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Friday, November 30, 2007

Forex Training Trading 102 - FOREX BROKERS! Who do I give my money to? Whose advice and training do I trust? -- PART 2

Forex Training Trading 102 - FOREX BROKERS! Who do I give my money to? Whose advice and training do I trust? -- PART 2

Let’s talk about brokers in the Forex industry as a whole as part of your premiere free forex training.


In the last post I left you at the Swap Test for brokers and how to determine what level of integrity the broker has.

Test 2 is the ECN test. This is going to take some explaining so I’m going to first teach you about the different orders system and how 1 is corrupt and the other is legitimate (in my eyes at least).

Simple Definition:

ECN = Electronic Communication Network – An electron system that brings buyers and sellers together for the electronic execution of orders / trades.

Order House/Market Maker = A broker that takes orders and may not necessarily place that order on the ECN to complete the trade. The broker may find 2 people within the firm that match up and complete the order that way.

You have to call up the broker and ask them what their structure is and how they place their orders. They should tell you (without thinking about it), that the orders go straight onto the ECN for execution and they do not handle any executions of orders, they just submit them via automated computer means.

The other type of broker could hold your order and bet on you loosing you money. So they will show you (virtually via the data stream) that you order went through, they hold the order in their “safe keeping,” betting you you loosing money (since most people do in the forex – because they don’t invest in their forex trading education). So you loose some money, but really that order never went to the market, the broker just kept it the entire time. This may not seam like a problem at first but what happens when you invest in your education and you end up making huge gains time and time again? Well since they didn’t put that order on the market, they will be responsible for taking money out of their account putting it in yours, which they will not like very much.

This type of broker may also have the ability to manipulate the data stream, so lets say you have a trade in place with pretty substantial stop loss (your protection point – a stop loss liquidates your trade at a price that you set that if it breaks you know the trade was wrong, protecting you from massive losses). If the bad broker has flagged your account as being a big winner and a risk to them, they will look at your stop loss and can manipulate the data engage your stop loss, after several of these they will have all of their money back.

Another question to ask them is if you place a trade with them can you see the trade go through on the level II (level two) data? If they say yes, ask what name it will appear as. If they cannot provide the name, beware, if they say no, beware. No I have not told you what this is yet, and it’s a little more than this post can handle. I am considering making a video to better illustrate this point.

This is a good breaking point for today….

To be continued……

Live abundantly and share that abundance with others!

Forex Training | Forex Trading

Thursday, November 29, 2007

Forex Trading 102 - FOREX BROKERS! Who do I give my money too? Whose advice and training do I trust? -- PART 1

Forex Trading 102 - FOREX BROKERS! Who do I give my money to? Whose advice and training do I trust? -- PART 1

Let’s talk about brokers in the Forex industry as a whole as part of your premiere free forex training.


I’m about to make a lot of brokers not happy with me, but it is my duty to tell you that the forex industry is not all that credible. There a lot of shady things going on in the forex market and its not something that we can really prove is going on. There are some tests that we can do to see if we can get the sense that our BROKER is cheating us.

The Forex market is a market that is traded electronically around the world so you have the virtual trading floors all over the place throughout the world. There are different laws and regulations all throughout the world so as you could probably imagine the forex market is the wild west of the 21st century.

Let that sink in. It is your responsibility to know that you are in a very risky, wild, frontier. That no one will protect you here and that you are on your own. At the same time the rewards of taking on this challenge are unbelievable! You WILL win big!!! You will loose! Its how we win and how we loose that determines whether we win our financial war. Another note to take is that when you win big, don’t get excited about it, it’s part of the job, and when you loose, don’t get excited about, it’s part of the job.

Now back to brokers! There are 2 types of brokers, ok ones, and bad ones. That’s about it. Now the brokers have their own challenges to deal with and we don’t make it any easier on them, but that is all the slack I’m going to give them.

There are 2 areas that we can look at with brokers that give us an idea as to which side of the line they lay on. These are 2 policies the brokers operate by and they are:

Swap Rates Test – The easiest to determine & most brokers will not pass this test

ECN Test – is to determine whether the broker is an ECN broker or an order house/market maker/bucket shop – more difficult to determine – usually take calling the broker and talking to someone. (Update…this will be covered in the next post, the to be continued post that I will post very shortly, like tomorrow…this is in an effort to keep the post to a length limit for your convenience).

To keep this post shorter I will only cover the simpler swap rates and a generic question to call the broker with to determine the broker’s integrity.

