Trading Live 101 – How to Select a FOREX Program, the RIGHT Broker and Other ‘Don’t Lose Your Shirt’ Tips

Having made the necessary sacrifices and put in all the effort to gather enough capital to start investing, you would undoubtedly wish to make the best use possible of that capital. Your aim is to maximize your potential profits while still maintaining as low a level of risk as possible, thus gaining the greatest return on your investment.

You have also chosen to invest other resources in your decision to start real trading, including the time required learning how to trade properly and the effort to train yourself to be as professional an investor as you can be. You spent long hours analyzing foreign currency pair movements and financial charts, constantly checking financial indicators and making use of various trading tools, organizing trade deals, and enduring the various trials and tribulations of trading. Your understanding of exactly how trading works grew and you became increasingly confident about the prospect of success in trading. You also realized how much more in control of your own life you now are.

And at last, you believe that you are ready to start trading for real. You are ready to leave ‘demo’ trading behind and step into the world of real trading. You start to dream of achieving your trading goals, and imagining the route to success and capital growth through the use of shrewd trading, gaining a significant second stream of income.

All that is left for you to do is to choose the broker and trading program you wish to work with. While this might sound exceedingly simple, the reality however, will hit you in the form of a sea of various options, different brokers and intermediaries, multiple trading platforms, details, offers, gifts, and various other things. The realization comes that knowledge of trading is not enough. You begin to have doubts, and you ask yourself the questions, “Who should I entrust with my money?”, “Which trading program best suits my needs?” and “Which broker should I pick?” The answers to these questions are buried beneath entire mountains of data, and you will need to sift through them in order to find those answers. You will also experience constant anxiety, worrying about the possibility of making an incorrect decision. A single bad decision may result in decreased profits; while a serious mistake may see you lose money! You might also wonder exactly how you can start investing in a variety of financial products – such as stocks, foreign currency, shares, commodities, and even indexes. Should you engage different agents to aid you in trading with different financial products?

The professionals at “FOREXBROKERS.CO.UK” will help you answer those very questions you are asking yourself, making the process of finding the right answers and reaching the right decisions painless and so much simpler. We have the ability to help you process the information that you have found, make sense of it, and save yourself a great deal of time, frustration, and trouble.

We have detailed summaries of the various important factors and subject matter you will require in order to determine exactly what you need for successful trading, so that you can arrive at the best possible decision and make choices that will provide you with the greatest benefit.

The first thing you require in order to enter the world of trading is an agent – this usually means a broker with whom you can establish a trading account. A trading program is also necessary, as you will use it to handle your trades and transactions. When it comes to these two factors, making the right decision means being informed of the various options and conditions surrounding each possibility.

As a trader, you will not require every single trading tool available. Depending on the investment method you intend to follow, you will need a certain set of trading tools that will most certainly not encompass every single tool in existence. If you are to make the right choices regarding which tools you need, however, you need to know all of them. This way you will be able to determine if your broker offers the right services and tools that you require. The same principle applies to choosing a trading platform. Another important detail you need to pay attention to is whether your broker supports the trading platform you intend to use.

Details to Note When Choosing Your Broker

Choosing a broker involves many different things. The following is a list of 8 factors that we have deemed to be the most important when making this choice:

Availability of ‘Demo’ Trading

Before deciding to engage the services of a particular broker, you should first determine if he offers the option of ‘demo’ trading. With this option, you will find the transition from ‘demo’ trading to real trading much smoother and easier. You will find it easier to learn the various trading skills that will serve you well when you start trading properly. You will first need to find out if your broker offers his own ‘demo’ trading program or if you are expected to learn using another broker’s ‘demo’ trading program first. If it is the latter, then you should definitely reconsider your decision to consider this broker, as this is not something to inspire confidence in him.

