Spread betting is a way of speculating on a future event and profiting from it. Spread betting originated in the world of sports events. The betting part of the name is the stake placed on an event occurring, for example, soccer results, or winning margins. The spread part of the name is the amount taken by the bookmaker.
Spread betting was then extended to cover financial markets, for example, is the stock market going to rise or fall today? And by how much? This video is limited to the use of spread betting in the financial or trading arena, where traders speculate on the direction of price movement. Pretty much any financial instrument can now be traded using spread betting. As speculation is on the direction of price movement, up or down, it means spread betting can be used to produce profits when prices are rising AND when prices are falling.
You’ll be able to open a spread betting account with a broker, although spread betting is not available in all countries. If you’re unable to obtain a spread betting account, you’ll need to trade currencies through a Forex account instead.
.Suppose I am trading EuroDollar and I expect the exchange rate to rise. The broker shows me the prices at which I can buy and sell this currency, buy at 1.2520 and sell at 1.2518. Ooops, the price has just changed. That often happens when you are preparing to trade. I am going to take a long position in Eurodollar, which means buying the currency. My trade amount is expressed as an amount per pip, in this case, I am trading at £5 a pip. The amount you trade per pip is determined by the process called trade sizing. I have £10,000 in this account and I am limiting my risk on this trade to just 1% of that amount, or £100.
A pip is the currency number expressed to the fourth decimal place on most currency pairs. In this case, a movement from 21 to 22 is 1 pip. A movement from 21 to 20 is also 1 pip. As I take the trade and buy the currency, my position is shown along with the original purchase price, 1.2521. The current price is shown, 1.2519, which is the price I will achieve if I exit this trade right now. A running profit and loss is shown as well. I’m currently down 2 pips, the difference between the buy price at 21 and the sell price at 19. At £5 a pip, this is £10.
Let’s watch this as the price changes. Notice as the price increases, my P&L position improves. Now the price has moved 2 pips, I’m breaking even. Each pip of price movement is worth £5.00, as that was my initial stake. As the price continues to move in my favour, the profit on the transaction grows. The price has moved 7 pips above my entry price now.
This transaction has reached my target price of 20 pips profit. Let’s close the trade and bank the profit. 20 pips of price movement didn’t take long in this video. Sometimes, the market will be even quicker than this video. Let’s run through the trade. When I closed the trade, there was 20 pips of profit, the price having risen in my favour as I’d bought the currency. This adds up to £100, as my stake was £5 per pip.
Had I staked £10, my profit would have been £200, 10 multiplied by 20. And so forth. Of course, if the price had moved in the opposite direction, my losses would have accrued at the same rate, meaning a 20 pip shortfall results in a loss of £100. One of the strengths of spread betting is in its simplicity.
I used UK pounds to trade the Euro and the US Dollar and did not have to do anything other than open and close the trade. Another advantage is the profits are tax free in the UK and Ireland. Simplicity and tax free, great combination. Hold fire though. It is possible to make losses with spread betting when prices move against you.
You need to understand risk management fully, plus the use of stop losses. It’s not just when prices are rising that you can make a profit, you can profit just as easily from falling prices by short selling.
Forex brokers will often encourage you to invest and make a profit, one method To do this is by providing bonus funds and other promotional offers, bonus funds Are not cash, they need to be reinvested before they can be withdrawn, usually Between 20 and 40 times, following a $50 bonus for example at a twenty times rate You must open new trade at a total value of $1,000 to withdraw that fifty, on the Other hand with Alvexo.
You have no transaction fees for commissions, instead We charge a spread, the difference in the rate at which you can buy and sell A currency is no different than a bank or the currency exchange abroad.
The value of a Currency is always quoted in pairs, the first number being bid price for selling The currency and the second which equals the off price if you want to buy the Currency obviously the bike prices higher than the sale price and that’s How you broke makes his profit, just like a bank or money changers spread is a Function of supply and demand your account and your turn over, the more you Trade the lower the spread.
When is the best time to get into a short trade when the trend and charts are bearish? and herein lies the dilemma, as it can be liked to catching a falling knife. Without a doubt the markets are out of whack at the moment and not logical. Things could get worse between now and the end of the month with the potential stale-mate in US politics and the passing of the budget. In addition to that is the US debt.
