Forex Trading Online- How Does It Work ?

[lucky2103]

Hiya mates,

recently, a friend of mine from the UK went to the Phililpines for a short holiday...

Now, he doesnt even bother to come back to LOS, saying he earns some big money with forex trading.

Just a few questions: How does it work, what are the risks and how huge are the margins ?

Any expertise wud b welcome...

[Jingthing]

I don't know what going to the Islands or Thailand has to do with it. Just open an account anywhere in the world, and be prepared to have your money eaten up by the pros. Most everyone who has made any money with Forex trading has first paid a very large "tuition" learning the ropes.

Edited January 19, 2008 by Jingthing

[lucky2103]

I don't know what going to the Islands or Thailand has to do with it. Just open an account anywhere in the world, and be prepared to have your money eaten up by the pros. Most everyone who has made any money with Forex trading has first paid a very large "tuition" learning the ropes.

Well, this friend of mine lived in LOS, selling on ebay for a very long time...so there must be a reason behind his "leave".

Thats why I started this thread, mate.

[nickbk]

I don't know what going to the Islands or Thailand has to do with it. Just open an account anywhere in the world, and be prepared to have your money eaten up by the pros. Most everyone who has made any money with Forex trading has first paid a very large "tuition" learning the ropes.

Well, this friend of mine lived in LOS, selling on ebay for a very long time...so there must be a reason behind his "leave".

Thats why I started this thread, mate.

The only reason I can see for your friend not comimg back is that he will not continue to sell things on E-bay. There is absolutely no link between forx market and where you live as you forex account will be offshore anyway (choose only Us, canadian or european companies if you don't want trouble and even there it's not guarantied).

Otherwise Forex is a very volatile market. You can make a lot of money but you can also lose a lot of money. margins on forex range from 50x to 500x but any good advisor would tell you to limit yourself to x100.

If you google "forex", you will get a lot of good websites with a lot of info and even "demo" accounts for you to try without playing real money. Then you can make your own opinion.

But, as Jingthing warned you, be prepared to lose money first as a teaching for the market.

Edited January 20, 2008 by nickbk

[Briggsy]

What is it about Thailand that it seems to attract these tall tale types?

Lucky, maybe your friend is telling the truth but my experience tells me there are very few people making a lot of money doing little. Forex trading is very high risk and requires a reasonable amount of capital but not necessarily a huge amount.

Do you remember all those "brokers" working at the boiler rooms in Bangkok a few years ago? They got busted but before they did a lot of money was made. Chavs were walking out with 2000 dollars a week and more. These were just the low level people. There were Filipinos working there too. Maybe they've moved to the Philippines. Maybe your friend has got an inheritance. I would take what he says with a pinch of salt.

In forex trading you can make and lose large amounts of money, far greater amounts than your investment. You ask how it works. You can use a 'trading platform' to buy and sell currency usually for periods of less than 24 hours. You forecast which way an exchange rate will move. You ask what the risks are. Well, if you make the wrong forecast you have to pay up. Could you handle losing 5000 pounds in a day?

[blizzard]

be prepared to lose trading forex at first and 2nd and continously thereafter.................lol

[kiakaha]

Hiya mates,

recently, a friend of mine from the UK went to the Phililpines for a short holiday...

Now, he doesnt even bother to come back to LOS, saying he earns some big money with forex trading.

Just a few questions: How does it work, what are the risks and how huge are the margins ?

Any expertise wud b welcome...

Forex market is a 24/7 exchange for buying and selling currency. I guess one of its main attractions over equities markets is it's liquidity(you've always got cash).

To make decent gains be prepared to gamble with a stack of money and put alot of time into learning effective hedging and spreading strategies.

In one way or another everyone trades currency at some point even if you dont sign up for an account to trade the forex market directly ie: travellers taking USD cash to Thailand, USD appreciates against the baht, the traveller now has more baht to play with.

or for example, if you had 100K USD in a USD bank account and your base currency was AUD then the AUD dropping from .9 to .8 would realise you a gain of 13,888 AUD on that deposit.

good luck.

[Moe]

I have recently started forex trading for the first time and I've found it extremely difficult. The money management and margin side is not a problem for me as I am disciplined enough to only trade with small amounts. What I am more interested in is knowing whether there is anybody out there who is able to consitently win more than they lose. Not talking about mega bucks here but enough to make it a worthwhile exercise.

I understand that there is a lot of time, discipiline, patience and self-education involved, but at the end of the day is it really possible to make a go of it?

Would be very appreciative if there are any successful traders out there who have words of wisdom on the subject they could share.