Your Initial Deposit

When trading, especially in foreign currencies, you will find a wide variety of options available from various brokers. Some brokers are content for your initial deposit to open an account to be a minimum of only $25 or even less, while others may insist that your initial deposit consist of at least $1000. This is important because your level of available capital is definitely a big factor when making your investment decisions. Many traders are of the opinion that ‘starting small’ is the best way to make a smooth transition from ‘demo’ trading to live trading. This is because trading small sums of money will not cause you to lose sleep or have anxiety issues the way trading a large sum of money might. Other traders argue that this is not a proper introduction to the world of trading, however, as in the real world of trading you rarely deal with small sums, and you should get used to being constantly worried about your money as soon as possible. This is a decision you will have to make on your own – whether you wish to have a smooth transition to live trading, or whether you wish to learn the harsh realities of trading as quickly as possible.

Deposits and withdrawals

This is another aspect in which brokers often differ from each other. Some brokers allow the deposition of funds into your account through a variety of methods, and you can decide according to which method affords you the most convenience. Credit card, the internet, telephone, bank transfers, and electronic internet accounts are just some of the possible ways of accomplishing deposits. Methods of withdrawal that various brokers might suggest will include direct payment to your bank account, using virtual internet accounts, or through a credit company. Some brokers, unfortunately, will provide only a few of these options and you might find that the options given to you for withdrawing and depositing money are inconvenient for you. This is especially true for those who might need to make frequent withdrawals or who travel often. Before you even seriously consider a particular broker, you need to find out if what they are offering suits your needs and trading methods. While this may seem like a small issue, the complexity of the process of opening a trading account and the available methods of depositing and withdrawing money are something you should consider. If this process is complicated, then you might find yourself facing extreme frustration when attempting to open a new trading account or withdraw money from an existing account. The broker you are considering might seem to be a good choice, but you might find out too late that withdrawing money from your account is all but impossible. You should definitely find out such details before you choose to entrust a particular broker with your money.

Spread

With regards to foreign currency trading, every broker will identical claims that they do not charge any form of commission on trades. While this may seem to be true at first glance, such claims do not hold up to further scrutiny. When you trade financial instruments such as shares or commodities, you will find that there are marked differences between the different organizations offering their services to you. This is, in fact, a commission, and bears closer examination before you decide to engage the services of a particular organization. If you are trading indexes or foreign currencies, however, this is simply known as the spread, or the difference between the sale price and purchase price. With any leading currency, the purchase price is a few PIPS higher than the sale price for that particular currency. This is the same when you trade indexes. The problem you will face is that some brokers will conduct your trades at a higher spread, which is not beneficial to you.

Some people may believe that this only holds true for currency pairs that are not popular among foreign currency traders. The truth, however, can be found by examining the real situation more carefully. While the spreads between less popular currency pairs are indeed larger, even the most popular currency pairs such as the Euro/Dollar pair also exhibit the same characteristic. The spread between prices can be anywhere from one to three PIPS. Most brokers take the middle road and offer prices with spreads of two PIPS. If you believe that a particular broker is trustworthy, you may decide that it is in your interest to simply accept his price and not demand a better price. Often, traders will adopt this attitude if they only wish to make a single trade in order to liquidate their entire position before exiting the market. The same may be said of anyone who only wishes to conduct infrequent trades, such as only a few trades every month. Most people who trade foreign currencies, however, are in the market to take advantage of the highly volatile prices by making many trades every day. We will therefore assume that anyone reading this article wishes to trade frequently and for a long time. You should be aware, then, that a broker who offers you a spread of a single PIPS means that your leverage per PIPS is only one dollar, so you only get one dollar. On the other hand, given the number of deals that you will do over a long period of time, you will realize that you save a significant sum of money. Over time, the balance of capital in your account will grow as your profits accumulate. You will then start to gradually increase your leverage. Soon, you will find yourself trading on leverages of two dollar per PIPS, then three dollars, ten dollars, or even a hundred dollars per PIPS.