But when is the best time to get into a short position on a bearish chart when the price is not retracing back for further downward movement? I don’t think there is an answer for this question and the only thing to do is wait for either a claw-back or announcement that brings back to a better entry level. The danger of getting in at the lower part of the trend is that if a reversal occurs then you blow that trade and are stopped out, then what would happen is the primary bearish trend continues.
Whilst I would love to be placing profitable trades as I did want to get my account into a better over-all returns position, it is just not worth it and would not want to go from 4+% up to 2 or 3% up by the end of the month. Too risky and will re-asses the charts tomorrow (Tues). Whilst there are announcements this week I feel somewhat that what is happening is that money is being taken out of the market at a higher level than usual as normally money is moved from one currency to another and think traders and banks are ‘cashing out’. Could be wrong and have been wrong many times before!
Last week I was starting to feel relieved in that the markets were reflecting a weakening US dollar, then on Friday night it all reversed. I just cannot make sense of it all and even the normal forex market commentary could not make sense of it – saying the market ‘reacted’ to the US interest rates on hold decision. Doesn’t make sense and the only sense I can make of it all is that we are potentially looking at bearish sentiment all around.
11 Tips of Profitable Foreign exchange Investing
Whilst your buying and selling is financially rewarding oneself really feel very good. Nevertheless your lifestyle can transform into nightmare anytime on your own deal with the interval of losses. Yourself can shell out months attaining revenue and missing almost everything inside of couple minutes. This condition is properly regarded toward all investors. As a result everybody ought to have an understanding of the likelihood of this kind of predicaments and be ready toward big difference the procedure inside of period. Sensible observations and logic asking yourself assistance us track down solutions toward all inquiries. This post handles simply just 1 speculate: “What is the big difference concerning profitable and non-profitable investors?”
The after observations are dependent upon a lot of investors’ working experience and they might develop into your pointers inside the procedure of fx investing.
The optimum of non-lucrative buyers are those people who adhere in direction of intraday or shorter-phrase Designs. This can be defined through the real truth that this sort of investors deficiency acceptable historical past and the intricate approach. This variety of buying and selling does not justification even insignificant problems, and other than these kinds of buyers do not sometimes personal ample cash. Financially rewarding investors are largely individuals who determine centre- and lengthy-phrase season occasions.
Finish: in accordance towards the figures centre- and quick-phrase buying and selling offer even more possibilities for investors in direction of attain accomplishment, and be aware your cash capacities – the additional oneself deposit the added opportunities by yourself contain in direction of “endure”.
Non-financially rewarding investors occasionally hire complex plans and methodologies. Worthwhile buyers upon the opposite hire easy strategies. They all seek the services of both transformed designs of recent insider secrets or the plans invented as a result of them.
Decision: it is logically proved that less difficult secrets are typically even more handy. The significant truth of the matter is not the mother nature of a treatment however the comprehending no matter whether it is educational or not. Consequently we may perhaps conclusion that the highest considerable section within investing performs your particular route of asking yourself and exploration.
Non-effective investors traditionally count upon laptop plans and signs. They do not spend season toward investigate the mathematic foundation of such plans and attempt basically the “pop” course of getting them. Rewarding investors recognize added benefits of making use of pc, these as the probability of proposed investigate of significant info selection and a great number of marketplaces. However at the exact same year they certainly comprehend sector mechanisms inside all the facts.
Finish: if oneself require in direction of be a lucrative investor it is significant towards fully grasp doing work fundamental principles of all the mechanisms provided.
Non-productive investors pay out a lot of period forecasting in which the marketplace will be tomorrow. Rewarding buyers fork out much more period pondering in excess of their response in direction of the latest industry flow and coming up with their technique correspondingly.
End: a investor will include good results if he can predict the group response for this or that occasion. As a result we might finish that it is a lot easier in direction of be a effective investor than a financially rewarding analyst as analysts need to predict marketplace circulation and produce suggestions as for how toward income most gross sales. If by yourself request a lucrative investor in which the market place will be tomorrow he will likely shrug his shoulders and answer that he would adhere to the current market in just any assistance. These kinds of an resolution proves that the investor displays marketplace stream.
Non-profitable buyers problem simply upon worthwhile transactions and productive buyers pay out notice at no-get transactions, revenue as nicely as likelihood and gain correlation.
