Best Forex Trading System

One often wonders what planet Bureaucrats inhabit, there is no way it can be the ‘third rock from the sun’, because if they did they would not arrive at such idiotic ideas as this latest hair brained scheme. Or maybe they want to crush the retail Forex Broker industry in the US, because that is the guaranteed result.

How could anyone imagine that retail trading Forex on a 10:1 leverage could ever be viable?

Keeping things simple, let’s say you have a $10k account and took a 1 lot trade ($100k) trade ( forget risk management for the moment), a couple of pips adverse movement and your’e on a margin call… mind numbing! If the trade went your way and you progressively locked in your profit, there is no way you could open even a mini lot to scale your trade!

Surely the CFTC has better things to regulate that this, or maybe they are too dim to realise that all this will do is send the industry offshore and depending on where retail brokers set up, the retail traders could be faced with even more risk due to a total lack of regulatory monitoring in some overseas arenas. Sure… countries like England, Switzerland and Australia, to name a few, are well regulated, but others are not so pretty.

So what to do? Try emailing David Stanwick at secretary@cftc.gov but remember any comments go public (including your personal info), so no rants, simply intelligent comments about the potential impact of this daft idea if it goes through.

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Forex is an acronym for Foreign Exchange Market (also referred to as the FX market) and is the world’s largest financial market, trading over $4 trillion every day.

This is larger than all the world’s Stock and Treasury markets combined!

The Forex Market is a truely global marketplace, it does not operate from a centralised location but from an electronic global network of financial institutions, banks and brokers. The Forex Market doesn’t sleep, trading 24 hours a day starting in Asia and ending with New York. This is the most liquid market in the world, with traders buying and selling currencies constantly somewhere in the world.

Until recently only government, banks and other large financial institutions were able to trade Forex, but with deregulation, advances in technology and the internet, the Forex Market is now open to anyone.

The Forex Market is very different and some consider a lot easier than trading the futures market, or stocks and commodities.

You may not be aware, but you and the Forex Market already have a relationship. If you have cash or money in the bank the value of that money is impacted by the fluctuations of the Forex Market. If you have travelled overseas, you have probably purchased travellers cheques and later redeemed them for better or worse, this is also influenced by the movement of the Forex market.

Suppose you took a jaunt to Europe, you had US$1000 and bought Euros when the exchange rate was 1.50 Euros to the dollar. You would have received 1500 Euros. If the value of Euros increased against the US dollar and you sold (exchanged) your Euros back to dollars you would have received more dollars than you started with.

Is it suprising then that many investors take advantage of this fluctuation in Exchange Rates, using the volatility of the Foreign Exchange Market to increase their investments. Could you do it too? Yes, if you are prepared to learn the necessary skills.

The Forex is vital in the world economy and as long as there is international trade there will always be a need for the exchange of currencies. For one country to sell products to another the FX market has to exist so that a comparative value can be set prior their currencies being exchanged.

Risks of currency trading:

All Forex Trading is based on hedging and margin trading. Margin trading (1:100) means that if you trade $1000 of your capital, your Broker will allow you to trade $100,000 or 100 times your capital. You are loaned 100 times your investment. With some brokers this margin rate can go much higher.

This increases your ‘Lot’ size and subsequent profits or losses by the same proportion.

Margined currency trading is an extremely risky form of investment and is only suitable for individuals and institutions capable of handling the potential losses that can occur. This is why you need to understand what is involved in Forex trading, otherwise one trade has the potential to wipe you out. It all comes down to Risk Management. Given the possibility that you could lose your entire investment, speculation in the foreign exchange market should only be conducted with capital funds you are willing to risk, in consideration that if lost, it will not significantly affect your financial well-being.

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Some of the earliest currencies can be traced back to the Middle East around 5000 years ago, these were Gold Bars and Gold Rings. In 650BC coin was first minted in Ephesus, using an alloy of Gold and Silver and these were struck with an image on one side. At this time China was also creating coin, cast from bronze and formed into more complex shapes. The early Chinese round coin with a square hole did not occur until the late 3rd century BC.

The Greeks produced the earliest European currencies, plus the concept of credit and debt, to facilitate movement around the country without needing to transport quantities of coin. As time progressed, the Romans adopted and formalised the Greek system and this has formed the basis of today’s currencies.

Paper money first occurs in China in 910AD, but because the Emperors could print it freely, major inflation occurred and it was abolished in the 15th century (history hasn’t taught us much).

