Forex scams can take many forms. Some scams can be compelling or seem to be very legitimate. They take advantage of traders seeking the magic answer to winning in the forex markets. Unfortunately, there are no easy answers. Here is a quick list of some popular general forex scams.
Mistakes That Forex Traders Make
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When getting started in forex trading, there are common mistakes to be avoided. This is a list of common forex trading mistakes.
1. Using Too Much Leverage
One of the biggest advantages of forex trading is the ability to use leverage or trading on margin. One of the most common mistakes that forex traders make is using too much leverage. Using too much leverage is when you have a small account balance, but make a big trade. If the market moves against your position by just a small amount, it can result in large losses. Commonly, the beginning forex trader will get emotional and nervous and close the trade for a sizable loss.2. Over Trading
Over Trading occurs when traders try to look for trading opportunities that are not really there. It happens to new traders very often, because they just want to trade. The result is usually a poorly executed trade that results in an eventual loss. Over trading can also result in traders making too many trades at once and using too much margin.3. Picking Tops and Bottoms
Many new traders attempt to try to pinpoint where a currency pair will turn around and start moving the opposite direction. This is something that is difficult even for professional traders.Best Times to Trade
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The forex markets are great because they are open almost all of the time and there are a wide range of currencies to choose from. This brings up an important question.
What are the most active hours for forex trading?
Generally speaking, the most active hours all around are between the London markets opening around 8:00 GMT and end with the markets in the US closing around 22:00 GMT. The absolute busiest time in the forex markets are during the London to US overlap between 13:00 GMT to 16:00 GMT. These are the hours that are the most liquid or when the most traders are in the markets making trades. If your intention is to do daytrading, these are key hours!
What are the major sessions for forex trading?
There are 3 major sessions each day in the forex markets. They are the London session, the US session, and the Asian Session.
The London SessionThe London session starts around 8:00 GMT and winds down around 1600 GMT. The currencies that are the most active during these hours are EUR, GBP, and USD.
The US Session
The US session starts around 1300 GMT and winds down around 22:00 GMT. The currencies that are the most active during these hours are AUD, EUR, GBP, JPY, and USD.
The Asian Session
The Asian session is a reasonable quiet session on most days. All pairs are pretty slow moving and it is not a good time to day trade. The only real currency that has noteworthy activity is the JPY and the activity is slow unless a major financial event happens.
Summary
The best hours for trading the forex markets, no matter your method, are during the London and US session overlap. The markets are full of active participants during these hours and the currencies really move. For the most part, even the larger fundamental news comes out during these times. Trading during these hours is your best chance to get in while the market is making decisive moves and it will be your best chance to score quick profits.
Get Started with Forex Trading
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Before you can get started with forex trading, there are so many questions to answer. How do I choose a broker? Should I use a demo account? What do I need to know before making my first trade?
Let’s answer these questions one at a time, in order of importance. 1. Choose a broker
Making a decision on which broker to use is personal for each trader. Some brokers offer certain options that some traders will thrive on, while other traders will hate the broker for those same options. It is important to review and compare the options of each broker closely and choose the one that makes you feel most comfortable.
- Review Forex Brokers
2. Open a Demo Account
Once you have made your decision on which broker you like the best, it is time to open a demo account. Most brokers will offer at least a 30 day trial of their trading platform giving you a chance to trade on the platform using play money. Using a demo account is a good opportunity to make sure that you feel comfortable using the broker’s trading tools. You would not want to trade real money without being fully comfortable with the trading platform. A demo account will not only help you get a grip on how to use the broker’s trading platform, but also trading the market in real time.
3. Learn About Leverage
Forex trading is typically carried out using leverage, or trading on margin. Margin is a useful tool, but it can be very dangerous if it isn’t used correctly. Forex brokers typically offer anywhere from 50:1 leverage up to 400:1 leverage. The higher the number, the less money required to put on a large trade. The use of leverage is something that needs to be taken with a lot of care.
Before you start making trades you should get familiar with charts and how they work. It is a good idea to get familiar with the different time frames and the different types of charts. The shorter time frames will give you an idea of how the market is moving minute to minute. The longer time frames can show you how the market moves over longer periods and will show the larger trends. Most charting software will offer charts as lines, candlesticks, or bars. Take plenty of time to try out different looks and time frames to find the style that you are comfortable with.
5. Making the first live trade
The first trade is a nervous and exciting experience. The demo account prepares you for the technical aspects of trading, but when real money is on the line, emotions will come into play. It is important that you keep a level head and do your best to trade with the same methods that you practiced on the demo account. It may prove to be difficult, but if you master your emotions and use sound money management, anything is possible after this step. If your first trade loses money, do not give up, just piece together where you think you went wrong, and try again.
Forex trading is a constant learning experience. Trading mistakes can be expensive. If you learn from those mistakes and do your best to avoid them in the future, you can become a very successful forex trader.
What is Forex?
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Forex Trading is the act of trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.
How Does Forex Trading Work?
Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you feel is going to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to close your trade at that point, you would have made $100.
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.
What are the Benefits?
There are five things give trading the forex market some unique advantages.1. 24 Hour Market
Since the forex market is worldwide, trading is continuous as long as there is a market open somewhere in the world. Trading starts when the markets open in Australia on Sunday evening, and ends after markets close in New York on Friday.
2. High Liquidity
Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.
3. Low Transaction Cost
In forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price.
4. Leverage
Forex Brokers allow traders to trade the market using leverage. Leverage is the ability to trade more money on the market than what is actually in the trader's account. If you were to trade at 50:1 leverage, you could trade $50 on the market for every $1 that was in your account. This means you could control a trade of $50,000 using only $1000 of capital.
5. Profit Potential from Rising and Falling Prices
The forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short.
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