Close: in accordance in direction of our observation it is significantly much more critical towards spend awareness at possibility still not at benefits or losses. A rewarding investor considers how substantially financial he can income and how significantly can unfastened and does not shell out focus at hypothetic maximums and minimums associating with “directly” and “mistaken”.
Non-effective buyers are frequently not able in direction of handle their inner thoughts. Lucrative buyers overwhelm their thoughts and basically then commence pinpointing sector scenario. If the predicament is unchanged thoughts are forgotten, in a different way sensation is admitted in direction of be immediately and the level is shut.
Final decision: if a investor opens and closes work opportunities simply just depending upon his thoughts his industry process can be regarded neither convenient nor sensible. It might good bizarre still all those investors who entirely ignore their feelings are not specifically both. The least complicated course is in the direction of acknowledge all thoughts and then look at the causes why this or that conclusion was developed.
Non-lucrative buyers are unbelievably concerned in direction of be straight. They together with the impression of euphoria each time adrenalin arrives towards blood. They including checking sector 24 hrs a working day. Profitable investors realize feelings still do not allow them prevail. It is not a should really for them towards always observe estimates. They do not try towards be constantly immediately. They spend consideration basically at what might provide monetary and what may possibly not.
Finish: it is necessary towards continue being synchronous towards current market Regretably it is additionally critical that buying and selling does not mingle with your personalized lifetime. “In excess of investing” prospects toward emotional and actual physical degradation. Effective buyers check out in the direction of suddenly reply upon the predicament nevertheless investing for them is a process, not a damaging weak point.
Each time a non-profitable investor loses, he purchases a refreshing e-book or course of action and commences buying and selling in accordance toward it. A financially rewarding investor analyzes what took place and deliver corresponding corrections in just his methodology thinking about the clean been given info. He does not exchange at when toward a contemporary procedure developing this merely right after the realization that the past process was not related.
Choice: the greatest lucrative investors adhere firmly towards their secrets and techniques. They at times hire one particular or 2 secrets that proved towards be rewarding. It is improved in direction of employ the service of just one terrible approach than soar in opposition to 1 in direction of yet another.
Non-profitable investors get as illustrations distinguished investors who designed significant monetary and try out towards imitate their secrets. Effective buyers review clean Plans; Unfortunately they seek the services of them simply just in just scenario whenever they correspond toward their personal strategy.
Final decision: a person additional period we perspective that investor’s affected individual capabilities, his practical experience and approach are a great deal even further vital than accomplishment of industry industry experts.
Non-rewarding buyers usually omit innumerable things to consider affecting the likelihood of attaining gross sales. Effective buyers recognize that product sales count upon “revenue move”. Marketplace must attain much more and provide a lot less. Anything affecting this method really should be regarded as.
Choice: all Reasons impacting product sales need to be taken into account.
Non-worthwhile buyers understand every thing also severely and do not incorporate a come to feel of humor. Financially rewarding buyers upon the opposite are the optimum delighted us citizens with the utmost obtain creativeness in just the international. They do their operate definitely yet they are normally prepared in the direction of giggle at by themselves.
Decision: it is very well identified that psychological gurus Work out regardless of whether a unique includes the experience of humor or not. The added really serious is a specific the large chance that this personal is unwell.
Equally productive and non-financially rewarding investors believe of a buying and selling as of a match. The merely variance is that for the prior it is not exactly amusement still a speaking to toward which he is absolutely committed.
What is a Forex Market Trading system?
A Forex Market Trading system in it’s simplest terms, is a set of strategies which can be used to find out how a currency will fare in the market.
Before beginning to trade, Inexperienced Forex traders would be well advised to seek out Currency Trading Strategies which have been implemented by more advanced traders. Mechanical systems are set up by experienced traders, based on the information they have gathered and signals that they have come to understand. These online forex trading platforms, are integrated into sophisticated computer programs that beginners can buy and will give indications to the trader as to when is best to sell and when is best to purchase currencies.
So the first step becomes to:
1. Obtain an automated Forex trading system
Whilst you are still learning the ropes of Forex trading, it will be beneficial to use an automated trading system. You can use it as you would a color-by-numbers approach to painting pictures. It guides you and in turn, you learn what works best.