Something you should note is that brokers have different ways of expressing the spread. Some brokers apply a fixed spread to trades, meaning that a particular spread of perhaps two PIPS per Euro/Dollar will always apply to trades, no matter the condition of the market. Other brokers will adjust the spread, either lowering or raising it according to market conditions and any significant world news or events. You should also take note of how a spread is costed. At certain times, you will open short positions at the prevailing market price and close them a price that is two PIPS above market price. When dealing with long positions, then the opposite is often the case (particularly if you are dealing in SCALPING, but you will often find yourself frustrated when the market price has risen by one PIPS but still remains one PIPS below the targeted closing price. In such cases, what might have been a profitable deal quickly becomes a deal where you lose not once, but twice.) Whether you choose a broker who offers a higher or lower price is up to your personal preference, but you should definitely be aware of this discrepancy between individual brokers.

The Stop Point

Before you begin any trading session, you first need to define a STOP LOSS condition. This condition will inform your trading program or broker exactly how much you will allow yourself to lose before you cut your losses and close your position. This is something that any broker will have experience with, and is certainly not a new concept by any means. The stop point sometimes gives traders headaches because some brokers seem to think this condition is open to their own interpretation of loss. There are even some brokers who will not guarantee you the ability to set a stop point. Other traders, however, will offer you a stop point guarantee and stay true to their word. This means that, if your broker guarantees your stop point, but you lose more on a deal than stipulated by your stop point, your broker will refund your losses over whatever you were already prepared to lose. Of course, you cannot expect your broker to tell you if your losses on a deal were over the defined stop point. You need to monitor your own trades and, if necessary, demand that refund from your broker.

Some brokers add a disclaimer to their guarantee of a stop point, warning traders that while under normal circumstances the stop point guarantee applies, during sharp market fluctuations the stop point cannot be guaranteed completely.

It is therefore of great importance that you first determine exactly what sort of criteria a broker has set with regards to setting a STOP POINT.

Leverage

Leverage refers to conducting high value trades of securities or commodities using relatively little capital. Brokers differ greatly from one to the next in this area as well. While this holds true in every financial market, it is most evident in the foreign currency market. You will find some brokers who offer leverage of 1:100 and others who offer leverage of up 1:500. You must keep in mind that while high leverage maximizes the profit earned on a certain amount of capital, the potential losses are also enough to wipe out your capital and more. New traders should not be overly enthusiastic when making use of leverage, and should start with moderate trades that do not make use of heavy leverage. The decision to use leverage or not in your trades is entirely yours, and you can trade without any leverage if you so wish.

Interest

While some people believe that the issue of interest is a simple one, it definitely deserves some of your attention. Some brokers take into account the interest you earn when you trade, while others do not. Certain brokers will give you interest on any capital that is left in your account at a particular time every month, while others do not offer any interest. On deals that include interest, that interest is calculated at the start of the next trading day (this may differ from one broker to the next, and depends on factors such as the broker’s physical location and the time difference between your country and your broker’s). Such calculations are made using the ratio between the volume of trades being conducted and the percentage interest being offered for the month. This will apply to a trade for as long as the deal remains open.

There are also brokers who do not offer interest on the money used for your trades, but do offer interest on any capital that remains unused in your account. You should take note of this because the market sometimes displays either BULL or BEAR characteristics for a certain currency, making trades on such currencies more profitable. The problem arises due to the interest on such options being low, particularly when compared to other currencies that you would usually trade against this particular currency. In addition to that, some dealers conduct trades based on interest rate differences. A good example of this is the reverse correlation in compatibility that, until recently, existed between the Euro-Dollar and Dollar-Swiss Franc currency pairs. If you were to initiate trades on both currency pairs, you would find that the movements in price were almost exactly opposite to each other. With a long trade on one and a short trade on the other, you would find your profits on one almost equal to your losses on the other. You might ask, then, where the profit lies. The answer is in the difference between the interest rates. While such a trading strategy is certainly not simple to make use of, you should realize that, in order to integrate such a strategy into your own trading method, you would need the services of a broker who gives you the option to offset interest.