Let’s talk about swap rates. What is a swap? A swap is a funny thing that the brokers are required to do. Basically the brokers are not allowed to hold a trade over night, so they must swap your trade out with a fresh new trade. You never see this happen and everything still looks the same but when this actually takes place someone has to pay for the swap. What that payment is, is interest. Depending on the position or direction of the market the swap/interest rate is either positive or negative. So let’s take the EUR/JPY and buy it (buying the EUR) and hold it anticipating that the trade is going up. When I hold it over night, the broker swaps it out, and because of how the finical markets work there is a +swap/interest payment that gets paid to me. So I make money on top of money. This Japanese Yen position is actually called the CARRY TRADE! Interesting right? Take a look at any JPY chart and look at that very long term trend, and then remember the words of Alan Greenspan talking about the unwinding of the carry trade. This is a whole other topic all together.

So we can either have to pay out swap rates or receive swap rates for holding trades over night. Well the brokers determine what the swap rates are. They have to pay or receive a swap rate themselves when they make the transaction and they basically give you a cut of that. You will notice that a swap is greater in one direction or the other. We use these numbers to determine the integrity of the broker. If the swap rate is a 3:1 ratio this is not good. A 2:1 ratio is the least that we will take from a broker. The ideal case would be a 1:1 ratio. Now what do I mean about all of this?

Simple Definition:

Swap long = the interest paid or deducted from you while holding the trade over night for a long position - meaning we buy the Euro in anticipation of the chart increasing in value.

Swap short = the interest paid or deducted from you while holding the trade over night for a Song position - meaning we buy the Dollar in anticipation of the chart decreasing in value.

Let’s take the swap rate for the EUR/USD of an unnamed broker:


Swap Long = -.29 (when I buy the Euro vs. Dollar to go up I will have to pay an interest charge every day I hold this)

Swap Short = .21 (when I sell the Euro vs. Dollar to go down I recieve an interest charge every day I hold this)

When we compare these rates we just divide the 2. For this example this shows that the broker is taking their cut, but not taking complete advantage of us. This is actually a really good rate.

.29 / .21 = 1.38 or 1.38:1

Lets look at some more currency pairs…

AUD/CAD: Swap Long = .2 / Swap Short = -.36 -- .36/.2= 1.8 or 1.8:1 = acceptable

GBP/JPY: Swap Long = 3.02 / Swap Short = -3.87 -- 3.87/3.02= 1.3 or 1.3:1 = acceptable

When you see a currency swap rate this is: 1.75/.6 = 2.9:1 which is unacceptable this is a broker who takes advantage of you.

So it looks like this is a good broker….so far (& I hope so since this is my broker). Go ahead and do this for every currency pair, it is a good exercise and can be easily done in excel, this will also serve as your record when brokers want to change swap rates on you.

Brokers change their swap rates, so be careful of this. I called this broker who is not in the U.S. and talked with them and told them that this is how we as customers evaluate them. I complained to them because they increased their swap rates to a ratio of higher than 2:1. Within about 3 months they switched the ratios back, and since that time they have even gotten better.

So this broker passes TEST 1 the swap test.

I will end this post here and will post a separate post for the continuation…

There is a lot of training to be had so that you can survive the Wild West, again if you have to get started right away please get some more training. The trading system in the links section of the blog (upper right) is a good place to start.

To be continued……

Live abundantly and share that abundance with others!

Forex Training | Forex Trading

Wednesday, November 28, 2007

Forex Trading 101 - What is a PIP? How does Leverage Work?

Forex Trading 101 - What is a PIP? How does Leverage Work?

When I am doing Forex Training one of the most frequent questions that I get asked when first talking to
people about forex trading is "What is a PIP?"

Pip stands for Percentage Increment Point

Since currency trading is buying one currency against another there are no shares to purchase. What you purchase is that actual currency. When you trade currency exchanges you are entering a position in that exchange, so you are positioning yourself on the side of one currency versus they other.

Lets talk in terms of the Euro and the USD. If I have information that is telling me that the USD is declining in value then I may want to buy a currency that is versus the USD. So we could buy the EUR vs. USD or (EUR/USD). As the USD falls the difference in the value between the EUR & USD gets larger. Well how do we define that? Money vs. Money. Money/Money=% right, if 5 apples out of 10 apples were bad (the difference between some being good and some being bad) well how do we define that 5 apples/10 apples = .50 or 50% are bad. So this would be a type of Percentage Increment Point or PIP, in this case it is 50 PIPS (because I only
gave you to 2 decimal places).

Lets say we are keeping track of the EUR/USD and for hypothetical reasons we are going to say that on Jan 1st 2008 it took $1.0000 EUR = $1.0000 USD. So if we looked at the charts we would see the price on that chart as 1.0000.