2. Start putting your intuition to use
As you get more confident, you will develop a feel for Forex trading. This comes through experience after you’ve made some gains – and no doubt, experienced some losses – As you learn from these experiences an understanding unfolds of how it all works; not just in terms of numbers, but in terms of the way the world currencies fluctuate. Keep an eye on the news of the world and pay attention to events that might cause an upturn or fall in a particular country’s economy. Cautiously apply your intuition based on the information you have and you will gain a better insight into how to make profits next time.
3. Educate yourself
Knowledge Reduces Risk. Forex trading, like any investing, can be considered extremely complicated. It is Imperative to your success that you arm yourself with the right information before you begin using real money. You can even use practice accounts available from most, if not all, broking companies. Continue to learn as you go.
4. Never risk more than you can afford to lose
Nobody gets it right every time. Sir John Templeton, one of the Greatest Investors of all time is said to be right not even half of the time. Failure is a far greater teacher than success and losses are normal in Forex trading. You can minimize the damage that your losses bring to you by making sure you’ve educated yourself sufficiently and you’re only trading with money you can afford to lose.
5. Trade on popular currency pairs
Lets not run before we can walk, there’s no sense in trying to play the maverick. Stick to what you’ve learned: if you are unclear as to what you’re doing, seek advice and/or stay with the safe options. By trading on popular currency pairs, you will find yourself in a comfort zone, a safe place in which to learn and grow. The five most popular pairs are USD/EUR, USD/JPY, USD/GBD, USD/CHF and EUR/JPY.
6. Plan for long-term involvement
Anything worthwhile in life takes time and Every Goal Has its process. If you see your Forex trading system as something that will bring you huge profits in a short space of time, you are unlikely to succeed. This is by means a “Get Rich Quick Scheme.” Currency markets change even on an hourly basis. The highs and lows can be massive, or they can level out, depending on major events happening in the world. See your Forex trading as something you will work on long term so that you can get a taste for how it works in a variety of situations and volatilities. This way you can learn to “Get Wealthy Steady ” and enjoy the process of becoming who you need to become along the way.
In Summary: Forex trading is not an overnight fix to get some quick cash. It requires a reasonable attention span as there is a huge education involved as well a shift in consciousness. You need to learn to focus on detail, study & understand currency markets and develop a good deal of patience. The other ingredient you need is a plan. You wouldn’t head out for a trek in the woods without a compass; don’t begin Forex trading without a trading system.
There are a lot of situations that can make financial tools turn quite dangerous the average consumer has not a clue in the least what they are doing and this all equals out to a bundle of problems for most people. If you find yourself in this position where you are messing around with the Forex market, it is very important that you carefully consider each of your options. For the average consumer there are far too many mistakes that can be made. Choosing incorrectly will quickly find you losing all of your money instead of getting further ahead with things as you want.
Taking just the smallest amount of time to study is always very important, but typically, most consumers just do not take this time. Rather they are busy worrying about ways in which they can strike it rich fast and for the most part the Forex market is not the place for that type of thinking. It is extremely important it is extremely important to take proper considerations and care before making any decision regarding Forex transactions as people make the mistake of rushing right in which you create enormous headaches in the near future.
The Forex market is extremely dangerous for anyone who does not know what they are doing. To get started it is quite easy to learn how to make wise decisions in the market though with careful consideration and planning you can be up and running in a matter of days though, it is very important that you consider that the wrong transaction could quickly enter your Forex career. Taking a plunge and just getting started in the market with no time to really review what you are doing or could potentially do can quickly cause you a serious financial problem.
In order to really engage in safe transactions in the market it is very important that you take some time to read up on how the market operates and also exactly, what you can do to ensure that you are trading successfully. Most mistakes that people make consist of not remembering the reality that the Forex market involves real cash. This is extremely important and can quickly have your situation turning ugly really fast. If you slip and forget about the fact that you are dealing with real cash it will take no time at all before you are suddenly broke, and wondering where exactly things went wrong.
A much better option is to take the time to really review your choices. By doing this, not only can you ensure that you are well on your way towards success, but you can also ensure that you are working to slowly increase your options over time. Many people rush into the Forex market and quickly discover that things are not turning out quite right. In order to really ensure that you make the right decisions it is important to realize just how disastrous things can really turn in the market.