Regulation

You also have a choice between working with a broker and engaging the services of a Market Maker (who does not need to be made aware that you will save on your spread by working with him instead of a broker). Brokers merely act as intermediaries between traders, such as yourself, and Market Makers. The incentives offered by brokers are designed to encourage you to enlist his services, while the he profits on a portion of the spread of your transactions – a spread that is the direct result of the actions of the Market Maker. In reality, your broker does not really have anything to do at all with your trades. Your broker will also profit from the relative part of each spread that you have already paid for.

A Market Maker, however, consists of a large financial organization, and represents another link between the markets and the various prominent banking institutions worldwide. Thanks to a powerful financial and commercial position, the Market Maker is able to handle all of the requests and trades of his clients ‘in house’. As an example scenario, imagine deals involving the Euro-Dollar currency pair. One client wishes to buy the Euro against the Dollar, in essence selling Dollars against the Euro. Another client wishes to make the opposite trade. In this situation, the Market Maker experiences complete overlap between the two trades, and is able to simply the losses from one trader to the winnings of the other trader, all the while earning a profit on the spread between the currencies.

Let us better illustrate the situation using a more extreme example. Imagine that every single client of a particular Market Maker chooses to sell the Dollar and buy the Euro. On the surface, this might seem to present a problem for the Market Maker, as he would be unable to pay his clients if they all profit from this trade. There are no trades coming from the opposite direction that can be used to cover these trades. At first glance, it would seem as if the Market Maker would have no choice but to stomach a loss and simply pay the clients using his own funds. However, it should be evident that this does not happen in real life. In such cases, the Market Maker simply has to make purchases from the central banks in order to cover the trades. This costs money as he has to pay the banks for the purchases, but he does not realize losses from the trades, only less profits.

This represents the system functioning ideally, but this seldom occurs. Market Makers tend to ‘piggy back’ on their clients’ deals, with the sole purpose of causing other clients to realize a loss, thus allowing the Market Maker to profit. In this manner, Market Makers are able to cover their clients’ trades without the need to purchase any additional currency from central banks, thus avoiding additional costs. Market Makers must be able to function in this manner as they represent large financial bases in the markets.

It is therefore important that you verify that a particular Market Maker is trustworthy. This way, you can rest assured that he does not deal unfairly and will not cause your profits to plunge. You need to be able to trust the Market Maker with whom you work, and if you enlist the services of a broker, you will need to verify the trustworthiness of the Market Maker whom the broker works with as well. Keep in mind that your broker often does not care if a Market Maker is trustworthy or not – he earns his profit either regardless. In reality, it is often impossible to truly determine if a particular Market Maker is trustworthy, but this does not mean you should not try. Here are some details that you could check:

Who exactly is the Market Maker?

Is it a recognized and trusted organization?

If you can, find out who his clients are.

Look for any praise or complaints clients may have about him.

Is there a regulatory body that supervises his actions?

How long has his tenure in the market been?

What is the stability level of his financial base?

At “FOREXBROKERS.CO.UK”, experts have already taken these various factors and more into account when we conducted our analyses of the various brokers, coming up with a list of the best and most trustworthy brokers whom you can entrust your money with. Despite this, it is still imperative that you ask questions to clarify your own doubts and so you have a better idea of exactly what kind of people you are doing business with. As you trade with your broker, the capital in your account may well grow to enormous proportions. The very last thing you would want to happen is for your broker to declare bankruptcy one day, leaving you with absolutely nothing to show for your time and effort. You should look out for some brokers who will offer bank guarantees for certain portions of your capital, such as guaranteeing every $10,000 dollars of capital in your account. While this may be a factor you wish to consider, it is definitely not important enough to be a deal-breaker in your decision-making process.

