The Official FOREX Thread

I have received quite a few private messages from people about how they have been inspired to take up FOREX trading, instead of keeping all this information hidden in the private sector of these forums I have made this thread.

This thread is dedicated to discussing FOREX all the tips, ideas, tricks people have and I have will be posted here so we can share the wealth. 90% of all FOREX traders lose all their money within 3 months so don’t become a statistic, if everyone helps each other we will be a lot better off.

So feel free to post any ideas or questions about FOREX here and I will answer them. I will also give a few tips on what currencies to watch out for in the coming week and give a few general tips on where you should invest.

Ok so to kick this thing off I am going to officially shorten the word FOREX because lets face it is really annoying to type. From now on FOREX is knows as FX…………. If this thread gets big I will open a FX forum.

Keep It Simple

We live in a very complex world. Cell phones are sending and receiving email and photographs, computers are moving out of the office and into the entertainment room, and iPods have been integrated into anything and everything imaginable, including your sneakers. We as humans have a tendency to be drawn to complex things because they’re newer, faster, smarter, and innovative. Innovation is growth and development and advancement. We feel all warm and fuzzy because we moving ahead and securing our future. But with all of that, we’re also making things that much more complex. And complexity breeds distraction. It’s always a better idea to keep it simple.

Now, with Forex trading, technology has had an enormous hand in shaping the industry. Technology provides us a 24-hour market, instantaneous execution of market orders, real-time charts, and software platforms that allow us to analyze market data. Could you continue trading without access to your charting software?

I think not!

Your successful traders will tell you to minimize your use of and exposure to complex trading strategies. Novice traders usually go the complex route because they want to avoid risk and blindly leaping into Forex trading.

Sure, you learn the intricacies and indicators of your trading strategy, but you never really study the market. You learn the method itself, and that’s it. And most of the time, you look at way too many indicators at one time. Some indicators display the same information, and many indicators end up not doing what you anticipate. Many traders believe that indicators help predict the future, when in actuality, they only describe the past.

Take with you that a complex strategy may not be the way to go when you are beginning. Simply understand that the market as a whole is complex and that it can’t be totally understood by merely using an indicator. Complex indicators and trading strategies can work, and do work for many. But as a beginner, start right and start simple.

K.I.S.S – “Keep It Simple…Stupid”

By drpipslow

I found this interesting; it focuses on the psychological side of trading it’s a good read.

Beginners Trading Plan​

Currencies:
-USD/CHF
-GBP/USD

Charts:
-Use 3 separate charts for each currency 15min, 1hr and 4 hr.
-Candle charts.

Indicators:
-Exponential Moving Average (EMA) with the period set to 5 (To change the period in the Dealbook platform just double click on the EMA and click on the ‘inputs’ tab in the window that pops up. From there type in ‘5’ under ‘Period’)
-Exponential Moving Average (EMA) with the period set to 10
-Relative Strength Index (RSI) with period set to 14
-Stochastic Oscillator with period set to 10

Time frame:
-6pm-3am (this is Melbourne time which is at GMT+10)
-Monday, Tuesday, Wednesday, Thursday

Before you buy:
-Check previous day highs and lows and plot them on your graphs (light green, orange these act as a mild resistance and support)
-Check weekly highs and lows and plot them on your graph (Green, red these act as a stronger resistance and support)
-The point of having to EMA lines is to wait for them to cross, when they cross it’s a buy or sell signal depending on where they cross. The RSI and Stochastic are there to confirm either a buy or sell.

Trading rules

-Stop loss order = 30 pips

Entry Rules:

Buy if:

-The 5 EMA crosses above the 10 EMA and both stochastic lines are heading up (do not enter if the stochastic lines are already in the overbought territory)
-RSI is greater than 50

Sell if:

-The 5 EMA crosses below the 10 EMA and both stochastic lines are heading down AND (do not enter if the stochastic lines are already in oversold territory)
-RSI is less than 50

Exit Rules:

Exit when the 5 EMA crosses the 10 EMA in the opposite direction of your trade OR if RSI crosses back to 50.

I got this plan from a website, tweaked it a little and addes some things to make it perfect for beginner traders.

This was on the other thread:

I emailed AF who has been a pro trader his entire life and asked him about Forex. He said:

There's no central clearing or quoting in the "small forex" industry. These shops make the markets themselves and deliver quotes they way they see fit, including spread and slippage.

You won't get the fills you think and stops will magically get hit, even when 90% of the other shops show no trades at those prices. Many of these places even cut off automatic execution features if you become profitable through scalping. Then they'll refer you to fine print that says their systems are not designed for scalpers.

Apparently there is no regulation at all. They are 'making the market' just like the bucket shops of Jesse Livermore's day. It is like the Wild West of trading.

From what this guy says about fills, it seems that one should not enter a stop order and leave. When it trades near your stop, they hit the stop, even if it is a little out of the market. So then do you hold the orders back and just enter them at the moment that you want to get traded?

This has got me interested. So I went on to limewire and downloaded 24 ebooks on FX. 24! And there are more that are still downloading. FX also sounds better than the stock market (simpler, make more money quicker(Loose money quicker too:nervous: ))

The firm is taking the other side of the retail trades and trading with the customers at whatever price they see fit. If I had done these things at my stock brokerage, I would have gone straight to jail.