Most consumers have no clue how the different currency rates can really impact aspects. It is very important to know and understand this. For example, if everyone who holds currency in the United States dollar started trying to dump their currency at the same time; this would force the value of the dollar into all time lows. However, at the same time, if everyone is trying to purchase the exact same type of currency this would again lead to people suddenly finding the value changing significantly. The biggest difference in this situation though would be the currency would go up significantly in value.
Taking the time to really understand how these things can impact is critical. Far too many people do not devote the time necessary to understanding these issues and quite quickly, they discover themselves in a situation that is not good for them. Taking the time to ensure you properly understand the Forex market before you ever start investing will help you to avoid dangerous situations that can really hurt your finances, or the finances of the world.
If you are planning to start a business that will give you more profits, Forex is the best option for you. The best advantage of the Forex trading market is, any one can invest in this business. However, it is not easy to achieve success in this platform, but one should be well familiar with all the basic fundamentals prior to investing in the Forex market. If you are looking for the best results, it is very important to know the ins and outs of the business. Knowing more about the strategies and technologies, which are involved in this business is also very important to learn before you start this business. There are different types of options available for investing in money, but online Forex trading platform is an option that helps customers to achieve success in online trading.
Internet technologies have a great impact on Forex trading and one should choose the best platform. Most of the traders who perform this business are familiar with the necessity of the online Forex trading systems as well as it is also important to make the right decision. There are some important things that should be considered in order to choose the best online Forex trading platform. The first step towards making a choice for the best fx trading platform is to try a free trading version (Demo), which is a good way to start. Currency pairs is also an important aspect that you have to consider before getting into an online trading platform.
One should also consider the user friendly options and customer support while they select an online forex trading platform. Experience and reputation are also some of the important aspects that you have to consider before you select an online platform. Repuattion will also help you to convert your investments into profits. The people who perform the trade should be easily approachable as the customers should find it simple to contact them. Effective demo trading can be beneficial for the beginners. There are many experienced traders on the net who will provide online Forex trading platform for their customers, which will help them to trade hassle free.
The demo version, which is available on the internet is will also provide some basic amount for the customers, which will help them to know more about the basic tactics included in Forex Trading. Before you select an online forex trading platform it is very important make sure that it will provide you FX Market Analysis, Technical Analysis Tools, Forex Trading Charts and FX Streaming news, which are some of the important aspects of this trading platform. There are several online traders available which boast of providing the best guidance to the customers, but one should consider the reputation first. The trader should be approachable and user friendly in order to generate good revenue from the Forex trading market. So, choose online Forex trading platform that can provide all these services.
Most of the people who select a wrong Forex Broker to run their business are not aware of the bad things, which can effect their business. Most of the people who start this business will basically take the assistance of a forex broker when they make large investments in their businesses. Now coming to the question, how to find if a forex broker is reliable? Well, the answer is simple; forex broker reviews. These reviews are just like the feedback of a particular product that a customer will give after using it, because most of these reviews are written by the people who have taken the help of the brokers with whom they have worked.
By accessing each and every point of these forex broker reviews, one can know how credible a forex broker is and what are the chances of acquiring success with him in the time to come. These days, it has really become tough to differentiate between the genuine and experienced and the amateur ones as all of them tend to have a lavish office and are surrounded by latest gadgets around them. Most of the people who invest large sum of money with forex broker feel uncomfortable to invest their money as they think it is not secure.
By accessing the online forex broker reviews anyone can come to know if the forex broker is worth the trust or not. These reviews tend to contain the names of only those forex traders who have been in this industry from years and have carried out many successful transactions in the past. Apart from credibility, expertise and trustworthiness, you can also gain more information about a broker by reading the forex broker reviews, which are available on the internet for free.
Before you take the help of the forex broker reviews, it is very important to understand that all the reviews that are available on the internet cannot be trusted as there are also some websites on the net, which are posted by some of the fake brokers, who do not have more knowledge in this business and most of these reviews will provide you the wrong information about the business. If you are looking for an option to know the genuineness of a review, it is very important to see the writer’s affiliations. Reading the latest forex broker reviews will help you to select the right broker for your business, who can work for you without causing any problems for you and for your business.
Forex trading is a way of speculating on the future value of a currency pair.