[kiakaha]

I have recently started forex trading for the first time and I've found it extremely difficult. The money management and margin side is not a problem for me as I am disciplined enough to only trade with small amounts. What I am more interested in is knowing whether there is anybody out there who is able to consitently win more than they lose. Not talking about mega bucks here but enough to make it a worthwhile exercise.

I understand that there is a lot of time, discipiline, patience and self-education involved, but at the end of the day is it really possible to make a go of it?

Would be very appreciative if there are any successful traders out there who have words of wisdom on the subject they could share.

I'm not really a trader per say ie: I dont have a brokerage account and trade directly on the forex exchange

But I do shift around some cash between various currency bank accounts I have, I guess I'm a "retail" prospector

ie: this week I sold some NZD and bought USD with my bank(so I get the bank retail rate on the currency sale and purchase as opposed to the market rate on forex exchange).

I have since realized an approximate 3% tax free gain as the NZD has slumped this week against the USD.

For opening a forex trading account check out the resources at oanda.com or xe.com

Edited January 20, 2008 by kiakaha

[blizzard]

i bet som tum sellers make than than mom and pop forex traders.................

[lannarebirth]

I don't know much about Forex trading, but I've spent a long time trading other financial instruments so I'll give my impressions from the outside looking in.

1) Minimum account sizes are ridiculously small and one can only imagine that is to draw in unsophisticated punters.

2) Leveraging ability is ridiculously high, and one can only imagine that is to run the stops of the people in item 1) ^

3) Spreads can be excessive and if you're highly leveraged or under capitalized eventually you're gonna get screwed.

That said, currencies tend to trend and if one uses good money management, learns some basic T/A, and is satisfied with hitting singles on a consistant basis and stopping out when wrong, maybe one could make a few bucks. It's not my thing.

Edited January 20, 2008 by lannarebirth

[Moe]

That said, currencies tend to trend and if one uses good money management, learns some basic T/A, and is satisfied with hitting singles on a consistant basis and stopping out when wrong, maybe one could make a few bucks. It's not my thing.

With my limited knowledge I am starting to wonder if the money management/self discipline side is more important than the actual trading system? That being said you need to have a trading system that is reasonably accurate, say correct 50% of the time, and combining that with tight stops and letting the winners run it seems to me that it might be possible to make money with it. Again because I am new with currency trading it is just a simple newbie observation at this stage.

[lannarebirth]

That said, currencies tend to trend and if one uses good money management, learns some basic T/A, and is satisfied with hitting singles on a consistant basis and stopping out when wrong, maybe one could make a few bucks. It's not my thing.

With my limited knowledge I am starting to wonder if the money management/self discipline side is more important than the actual trading system? That being said you need to have a trading system that is reasonably accurate, say correct 50% of the time, and combining that with tight stops and letting the winners run it seems to me that it might be possible to make money with it. Again because I am new with currency trading it is just a simple newbie observation at this stage.

Yes, it's more important. Lots of off the shelf ideas/programs out there that will give you a statistical edge. It is psychology and money management that is key IMO.

[PCA]

beside the points LRB has listed there are several more things to understand:

1) Forex is an unregulated market which means you have no legal position to fight against any form of getting screwed from your broker during the trading procedure (and you will be screwed)

2) very low volume in most currency pairs even when brokers claim Forex is the market with the highest volume.

3) your broker is holding the other side of your trade, the only thing you can determine is your entry point when you buy/sell limit. (you think who is winning the trade and bear in mind you dont pay commission but only the spread, right? So how does the broker make his money?)

4) Overleverage and thats the most dangerous thing and you will use it as a newbie, either because you got some lucky shots and get greedy or you want to look for the one trade that might bring you back the last 10 losers. And there is the end of the story.

5) here is a little advantage - In case you know how to trade and hold positions and not play intraday you dont need to make a rollover to other expiration months like you have to when trading currency futures. This is an advantage for experienced traders who have deeper pockets and dont need a very good fill for both entry and exit. Those people also use quite big stops and many even dont use stops just to stay out of reach from their brokers.

If you want to trade then do it in regulated and liquid markets.

Conclusion: your buddy is a liar and you are well advised to keep your fingers from Forex.

[ZZZ]

That said, currencies tend to trend and if one uses good money management, learns some basic T/A, and is satisfied with hitting singles on a consistant basis and stopping out when wrong, maybe one could make a few bucks. It's not my thing.

With my limited knowledge I am starting to wonder if the money management/self discipline side is more important than the actual trading system? That being said you need to have a trading system that is reasonably accurate, say correct 50% of the time, and combining that with tight stops and letting the winners run it seems to me that it might be possible to make money with it. Again because I am new with currency trading it is just a simple newbie observation at this stage.

