Archives: 2009 July

Few years back Fx trading was completely done by large financial institutions. The evolution of internet and Forex Trading Software had changed the situation. Fx mini accounts are perfect for any person who is starting out in Fx trading. You should be very wealthy or really confident to begin directly with a standard currency trading account if you are a retail trader. A forex mini account lets an individual to get started without risking big amont cash and this makes it an incredible option for most guys.

Here is an informative article about forex mini accounts with very good detials.

Forex Mini accounts commonly let you to trade with just one tenth of the regular lot size. In other words 10,000 units of foreign exchange instead of standard 100,000 units.
Of course you do not have to have this much in your trading account. You know currency trading works with leverage. Suppose you are utilizing 100 times leverage then you need $100 to manage $10,000 in your mini account or $1K to manage hundred thousand dollars in a standard forex account.

USD100 or 100 units of the currency your trade per trade is adequate for most people to start trading and that is the reason the forex mini account is so attractive.

Knowing what type of a trader you are, can make or break your investment career. Take the analogy of a football team. All players are talented and super fit. Everyone can throw and catch the ball. Everyone is a hard hitter. However some are more skilled as receivers. Others are more skilled as kickers. If the receiver is going to do the job of the kicker, not many field goal points will be made.

In general there are three type of trading styles: Position trading, swing trading and day trading. Investing in the currency markets or stock markets is also the same. It depends on your personality makeup what type of trading is best suited to you. You need to know what type of trading style is for you.

In currency trading, position trading means you are in a trade for many months trying to capitalize on a major long term move in the market. Position Trading is generally the buy and hold strategy of investing in stocks over a long haul. Usually positions traders are in a trade for a large long term move like when you carry trade AUD/JPY. Options traders can also be position traders through covered calls and other strategies.

Swing trading is possibly the most dynamic of the three types of trading as the swing trader is able to switch up holding times quickly as the market demands. Swing Trading means taking short term positions in anticipation of quick market movements over a series of days or weeks. Swing traders take advantage of technical and fundamental analysis.

When you look at the COT report, you should focus on the non-commercial participants rather than on the commercial participants. You would want to know the reason. Commercial participants are mostly trading forex futures for hedging purposes. They keep on rolling on their positions from month to month for hedging even though they maybe taking losses.

However, large speculators like the hedge funds and the banks trade the forex futures contract for speculation and capital gains only. Most will immediately close their losing position instead of rolling it over to the next month. Large speculators do not have any intention of taking delivery of the currency in cash like the commercial participants.

By gauging market sentiment in the forex futures market, you can also gauge the market sentiment in the spot forex market. There is a close correlation between the currency futures market and the spot forex market.

Near the maturity of the forex futures contract, the spot forex and the currency future prices converge. Prices become equal on maturity. Currency futures are basically spot prices adjusted for the forwards based on the interest rate differentials to arrive at the future delivery price.

Forex futures are traded on a Centralized Exchange Chicago Mercantile Exchange (CME). CME functions as a clearing house between the counter parties. The main difference between the spot forex market and the forex futures market is that the spot forex market is not a centralized market. It is an Over the Counter (OTC) market. So no volume and net position data is available for the spot forex market.