Trading is buy low, sell high. For short selling, we do exactly that, but in reverse sequence, i.e. we sell high and then buy low. People have difficulty understanding how this works and end up asking the question “how can you sell something you don’t own?”.
I’ve several responses to that, so take your pick. The accurate answer is that we never own anything, it is pure speculation on the future value of something. By short selling, I am speculating the value will be lower at a future time and I make the commitment to buy it at that time. It is the way business runs. If you want to spend your profits from trading on a new car and that car is not in the dealer’s stock, it does not stop the dealer selling you the car.
They are expecting to buy the car for you at a later time. There is no guarantee they will be able to source the car at the exact same list price as they could today, so they too take on some risk. But the principle applies, sell first and buy it later, in effect, fulfilling the delivery. In the other video covering trading, “What is a Forex account”, you saw how dealing in currencies always involves selling and buying at the same time. Suppose I am trading Cable, and evidence suggests that the exchange rate is going to fall.
I can see the prices at which I can buy and sell this currency, buy at 1.5851 and sell at 1.5848. The price is fluid as the market is open as I take the trade. Suppose I were to go short on Cable, that means selling Cable at £8 per pip. Remember, a pip is the fourth decimal place on this currency pair. As I sell the currency, my position is shown along with the price I took the trade. My exit price is shown, which is the price I can currently buy at. A running profit and loss is shown too. Let’s watch this as the price changes.
Notice as the price increases, my P&L position has got worse. I have traded for a future value to be lower, so price rising is not what I want. I want the price to fall. Like that. But I am still losing money, as the spread of 3 pips has not been covered yet. Each pip of price movement is worth £8.00, as that was my initial stake. As the price continues to move in my favour, we reach break-even. It’s only 1 pip, but at least we’ve moved into profit. That’s better, 9 pips so far. Now up to 16 pips of profit. Up to 23 pips. This is my target on the trade, 25 pips. Let’s close the trade now, buying the currency at 1.5822 and bank £200 profit.
Let’s run through the trade. When I closed the trade, there was 25 pips of profit, the price having fallen in my favour as I’d sold the currency. This comes to £200 as my stake was £8 per pip. Had I staked £20, my profit would have been £500, 20 multiplied by 25. And so forth. It is possible to make losses using spread betting when prices move against you.
If the price had risen, my losses would have accrued at the same rate, so a 25 pip rise equates to a loss of £200. You need to understand risk management fully coupled with the use of stop losses. In this example, I used UK pounds to trade the British Pound and the US Dollar and did not have to do anything other than open and close the trade. The equivalent trade in a Forex account would involve selling a specific amount of currency.
The spread is an inevitable part of trading and is the profit taken by the broker. When trading Forex, whether through a Forex account or using spread betting, the broker does not charge you a fixed or monthly fee for operating the account. The broker does not take any direct transaction charges for taking a trade either. Instead, the broker offers two different prices for a currency trade, often referred to as the bid price and the offer price. These are the brokers prices, describe what the broker is doing, the broker is bidding and offering. You buy at the offer price and sell at the bid price. The difference is called the spread and is the brokers profit margin.
These are the prices at which I can buy and sell Eurodollar, the currency pairing of the Euro and the US Dollar. The price you can sell them to the broker is 1.2612. This is the bid price, or what the broker is bidding to buy your currency. When looking at Forex charts, it is most common to have the bid price displayed. If you wanted to buy this currency from the broker, you would have to pay 1.2614. This price is called the offer price, or ask price, or the price the broker is offering to sell you the currency.
There is another price called the mid price. The mid price, as it’s name suggests, is the middle point between the two prices. Take the bid and offer price, add them together and divide by two to obtain the mid price. The mid price is not often used, as you can’t actually trade at this price. It may be useful when the market is very slow or volatile. Currency movements are measured in pips. The spread is the difference between the bid and offer prices and is expressed as a number of pips.
To calculate the spread, move the decimal point four places to the right and simply deduct the bid price from the offer price. In this example, Eurodollar is trading with the spread of 2 pips. When you look at a price chart based on the bid price, you need to add the spread to the bid price whenever you are contemplating buying the currency to find your true cost. Spreads on different currency pairs vary. The calculation is the same, so move the decimal point four places to the right and deduct the bid price from the offer price to obtain the spread. Cable is trading here with the spread of 3 pips.