Sweden introduced the first European paper notes and also the first bank. Stockholm Banco was established in 1656 and introduced a paper note which could be exchanged for a fixed value in silver coins. Again inflation destroys the system, when the banks owner; Palmstruch prints more notes than he could secure with cash. In 1667 the system collapses and he is imprisoned for fraud.

There are many further developments of paper money, all having problems until the British Government introduced the Gold standard in 1821.

International trade has always involved exchange of items of value, everything from Cowrie shells in Africa to Wampum in America. It was just a matter of attributing a common value and all has had its problems until the Gold Standard arrived.

In the early 20th Century, the Pound Stirling was the principal currency and the centre for foreign exchange was London. The Second World War saw the demise of his, with the Gold pegged $US taking over.

In 1944 the Bretton Woods Accord gave rise to two significant elements of the Foreign Currency Market, it struck an agreement whereby no other currency was allowed to fluctuate more then 1% in relation to the $US. If excessive fluctuation did occur, the central bank which controlled the fluctuating currency had to step in to stabilise it, and it gave rise to the creation of the IMF – The International Monetary Fund.

The IMF took on the role of a World Finance Legislator, producing a stable system for the sale of currencies, promotion of world trade and providing financial resources to member countries with the requirement that changes be undertaken to rectify the situations causing the need for financial assistance.

In 1978 the IMF proposed that currencies become ‘Free-Floating’, this allowed currencies to be traded freely and values determined by both supply & demand and the country of origin’s economic stability, productivity or what ever the international marketplace deemed appropriate.

In 1979 the European Monetary System was born, but the British decided to keep out of the economic conglomerate and when the Euro was adopted in 1998 as the European Currency, The British hung on to the Pound Stirling. This action gave the Forex an additional trading currency GBP. Now the Forex had EUR/GBP, GBP/USD, GBP/CHF, GBP/CAD and others, but many will notice that when comparing cross Atlantic currencies , some charts can follow very similar trends.

When currencies were free-floated in 1978 the Forex traded around US$5billion per day, at the beginning of 2009 that has risen to around US$4trillion. It is now the biggest trading market, eclipsing all the stock markets combined.

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World of Money

The Foreign Currency Trading Marketplace, now referred to as the ‘Forex’, has been trading for more than a century, but until late in the 1900s Forex Trading was restricted to Governments and Banks and was beyond the scope of the small trader like you or me.

The Forex is a marketplace where Governments, Banks and Institutions trade currencies, with the intention of making a profit as the value of one currency is assessed against another. These ‘Big Boys’ still have the major influence on the Forex market and this is often reflected in currency movements at certain times of the day, particularly when markets open for trade in geographic zones.

If you have traveled to another country, you have traded in a foreign currency. When you arrive at your destination, you need the local currency, so will have exchanged some of your currency for theirs. You’d have seen the variation in exchange rates that impact on how much you receive, this is how Currency traders work, they trade these differences and movements, buying and selling $millions each day as the exchange values fluctuate.

Unlike the stock market, the Forex Market trades continuously 24 hrs per day. It opens with the Asian market, then progresses to the European, the UK and finally the US. As the US market closes the Asian market opens again, so Foreign Currency Trading runs around the clock virtually 6 days per week, finishing at 5pm Friday US time.

Following deregulation in the 1990s, the Forex market became accessible to anyone, so with the right tools and a good understanding of what you are getting involved in, virtually anyone with a disciplined approach and the right strategies can make money trading Forex.

With more than $3 trillion traded every day, the Forex market is bigger than all the stock markets combined. It has the potential for astute traders to make serious money, but can also be the fastest and surest way to lose it as well. This market does not take hostages, a trader lives or dies by his trading decisions.

The Foreign Currency Exchange has no centralized headquarters and each country has its own laws, regulations and international agreements that apply to Forex Trading. The Foreign Currency Exchange is in reality little more than a worldwide network of traders connected by the internet, telephone and computer screens.

In recent years authorities have been successful in exposing scams and frauds but it is still very much a buyer beware environment. To win in this market you need to learn to trade Forex from the experts, but you should also learn to verify what they are telling you is both correct and suitable to your trading systems. Test, test then test some more and only when you are satisfied that the system they expound suits your trading style should you proceed. Always remember that Forex trading is extremely risky.

OK, that’s a bit of an overview for newcomers, now I’ll get into more detail about Foreign Currency Trading, so look through other articles that interest you.

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