What are you really selling or buying in the currency market?

The short answer is nothing. The retail FX market is purely a speculative market. No physical exchange of currencies ever takes place. All trades exist simply as computer entries and are netted out depending on market price. For dollar-denominated accounts, all profits or losses are calculated in dollars and recorded as such on the trader’s account.

The primary reason the FX market exists is to facilitate the exchange of one currency into another for multinational corporations who need to trade currencies continually (for example, for payroll, payment for costs of goods and services from foreign vendors, and merger and acquisition activity). However, these day-to-day corporate needs comprise only about 20% of the market volume. Fully 80% of trades in the currency market are speculative in nature, put on by large financial institutions, multi-billion dollar hedge funds and even individuals who want to express their opinions on the economic and geopolitical events of the day.

Meaning of Trading in Pairs

Because currencies always trade in pairs, when a trader makes a trade he or she is always long one currency and short the other. For example, if a trader sells one standard lot (equivalent to 100,000 units) of EUR/USD, she would, in essence, have exchanged euros for dollars and would now be short euro and long dollars. To better understand this dynamic, let’s use a concrete example. If you went into an electronics store and purchased a computer for $1,000, what would you be doing? You would be exchanging your dollars for a computer. You would basically be short $1,000 and long 1 computer. The store would be long $1,000 but now short 1 computer in its inventory. The exact same principle applies to the FX market, except that no physical exchange takes place. While all transactions are simply computer entries, the consequences are no less real.
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Have you ever heard of the Dogs-of-the-Dow system. It’s a well known system in the stock and trading business. There are several stock brokers who have earned a lot of money by working with this system. They are using at for several years now. They think it’s a safe way to let your money grow slowly but consistently.

If you know the Dogs-of-the-Dow system you know that the system makes yearly a better percentage then the index.

If you have started using the system several years ago and used it properly for those years you would have earned a nice percentage each year. Double figures are more then ones made. A high yield income of 17.7 % average annual return since 1973 has been made.
The Dow Jones Industrial Average overall return was 11.9 % during that same periode.
So you would have made almost 6 % more each year. Not bad at all.

If you never heard about it let me explain how that system works.
At some point in the year, mostly early January, you take a look at all the companies that gives you the highest dividend payment.

You make a basket (several companies added together) then you decide how much percentage you will spent on each company. Next you buy stocks of each company to a curtain amount of money you have available and wait until the year passes.
When the year has passed you make op the balance and see how much you have earned.
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Forex Trading, meaning Currency Trading, is a world wide, little known market, which will become the most popular source of income for investors in the very near future. It is open for banks, rich investors and small ones alike and, depending on the sum of money they are willing to risk, the earnings demonstrate this is the best way to start getting rich.

Why choose currency trading over stock, real estate or futures trading? The currency trading advantages are speed, liquidity, commission-free transactions, increased safety, short-term trading and great earnings. Let’s study each of these advantages in other trading systems:
-Speed: Currency trading is instant due to a large amount of transactions while future trading implies a longer time to trade certain commodities, agricultural products, financial instruments and goods (contracts need to be written and signed)
-Stock traders must pay brokers a certain fee for each transaction made. The brokerage fee is available for all futures transactions, but not in the case of currency trading. In currency trading brokers earn money by studying and profiting from the difference of price between sold and bought currencies.
-Liquidity: The currency market is opened non-stop, anywhere in the world giving currency traders the chance to trade whenever they find the opportune moment and prices. This is a characteristic attributed only to currency trading.
-Safety: while other trading systems are based on speculation, on the fluctuation of price, on slippage and market gaps, currency trading is controlled with the help of built in safeguards that limit slip-ups.
-Short term trading, like currency trading, is more efficient for profit making than long term trading. Day trading does not increase speculation, risk and does not imply that the broker’s commission will reduce any profit made.
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With the growing popularity and easy access to the foreign exchange (ForEx) market, more and more people are drawn to it as their financial vehicle of choice. Along with this popularity come all the extras. This includes all kinds of software, trading systems for sale, books, videos, and third party signal party providers. Today I’m going to touch on a few points when seeking out a third party forex signal provider.

Before we get into choosing a provider we need to have a good understanding of what a third party signal provider is. A signal provider is a trader or analyst that generates trades that in turn get placed on your account. You can have several signal providers trading your forex account or just one.

Like anything else, all third party signal providers are not created equal. At first glance a trader may look like a home run. That same trader may well end up completely torpedoing your entire account in one afternoon. To help make sure this doesn’t happen we’ll set down a few guidelines. These guidelines will give us something to look for when choosing our third party signal provider.

1. The first thing I look at is weather the trader is a winner or a loser. This may seem obvious to nearly everyone, but I often see losing signal providers with 50-100 people trading their signals.

2. The next thing I look at is how long they have been a winner. If a trader has been winning for a week that means nothing to me. I recommend that you don’t trade any signal provider with less than a few months of results to show you. Any one can place a few good trades one week and get lucky. If you are going to be trading this trader’s signals they need to be established.

3. Look at the max draw down. This is the largest peak to trough draw down in equity that the trader has historically had. Some traders refuse to take a loss. This causes them to hold on to losing trades forever or until they turn to a winner. Turning a loser into a winner sounds great, but it will eat up a huge chunk of margin and may never turn around. If it doesn’t turn in your direction, you will have your entire account destroyed by a trader that could have taken a 30 pip loss but held on until it was an 800 pip loss.
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