 8:47 PM