This Forex thing reminds me of the way that the stock market was in the 1920's. It was a wide-open free for all with hardly any rules.

http://en.wikipedia.org/wiki/Forex

The rules of the game in trading FX are highly disadvantageous for retail speculators. Most retail speculators in FX lack trading experience and and capital (account minimums at some firms are as low as 250-500 USD). Large minimum position sizes, which on most retail platforms ranges from $10,000 to $100,000, force small traders to take imprudently large positions using extremely high leverage. Professional forex traders rarely use more than 10:1 leverage, yet many retail Forex firms default client accounts to 100:1 or even 200:1, without disclosing that this is highly unusual for currency traders. This drastically increases the risk of a margin call (which, if the speculator's trade is not offset, is pure profit for the market maker).

btw, I am still interested, too, and not forex-bashing.

"imprudently large positions using extremely high leverage" is what I used to do for a living.

wow great idea for a thread man

There are Forex firms that make sure that 'investors' never over leverage their accounts. I need to check my bookmarks because I came across a company that appeared to be extremely ethical...

Here's another wiki link...

http://en.wikipedia.org/wiki/Forex_scams#The_disadvantages_of_retail_speculators

http://www.elitetrader.com/vb/showt...=73692&perpage=6&highlight=forex&pagenumber=1

http://www.mbtrading.com/
MB trading claims:


No Deal Desk
Unlike most FOREX trading firms, we do not have a deal desk in between you and your orders. We utilize Straight Through Processing (STP), sending your orders directly to various banks and eliminating the potential for a markup. STP also prevents instances where you may be re-quoted, which generally occur when it is in the deal desk's best interest to delay the execution of your order, acting against your best interests.

Trading Never Restricted
Trading is never restricted due to volatile markets, giving you all the available opportunities to open or close potentially profitable positions.

No Trading Style Discouraged
All trading styles are encouraged, including scalping! The trading style you choose is your decision and we will not interfere.

The Chicago Mercantile Exchange is supposed to be working on a system to trade forex. When it is completed, they are going to give the online bucket shops some real competition.

Electronic markets change very quickly. The forex market for retail traders is going to change when the CME system goes online, although that is still over a year away.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=68513&highlight=forex

"We expect to begin beta testing in November and to launch in the first quarter 2007."

from:
http://www.elitetrader.com/vb/showt...=72824&perpage=6&highlight=forex&pagenumber=8

Another thing ... concerning the "commish". To those who can't wrap their heads around the concept ... here ya go ... lets take USD/JPY. The spread at MB is 1 pip (sometimes 2 during low volume). So that's either $1 on a mini or $10 on a standard lot. The vig is .50 per side on a mini and $5 per side on a standard lot. Let's do the math ... Hmmmmmm ... comes out to 2 pips. That's the same if not cheaper than the bucket shops. So the buckets build the vig into the spread, trade against you, shade the feed and basically bend you over and that sits well with some of you folks? Personally, even if it came out more I'd still gladly pay for the piece of mind know I'm not getting screwed over.

To the dense folks who keep talking about how cheap such and such is on equity trades ... consider your BIG savings compensation for all the time you have to spend messing with buggy software, front ends, log in problems and various other crap. I don't know about you but my time is money. I also must have confidence in my platform, my feed from MB (WHICH IS FREE for FX, CBOT and CME) and my broker. To date I have confidence in all three.

My pip spread for USD/JPY is 3 pips, that sounds interesting I will definetly check out MB trader.

Bible haveyou heard anythign bad about GFTFOREX?

Here is an old thread on elitetrader about gft forex. You could bump it and see what the guys there say about them.

http://www.elitetrader.com/vb/showt...347&perpage=6&highlight=gftforex&pagenumber=1

What is scalping?

Here is the advice that the guys on siliconinvestor are giving me. The day trading fundamentals thread on SI is read by some of the most talented and experienced day traders in the world. These are the traders who have survived the stock market boom and bust and still make money. I respect and value these opinions very highly:

FX dealers are bucket shops. They take the opposite side of your trade AND they set the price. These are somewhat less than ideal trading conditions, to say the least. You can trade the same price movements using electronic futures in a much less unfavorable setting.

"there are currency futures that are exchange-traded and separate from the forex world."

http://www.goforex.net/forex-broker-comparison.htm

http://www.goforex.net/recommended-forex-brokers.htm

"Hotspot FX and IB are two big guys. IB is cheapest."

I personally don't know what scalping is, I think it may be making a lot of small, quick deals throughout a day and only getting 5 pip gains. Doing that 20 times = 100 pips.

I'm not sure though, anybody care to clarify?

Bible you seem to know more than me about all the technical terms

What is scalping?

Scalping has no exact definition, but generally speaking, it is the shortest holding timeframe possible, usually measured in seconds. When I traded nasdaq, my average hold was about 40 seconds, but I knew guys whose average trade was more like ten seconds. The nyse computer system is much slower than nasdaq. NYSE scalpers hold for a minute or two.