Understanding Forex Trading Spreads: Choosing the Right Spread for Your Trading Strategy

When you trade in the forex market, you will come across the term "spread." This refers to the difference between the buying and selling price of a currency pair. It's a bit like buying a car - the price you pay is higher than the price the seller receives. In forex trading, the difference between these two prices is measured in pips, which is the smallest unit of measurement.

Brokers charge a spread as their fee for facilitating the trade, and it's important to choose a broker with a good reputation and competitive spreads. The spread can be either fixed or variable, and its size can impact the cost of trading. A tighter spread can make it easier to make a profit, while a wider spread can make it more challenging. It's also important to consider your trading strategy and risk tolerance when choosing a spread.

The spread can vary depending on market conditions, so it's essential to keep this in mind when trading. During periods of high volatility, such as during news events, spreads may widen, which can increase the cost of trading. Ultimately, choosing the right spread is an important part of managing risk and maximizing profit potential in forex trading.

In forex trading, the "spread" refers to the difference between the buying price (also known as the "bid" price) and the selling price (also known as the "ask" price) of a currency pair.

The spread is usually measured in pips, which is the smallest unit of measurement in forex trading. Pips refer to the fourth decimal place in a currency pair's price, with the exception of Japanese yen-based pairs, where the second decimal place is used.

For example, if the bid price for the EUR/USD currency pair is 1.2000 and the ask price is 1.2003, the spread would be 3 pips.

The spread is essentially the cost of trading forex, and it is the primary way in which forex brokers make money. When traders buy or sell a currency pair, they pay the spread to the broker as a fee for facilitating the trade.

Generally, the tighter the spread, the better it is for traders, as this means the cost of trading is lower. However, spreads can vary depending on market conditions, liquidity, and other factors, so it's important for traders to be aware of the spreads offered by their broker and to factor this into their trading strategy.

Types of spreads: There are two main types of spreads in forex trading - fixed and variable. Fixed spreads remain constant regardless of market conditions, while variable spreads can widen or narrow depending on market volatility and liquidity.

Factors that affect spreads: Spreads can vary depending on a variety of factors, including market conditions, the liquidity of the currency pair being traded, the broker's commission structure, and the time of day (with spreads typically widening during periods of low liquidity, such as during market open and close).

Importance of spreads: The spread is an important factor to consider when choosing a forex broker, as it can significantly impact the cost of trading. A tight spread can make it easier for traders to make a profit, as they will need to generate less profit to cover the cost of the spread. On the other hand, a wider spread can make it more challenging to make a profit, as traders will need to generate more profit to cover the cost of the spread.

Spreads and trading strategies: Spreads can also influence trading strategies, as tighter spreads can make scalping (short-term trading) more profitable, while wider spreads may be more suitable for longer-term trading.

Spreads and risk management: As spreads are an inherent cost of trading, they should be factored into a trader's risk management strategy. Traders should be aware of the cost of the spread when setting stop-loss and take-profit levels, as wider spreads can result in a larger loss or a smaller profit.

As a trader, it's important to choose a spread that aligns with your trading strategy and risk tolerance. Here are some factors to consider when choosing a spread:

Broker reputation: It's important to choose a reputable broker with a good track record. Look for a broker that is regulated by a respected authority, and check their reviews and ratings online.

Spread type: Decide whether you prefer fixed or variable spreads. Fixed spreads are more predictable, while variable spreads can offer lower costs during periods of low volatility.

Spread size: Look for a broker that offers competitive spreads for the currency pairs you plan to trade. Generally, the tighter the spread, the better for traders.

Commission structure: Some brokers may offer lower spreads but charge a commission per trade. Consider the overall cost of trading when factoring in the spread and commission.

Trading strategy: Consider your trading strategy and risk tolerance when choosing a spread. If you plan to trade frequently or use a scalping strategy, a tight spread may be more suitable. If you prefer longer-term trading, a wider spread may be acceptable.

Market conditions: Keep in mind that spreads can vary depending on market conditions. During periods of high volatility or low liquidity, spreads may widen. Consider the potential impact of wider spreads on your trading strategy.