Well then we check that chart again on Jan 5th 2008 (great day in the year) we see that the chart price has changed to $1.0050. This means that now $1.0000 EUR = $1.0050 USD, it takes more USD to equal EUR, also meaning that the value of the USD fell by $0.0050, or a half of a cent.

Since I gave you the amount in 4 decimal places we are going to call that change 50 pips. Here are some more examples of this:

Change = PIPS
$.0001 = 1 PIP
$.0005 = 5 PIPS
$.0060 = 60 PIPS
$.0700 = 700 PIPS

So know you understand how a pip works. How does that translate to profit?

Well lets take out example of a change in the EUR/USD of $.0050

If I took $1000 and purchased Euros on Jan 1st 2008, and then sold those Euros for Dollars on Jan 5th 2008, I would have made a WHOPPING $5.00 because of the difference $1005 ($1,000 * $.0050 = $5).

Why then is there a FOREX craze going on? (and it's just getting started)

Well here is were the FOREX market comes alive. Ohh MY IT'S ALIVE!!!

This Beasts name is LEVERAGE. It is much like having your very own BIG FOOT (some say fictitious man-like beast roaming the forests with incredible strength). While having BIG FOOT as a friend is nice because you don't need a jack to change a car tire, no one would ever pick on you again, you might even get into some really cool clubs. While all of that is very cool, it sure does hurt when the dumb oaf steps on your foot, takes out walls in your house, destroys your neighbor's car, damages public property. He's a REAL Liability to have around!!!

So unless you have a shock collar to train Big Foot you better be very careful with him! Same goes with leverage, I actually recommend getting a shock collar and wearing while trading, shock yourself right before you place a trade just so that you are reminded that LEVERAGE can be VERY BAD. Please don't put a shock collar on yourself, I was only kidding.

So how can leverage be good and bad. Leverage works like this, it is a loan. Very hard concept, right?

Well in the stock market you can get leverage of 2:1 or 4:1 but really no higher. That means that if I used my $1000, when I placed the trade they actually placed the trade for $4000 (considering 4:1 leverage).

The FOREX market offers much higher leverage, brokers offer varying amounts from 50:1, 100:1, 200:1, and some 400:1. The most common is 100:1 leverage.

Wait one jiffy minute here, do you mean to tell me that if I had $1000 and I was able to trade with 100:1 leverage that would mean that I would be actually trading with $100,000. Why YES that is exactly what I mean!

So now you see that that with that same $1000 and that same Jan 1st - Jan 5th trade with 50 PIPS gain would go from $5 with no leverage to 100 X $5 = $500 and your new balance would be $1500.

This is what drives this new FOREX craze. That is a 50% gain in just a few days. So when we talk about PIPs we loosely associate that to percent gain. Most of the major pairs (currency pairs) pay 1% per PIP with leverage, others are slightly less but that is a whole different conversation and we will save that one for later.

So how is leverage bad? The previous case also hold true if your information was wrong and instead of buying the Euro you bought the US Dollar, that would have yielded a -50 PIP return and now your $1000 would be only $500, ouch!

Earlier I mentioned the information telling me what I need to do. That is what I am here for, I'm going to be showing you the secrets of the systems. Those things that have been kept secret from the many I am going share with you, mainly because this is really easy and I feel guilty
for not telling people how to make their lives better.

There are huge profit potentials in the Forex Market, and I myself have made huge profits, it is not unlikely to make 100, 200, or even 300 PIP profits in 1 day. Just today there was a 485 PIP move in the GBP/JPY (Great British Pound vs Japanese Yen) in 11 hrs.

Stay tuned! I will be showing you some really cool things to come, I will even be uploading some videos showing you examples of some really great gains and how you protect yourself with stop losses. Some of the things I will be showing will be worth THOUSANDS of dollars.

Add me as a friend, get in touch with me, tell me what you want to learn in this industry and I will do my best to getting to everyone's questions and posting the secrets pertaining to those questions.

Please subscribe to my Feeds and that will alert you as to when I have posted something new. It does save time.

If you are dying to start in the forex market and you cannot wait for me to teach you stuff please get some eduction in the forex market before putting any real money in it. A good start to Forex Trading can be found here: Forex Training | Forex Trading

Have fun, and live intentionally!

I am Mission, and I have been given a charge, a quest so to speak from a higher calling to
help all of those that want to learn.

Tuesday, November 27, 2007

Welcome to the Ultimate Forex Trading Blog

We are going to have a lot of fun here, so hold on to your shorts!!!

Videos and great demonstrations are soon to come introducing you to the great forex trading markets and showing you real live profiting trades that produce astounding rates of return.

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