FOREX newbie has questions.

Hey all,

I'm very new to this, and I have a few questions that I hope others here with experience and wisdom can answer.

1. I just funded a regular FOREX account. I've had a demo. account that I've done quite well on. Should I continue to use the same strategies or is there something about the demo that's different. What I mean to say is that is the demo a different ballgame for traders since there is no real money and thus more risk is taken???

2. Most brokers like FXCM, Refco, etc. have similar PIP spread (i.e. 3-5 PIPs on most pairs), but then I hear about brokers like Onada which have only 1.5 PIP spreads. How are such small spreads possible, and what are the drawbacks, if any of using a broker like Onada as opposed to FXCM??

3. For overnights, is the interest rate calculation different at every brokerage house? I thought it was supposed to be the interest rate differentials between central banks, and if you're long you get interest, short you pay, but it seems every house has their own system. Please enlighten me on this.

4. What are some good books to read up on to give more insight into FOREX trading, and what magazines do you guys recommend?

Thank you.

 

Fx225,

1. Demo accounts and live accounts should act the same mechanically , actually you’ll probably find your live account’s charting/software works better. While the demo account is a great way to work on the mechanics of your trading plan it will not prepare you for the emotional side of trading, which imho is the whole ballgame. Take it easy at first do not over trade.

2. Don’t worry so much about the spread, pick a broker that you can trust and you feel will be there tomorrow.

3. Each broker is different, do your homework diligently before you place your money on the line. Your trading style will depend a lot on who you choose, carry trades ect….. each broker has it’s faults and weaknesses. Use them to your advantage.

4. Do a web search, you will find lots of info on forex trading, most of which you can toss in the trash. Use you own brain when it comes to trading. Field and Stream.

Good luck.

 

A very good Forex book

Interest only applies to positions open at 2pm EST, and its so small it will not affect the outcome of your trade. On a 10k position it might be -$1.50 or so.

What leverage is your account and with which broker?

 

Thanks for the advice guys.

 

1. As Wallet pointed out the biggest difference is the emotion involved when real money is on the line. Other than that they are the same.

2. Make sure you choose a regulated firm. Remember RefcoFX was unregulated and "borrowed" the registration info of their parent, it won't give you account protection but you will be able to view their financial info at www.cftc.gov to make a comparison. Always go with a larger firm, you can be sure they will stick around and becuase of their volume they will be able to get fills when smaller guys will not.

3. Most of them are going to be substanitally similar. Different brokers rip you off more on the interest though, pick one that will allow you to earn interest and makes it easy to see what the rates are.

The formula is:
No. of Lots x No. of Units per lot x Yearly Interest Rate Differential / 360 x No. of Days

The interest rates are freely tradable on their own so it will never be exact but should be close.

Trader/God

 

"Different ballgame," yes, and for a reason you may not know about.

I opened an account with a FX dealer after trading its demo for more than one year. Platform worked flawlessly, no problems, all orders -- limits included -- filled at right prices. Then, within two weeks of funding a real account at the same dealer, my profitable limit orders were dishonored. Dealer excused the problem by saying prices streamed to platform and charted on its own charts were "misquotes." No misquotes when my stops were hit and always filled. Never a misquote while on the demo, covering a huge number of trades in virtually all the currency pairs offered. So, in my experience, with real money on the line, the dealer preferred not to fill my winning trades. Simple as that.

And, by the way, the dealer I used is one of the so-called large, hitherto reputable dealers.

And also by the way, I use the word "dealer," not "broker," because the dealer's not brokering anything; it is always your counterparty. Your win is its loss and vice versa. Contrast that to FX futures where you trade through an actual broker who is not staked against your trades. That futures broker also does not set the prices of the currencies, in contrast to trading spot FX on a dealer's platform.

 

To avoid what Chood is talking about try out one of the several ECN type platforms out there. No market maker, and no excuses but you are subject to the whims of the market.

Trader/God