On some of the less commonly traded currency pairs, it is normal to see spreads a lot higher. Here, the Kiwi Dollar and the Swiss Franc are trading with the spread of 7 pips. You might decide this is too high for you to trade. Your might restrict the currency pairs you trade on certain strategies as a result of the spread. When it comes to trades involving the Japanese Yen, the decimal place is moved two places to the right to calculate the spread. In this case, the Aussie Dollar is trading against the Japanese Yen with a 4 pip spread. Competition amongst brokers is fierce and often seen in their advertising by the spreads they quote.
Eurodollar is the most heavily traded currency pair and usually has the tightest spreads. Brokers are keen to let you know how tight (or narrow) their spreads are on Eurodollar. From 2 pips, there are not many steps down to zero, so many brokers have moved to pricing at 5 decimal places. To calculate the spread still means moving the decimal point 4 places to the right. In this example, the spread is 1.3 pips. The equivalent for pricing the Japanese Yen is to quote the price to three decimal places. The decimal place is still moved two places to the right to calculate the spread, which at this moment is 2.8 pips.
Most brokers now use variable spreads. This means the broker can change the spread at will. During periods of normal trading, this leads to very competitive spreads. When trading is “thin” , which means not very much activity, brokers often widen their spreads. This can sometimes be seen at the beginning of the week when the market is opening and at the end of the week when it is about to close. Given spreads are variable, it can mean the bid and offer price moving quite independently of each other. This can also happen at times of high market volatility. Although the spread is the brokers cut, it is not generally seen as a transaction cost.
When trading, the focus is on the bid and offer prices at the moment in time when the trade is executed. You can see the impact of the spread at the precise moment you take the trade. For example, trading Eurodollar at £2 per pip with the spread of 1.1 pips results in a cost of £2.20. Rather than focus on this cost, you will be looking at the P&L as the trade progresses and either the net profit to you, or the total cost.
A quick recap on spreads. Spreads on currency pairs vary by currency pair. Most traders focus on the major currency pairs for trading, as the spreads are more competitive. Competition amongst brokers is fierce. Don’t assume all brokers give the same bid and offer prices, or the same spread. If you have multiple trading accounts, shop around. Market conditions can affect spreads. Most brokers use variable spreads allowing them to take advantage of slow markets.
And what time of the day is best for trading? The first thing to add to the mix is quality. By quality, it is not so much the amount of time you spend, but what you do during that time and the value you derive from that time. 20 minutes of good quality time to focus on the market and trading is better than a couple of hours with the television, kids, pets or partners in the background providing continual interruptions. Your experience also plays a part. When you are starting out, it makes sense to invest more time.
You’ll naturally be slower recognising patterns, charts and events and navigating around your trading terminal. Like most things, practise means you’ll get quicker and find it easier. The next thing to consider is your trading goals against your available time. Many people starting out trading are in full-time employment. This means unless you’re working shifts, your time to trade is likely to be in the evenings or early morning. There is no issue with trading in the evening. But strategies designed for the morning session are not going to help. Of course, your time zone plays a part too.
Trading in the evening in the UK is quite different to trading in the evening in Hong Kong or Chicago. Check which geographical markets are open at the time you are trading and which currencies are most likely to be traded. If you are working full-time, allocate 30 minutes or so each day and focus on strategies more suited to trading longer term. If you have a larger amount of time available during the day, then by all means allocate a couple of hours a day. But do it consistently to gain consistency. If you are going to be trading full time, do plan your day, for example, strategies, currency pairs, trading objectives, measurement and analysis. The Forex market is open for 24 hours a day, five days a week. You’ll need a awful lot of stamina to trade all of those hours each week.
The market opens at 5pm Eastern time on Sunday and closes at 5pm Eastern time on Friday. That is 10’o’clock Sunday evening in the UK and 11’o’clock in Europe. In Asia and Australasia, it’s from Monday morning to Saturday morning. Times in other parts of the world vary as daylight saving operates in some countries in the northern and southern hemispheres, but not in others. You’ll not be missing too much activity in the early hours on Sunday or late on Friday. In general, the markets follow the sun around the world, with the largest markets and highest volumes traded in the Tokyo, London and New York sessions.