Ultimately, the best spread for you will depend on your individual needs and trading style. It's important to do your research and choose a broker and spread that align with your goals and risk tolerance.

Without doubt the spread is a crucial factor in forex trading that refers to the difference between the buying price and selling price of a currency pair. It is the primary way in which forex brokers make money and can impact the cost of trading. Traders should consider various factors, including broker reputation, spread type and size, commission structure, trading strategy, and market conditions when choosing a spread. Ultimately, selecting the right spread is important for managing risk and maximizing profit potential in forex trading.

Understanding the Nexus Between Price Stability, Financial Stability, and Fiscal Sustainability for a Strong Economy

The article "The nexus between price stability, financial stability and fiscal sustainability" talks about three important things that are connected to each other: price stability, financial stability, and fiscal sustainability.

Price stability means that the prices of things we buy and sell stay about the same over time. This is important because if prices go up too quickly, people might not be able to afford basic things like food or housing.

Financial stability means that the banking and financial systems are working well, and people have confidence in them. This is important because if the financial system isn't stable, people might not be able to access money when they need it, or businesses might not be able to get loans to grow.

Fiscal sustainability means that the government is able to keep paying its bills over time. This is important because if the government can't pay its bills, it might have to cut services like healthcare or education.

All of these things are connected to each other. For example, if the government spends too much money, it might cause inflation (when prices go up too quickly), which can hurt price stability. It can also make it harder for the government to pay its bills over time, which can hurt fiscal sustainability.

Similarly, if the financial system isn't stable, it can cause problems for the economy as a whole, which can hurt both price stability and fiscal sustainability.

So, it's important to think about all of these things together when we're making decisions about the economy. We need to make sure that the prices of things stay stable, the financial system is working well, and the government is able to keep paying its bills over time.

Original article:The nexus between price stability, financial stability and fiscal sustainability

Hot Trading Tips & Rules

Golden Rules of Trading

- Plan your trades. Trade your plan.
- Keep records of your trading results.
- Keep a positive attitude, no matter how much you lose.
- Don't take the market home.
- Forget your College degree and trust your instincts.
- Successful traders buy into bad news and sell into good news.
- Successful traders are not afraid to buy high and sell low.
- Continually strive for patience, perseverance, determination, and rational action.
- Limit your losses - use stops!
- Never cancel a stop loss order after you have placed it!
- Place the stop at the time you make your trade.
- Never get into the market because you are anxious because of waiting.
- Avoid getting in or out of the market too often.
- The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
- Always discipline yourself by following a pre-determined set of rules.
- Remember that a bear market will give back in one month what a bull market has taken three months to build.
- Don't ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
- Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
- Split your profits right down the middle and never risk more than 50% of them again in the market.
- The key to successful trading is knowing yourself and your stress point.
- The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.
- Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
- Dream big dreams and think tall. Very few people set goals too high.
A man becomes what he thinks about all day long.
- Accept failure as a step towards victory.
- Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker!
- You don't invest ...You will lose.
- You don't manage risks ...You will lose.
- You follow tips ...You will lose.
- You don't investigate before you invest ...You will lose.
- You panic ...You will lose.
- You want to speculate ...You will lose.
- You don't understand your finances ...You will lose.
- You don't use cost averaging ...You will lose.
- You want to play ...You will lose.
- You don't know when not to invest ...You will lose.
- You don't know when not to exit ...You will lose.
- You can't afford to lose ...You can't afford to make a profit.

Dollar Fails to Rally and Bottoms at One Year Low

Finally the Dollar could no longer hold on to its value and position vis a vis other currencies as it continued to slip down rapidly to finally bottom out to a one year low ,on September 16, last wednesday.

On the other hand, the new Finance minister of Japan was optimistic about Japans economic future, as Japanese Yen reached a seven month high against the dollar, as he considered that a strong Yen is good for Japan.

The Japanese yen to dollar rate fell 0.9% against the yen to a seven month low of 90.13.

The euro to dollar rate hit a nine month high of $1.4715. The last time the euro hit $1.47 was in September 2008.