1. Always, always trade with the trend, the trend is your friend.

2. Never ever use short stops, they always seem to be taken out just before the trade goes your way.

3. Don't let profits run, they quickly run into a loss. Take profit when your target is reached.

4. If a trade goes against you, take another position and this will soon give you a combined profit, when the trend returns.

5. Never put more than 5% of you account into a trade, the big margins available is a killer.

6. Look at the fundamentals, be very careful, or avoid, trading near big fundamental news releases.

Add a bit of luck and you could be in the 5% of the traders making money.

Edited January 22, 2008 by ZZZ

[blizzard]

do you make $s trading forex zzz?

[samran]

dumb question - but for us plebs who are simply looking to transfer money about the place (ie earnings in country X to pay bills in country's Y and Z) are these platforms useful?

[kiakaha]

dumb question - but for us plebs who are simply looking to transfer money about the place (ie earnings in country X to pay bills in country's Y and Z) are these platforms useful?

If you know how to hedge strategically to avert exchange rate risks.Kind of an advanced topic, out of my realm of advice giving.

I pay bills in 2 different countries. but fortunately I have income in X to pay for X bills and income in Y to pay for Y bills. It would do my head in worrying about exchange rates otherwise.

[PCA]

dumb question - but for us plebs who are simply looking to transfer money about the place (ie earnings in country X to pay bills in country's Y and Z) are these platforms useful?

no.

[ZZZ]

dumb question - but for us plebs who are simply looking to transfer money about the place (ie earnings in country X to pay bills in country's Y and Z) are these platforms useful?

You could use it, a simple example:

You expect to earn USD100,000 in a year. All your expenses are in GBP. To make it simple assume you are living of your savings and keep your USD income in a USD account until the year is up. You expect the GPB to go up against the Dollar.

You then open a trading account and deposit say USD5000, could be less than this but this will give you a bit of a buffer. The cost of opening an account is free.

You then take a buy position in GPBUSD worth USD100,000. To do this you need to have USD1000 in your account, most trading accounts will give you a 100:1 margin. As the GPB interest rate is higher than USD, at the moment, you will not have any interest cost to roll over this position. Most trading accounts do not charge any trading fee so there is no cost for this position. The only cost would be if you immediately sold the position, before the rate changed, as there is a spread between buying and selling price, in this case the loss would be about USD50. At this point lets say that you did the trade when the GBPUSD was 1.96.

After a year you could have three scenarios:

The rate is still 1.96:

You transfer your USD100,000 to a GBP account at 1.96, GBP51,020

You close out your trading position at 1.96 , at no profit and no loss, and withdraw your USD5000.

There has been no cost, except for some transfer costs. You will have made some interest on your USD deposits but not as much as if you had kept them in a GBP deposit.

End total: GBP51,020

The rate went up, say 2.10:

You transfer your USD100,000 to a GBP account at 2.10, GBP47,619

You close out your trading position at 2.10, that will give you a profit of USD7142. You withdraw this from your account, change to GBP at 2.10, GBP3401. You can also withdraw the initial deposit of USD5000 or keep it for next year, some will give you interest on this margin deposit.

End total: GBP51,020

The rate went down, say 1.7:

You transfer your USD100,000 to a GBP account at 1.7, GBP58,823

You close out your trading position at 1.7, that will give you a loss of USD13,265. Note that as your initial deposit of USD5000 in your trading account will not cover this loss you will have to deposit additional funds to your account BEFORE there is a loss.

The loss of USD13,265 at 1.7 is GBP7803

End total: GBP51,020

So in the end you have secured the exchange rate for a year at a small cost. There are of course some interest rate differences that must be taken into account, above is just a simplified example that have several other variations.

The thing is that if this is what you want to do it is much easier to go to your bank and explain your problem. Any bank should be able to lock the exchange rate for you for a small fee and you do not have to worry about any of above mentioned technicalities yourself.

[PCA]

ZZZ,

thats a very wrong advice.

[ZZZ]

ZZZ,

thats a very wrong advice.

My advice was to let a bank take care of something like this, what's wrong with that advice?

Banks do this all the time especially for import export businesses that need to lock in a fixed rate but it can also be done for individuals that want to fix the exchange rate to avoid surprises.

[thaiclan]

There is money to be made on FOREX, but like any low-entry investments or even careers the road to success is littered with empty pockets and broken nights sleep! The earlier thread re money-management and psychology is spot on. There are 3 points against you with any investing. Fear, Stupidity and Greed.

I do not trade FOREX I trade Futures (with algorithms) but I have many an acquaintance that has started themselves up with a FOREX account, and most of them are rolling along quite nicely....

[ray08]

very very hard business to make money ,even the dealers work on small percantages , unless you are in talks with the federal reserve and know where interest rates are going it really is a form of gambling , up=or down ,

[Maestro]

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Maestro