Trading Tools

A large variety of trading tools are available to help you in your trades, presenting you with a great many possibilities. As with everything else, you will find differences between individual brokers. Some brokers offer their clients many trading tools to help them trade while others only offer a limited set of tools. You should definitely take note of the tools that a particular broker is offering when deciding whether or not to engage their services. You should also take note of those brokers who offer trading tools free of charge and which ones will charge you a fee for the use of their trading tools.

Professional and Technical Support

Computers and computer programs are prone to failure – something most of us are probably familiar with. In the case of computer malfunction, it is vital that you know where to turn for help. Find out what forms of support are at your disposal, how you can contact them, and the operating hours of support services. Will you receive efficient and competent support or will it be inefficient and possibly result in financial losses on your part?

Is support available round-the-clock or only certain hours? If you are considering working with a broker or Market Maker from another country, then this is of particular importance to you. Working and trading hours are likely for them are likely to be different from those in your country. You may not always have access to a computer when you need it, so you need to find out if you can contact support services via the telephone.

Online articles and literature – reading various articles and financial literature can be useful in improving your trading. They will help refine your technique, making you more professional in trading, and if not, then at least provide you with a better understanding of the topic covered in the articles or literature.

Trading courses – Some brokers offer their clients trading courses to help them improve their trading technique. Are advanced courses available for more experienced traders as well? Some brokers will even facilitate meetings between individual traders so that they can exchange experiences and ideas, helping each other improve on their trading methods.

Surveys – Does your broker provide access to reviews and surveys from the most respected dealers in the industry? Reading reviews may open the door on transactions that you may not have thought of on your own or that you were previously apprehensive about conducting. You may find that this saves you a great deal of money in the future.

Trading alerts – Certain brokers provide clients with a computer program that alerts them when they should open a transaction, what currency pairs to trade, and also when profit goals or stop loss points are reached. This is particularly useful for traders just starting out, helping them react more quickly to the market in order to earn a profit. Even experienced traders make use of trading alert programs as these programs can help them earn greater profit and see opportunities that they might otherwise miss.

Trading Guides – Have you forgotten an important point about your chosen trading system? Or perhaps you are simply feeling somewhat lost? Do you need an in-depth explanation of the concept of volatility? Or perhaps you are simply looking to expand your knowledge about the world of trading and finance. The best brokers offer their clients access to guides on trading and other aspects of the financial universe.

Range of foreign currency pairs, shares and commodities – While every broker offers a variety of options when it comes to your trades, the range of options offered varies greatly. Some traders prefer to be involved only in the main aspects of a trade, making use of only the main trading options. Other traders may feel the need to control every aspect of their trades, in which case they need to make use of all the trading options being offered. If you are the latter type of trader, then you should definitely pick a broker who offers you a greater variety of trading options to choose from.

Language Support – In some cases, especially with brokers who are not from your country, information you require may not be in a language you understand. You should ensure that your broker will provide you with a trading program in your own language as well as have the contents of his site properly translated to your language, assuming you and your broker have different native languages. It is therefore important to find out if your broker’s website supports your native language and how well it does so.

On-line trading room – online trading rooms provide you with access to an experienced trader who will give you opinions and suggestions concerning the particular currency pairs you are interested in and what trading options are available for any trades you have in mind. He or she will also answer any questions that you may have about your own trades. This is an enormously beneficial tool that you should definitely make use of.

Coaching – Does your broker offer his clients personalized, effective coaching? Some brokers engage successful and experienced traders to take you through the process of learning to trade effectively and becoming a successful trader.