Some currency experts are predicting the Pound to dollar rate will hit $1.70 in the near future.

Massive US deficits also caused investor concern but higher stocks were the main driver of risk appetite.

With stocks going up, it continues to be very difficult for the dollar to rally.

Traditionally the dollar trades lower when stocks perform well.

Dollar Weakens because of US Gross National Debt

The Dollar is now the cheapest currency in the world to borrow, since the Dollar LIBOR rate fell below than the corresponding Japanese rate for the first time in 16 years.

One of the biggest reasons why Dollar is losing value is because of the US National Debt.

As of today the gross US national debt (Treasury securities) outstanding, stands at $11.4 Trillion.

Of this the debt owed to external parties is probably about $6 Trillion.

Going forward, meanwhile, the latest government projections indicate a $9 trillion increase over the next decade, touching a whopping $20 Trillion in 2020.

In absolute terms, it would smash all previous records, while in real terms (as a percentage of GDP), it would be the largest increase since World War II.


Over the long-long-term, the growth in national debt is projected to be catastrophic, as the baby boomer retirement leads to an explosion in entitlement spending.

The resulting strain on the system is summarized by the Government Accountability Office: “Without changes, spending for Social Security, Medicare, and Medicaid would permanently and dramatically increase the Government’s budget deficit and debt, leading eventually to renewed financial and economic instability.”

No wonder the United Nations report has called for a reduction in the dollar’s prominence as an instrument of global trade.

The UN report – the first multinational statement on the issue – argued that dollar’s status as the world’s reserve currency should be subject to reconsideration in light of the major imbalances in global trade that have produced the current financial crisis.

Source:

http://www.forexblog.org/2009/09/dollar-under-pressure-on-all-fronts.html

http://forex.gftforex.com/public/item/239108

Margin Trading and its Importance - Forex Basics

Margin Trading is the most important aspect of Forex trading, because it is one of the most popular methods of trading with foreign exchange currencies through the medium of a broker.

In this kind of trading, a minimum amount has to be deposited and maintained in ones account with the Broker of ones choice. This amount in turn is used as leverage money by the broker on behalf of the trader to open positions with higher value, which could be as high as 200 times the amount deposited and thats traded in the market.

This is how Forex traders take control of large amount of currency and trade them in the market by making a marginally small deposit in comparison to the trading amount with which traders play in the market.

It is also one way to ensure the broker from losses if any. This margin money to be deposited with the broker for safe keeping acts as a collateral. Its from this money any loss incurred by the broker is to be compensated by the trader as part of a contingency plan. It sort of acts some kind of a safety net for the broker to offset any loss.

Hence this margin money thats to be maintained in ones account is decided by the broker and which differs from one broker to the other.

However one must exercise caution when trading using margin money to leverage your trading power. One false move can doom your fortune to doldrums, otherwise the prospects are very high if you learn to trade carefully.

The prospects of rise and fall are indeed great in Forex Margin trading. Say for a 1% margin you have to deposit 10,000 USD to trade one million dollars. No wonder a swing of 2% either way can cause a 200% loss or profit.

Forex Trading Commandments for Success

1. Emotional control is at the heart of good trading.
2. Cut losses with the most strict discipline
3. Make good decisions and winning will take care of itself.
4. When you lose, don't lose the lesson!
5. When in doubt, get out.
6. Keep your risk/reward profile in check.
7. Avoid scheduled news.
8. Consider your account size for appropriate trading.
9. Get a charting program that allows you to build watch lists, sort stocks, and draw trendlines.
10. Scale out of winning positions as they work for you.
11. Don't dig yourself into a hole early in the day or in your career.
12. Trade with a blend of anticipation and confirmation.
13. Evaluate your results at least monthly.
14. Finally (perhaps most important), always be patient.
15. Invest on the side that is winning
16. The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
17. Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
18. Markets can remain illogical far longer than you or I can remain solvent.
19. To trade/invest successfully, think like a fundamentalist; trade like a technician.
20. Grow Slowly But Strongly "Pip-Machine"