Free Forex Guide Part 5

Brokers that you need to avoid

Just like there are brokers that you want, there are also brokers that you will want to stay away from. For example brokers who are prone to prematurely buying or selling near preset points (commonly referred to as sniping and hunting) are trifling things that are committed by brokers who only seek to increase profits.

Obviously, no broker would actually admit to doing this, but there are ways to know if a broker has committed this offense.

Unfortunately, the only way that you can really determine which brokers do this and which brokers don't is to talk to fellow traders. There is no actual list or organization that reports this kind of activity. The point here is that you have to talk to others in person or visit online discussion forums to find out who is an honest broker.

Strict Margin Rules

When you are trading with borrowed money, your broker should have a say in how much risk you are able to take. With this in mind, your broker

can buy or sell at its discretion, which can be a really bad thing for you.

Let's just say that you have a margin account, and your position takes a headlong nosedive before it begins to rebound to all-time highs. Even

if you have enough cash to cover it, some brokers will liquidate your position on a margin call at that low. This action on their part can cost

you dearly. You talk to others in person or visit online discussion forums to find out who the honest brokers are.

Signing up for a Forex account is a great deal like getting an equity account. The only major difference is that, for Forex accounts, you are

obligated to sign a margin agreement.

This agreement basically says that you are trading with borrowed money, and, because of this the brokerage firm has the right to interfere

with your trades in order to protect its interests. Once you sign up, all you have to do is fund your account and you'll be ready to trade right

away.

Basic Forex Strategy

Technical analysis and fundamental analysis are the two basic areas of strategy in the Forex market which is the exact same as in the equity

markets. However, technical analysis is by far the most common strategy that is used by individual Forex traders. Here is a brief overview of

both forms of analysis and how they directly apply to forex trading:

Fundamental Analysis

If you think it's hard enough to value one company, you should try valuing a whole country instead. Fundamental analysis in the forex market

is often an extremely difficult one, and it's usually used only as a means to predict long-term trends. However it is important to mention that

some traders do trade short term strictly on news releases. There are a lot of different fundamental indicators of the currency values released

at many different times. Here are a few of them to get you started:

• Non-farm Payrolls

• Purchasing Managers Index (PMI)

• Consumer Price Index (CPI)

• Retail Sales

• Durable Goods

You need to know that these reports are not the only fundamental factors that you have to watch. There are also quite a variety of meetings

where you can get some quotes and commentary that can affect markets just as much as any report. These meetings are often brought out to discuss

any interest rates, inflation, and other issues that have the ability to affect currency values.

Even changes in how things are worded when addressing certain issues such as the Federal Reserve chairman's comments on interest rates; can

cause a volatile market. Two important meetings that you have to watch out for are the Federal Open Market Committee and Humphrey Hawkins

Hearings.

Just by reading the reports and examining the commentary, it can help Forex fundamental analysts to get a better understanding of any and all

long-term market trends and also to allow short-term traders to be able to profit from extraordinary happenings. If you do decide to follow a

fundamental strategy, you will want to be sure to keep an economic calendar handy at all times so you know when these reports are released. Your

broker may also be able to provide you with real-time access to this kind of information.

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