Bonuses, free gifts and other tempting offers – Brokers who want more than anything to attract you will go to great lengths to capture your attention. You should never take these offers at face value, however. Some brokers will even offer new clients gifts such as cell phones and even laptops. They may provide you with an incredibly sophisticated mobile trading program for use on your handheld computer. You will receive bonuses on all the initial capital you deposit in your account, and many other attractive offers. The bottom line, however, is simply not to allow yourself to be overwhelmed by these offers. On the other hand, you should not be suspicious of all offers either. The best thing to do is to verify anything that is offered ‘free of charge’ by your broker. If the broker himself suits your needs and wants, only then should you consider his offers. Your decision should never be based solely on the offers and benefits provided by a particular broker. You would hardly want to work with a bad broker simply because he gave a gadget for free. Your losses will almost certainly more than make up for the price of that gadget. Make sure your decisions are well-researched and based on the right factors.

Factors that Should Influence Your Choice of Trading Programs

Downloading a trading platform – Most brokers will require that you download a computerized trading platform in order to make use of their services. For those who are reluctant to introduce such software onto their computer systems, however, there are some brokers who allow clients to access their trading platform directly through their website, eliminating the need for clients to download any programs.

Usability – Some trading programs are inevitably more efficient than others. Some programs have been professionally designed, and are sophisticated and efficient while others are quite the opposite. Some traders prefer their trades to be simple and are satisfied with limited sets of trading tools, as long as they are able to open and close positions. Such traders really have no need for sophisticated trading programs. There is a difference between simplicity and efficiency, however. Some programs may be exceedingly simple yet difficult to make use of. For example, a program might require that you switch to a separate screen in order to view financial charts before switching back to the main screen in order to execute a trade. In trading where even split-second timing is critical, such delays switching screens may cost you your profits. This is particularly true in the case of traders who are Day Traders, operating on a SCALPING or short term basis.

Why should you settle for less though? Even for traders who prefer simple trading, having a sophisticated trading program is better. As an example, let us take one of the features available in more sophisticated programs that is usually absent in lesser programs. In a sophisticated program, all of the icons that you require in order to execute trades and access financial information are contained on the main screen. Switching between the graphs of separate currency pairs should be quick and efficient. You may also appreciate the ability to add new volatility indicators over time to augment your trading technique. As you gain experience as a trader, you may wish to start using more complex tools such as oscillators and various other tools that only sophisticated trading programs include. Some traders even prefer to make use of automatic trading templates that can be downloaded and installed on certain trading programs, allowing for automated trading. There really is no reason for you to settle for a broker who provides only a simple trading program when there are other brokers who provide efficient and sophisticated programs that can make your life as a trader much easier. Even if you do not need such a program right now, you may find yourself needing one later on in your trading career.

Also, keep in mind that sophisticated programs still allow you to make use of simple trading strategies as well as more complex trading systems. Simple programs, however, will not allow you to make use of complex trading systems. With more developed trading programs, you will be able to adjust your trading methods as you please, without the need to limit your trading strategies simply because of your trading program.

“Multi” programs – Once you have made the decision to make use of a sophisticated, professional program, why stop there? Many traders make use of one sophisticated program for trading foreign currencies, and then use another excellent program to manage stock trading. If you intend to trade in more than one type of financial instrument, then why not make use of a ‘multi’ program that will allow you to do all of that with a single program? While you may not wish to trade more than one financial instrument at the moment, you might decide to add commodities to your share trading in the future, for example. You will definitely benefit from having a single program that is able to handle all the different types of trading that you wish to engage in. This keeps your computer clear and free of clutter, as well as taking up less space on your computer’s hard drive. You also eliminate the need to move from one trading program to another when trading different instruments at the same time, a process that can be very confusing even for the most experienced traders. There is an emphasis in the trading world on speed and efficiency, and using a single program instead of many definitely will aid you in addressing that particular emphasis better.

At the end of the day, it is clear that you should search for a broker who will provide you with a trading platform that fits the criteria laid out above. A broker who is able to provide you with a trading program that, while being sophisticated, is able to handle multiple investment channels including shares, commodities, foreign currencies, and other financial instruments – all on a single trading platform.