Forex Trading

BarryS_2

I've seen lots of investment types covered in this forum, but most of the online trading focuses on share dealing.

I see a lot about currency trading, and have checked out a few brokers. Does anyone know which are the best online forex brokers? I'm interested in starting with £200-500, and seeing where that takes me.

Stonk

I think on that kind of pot, your transaction costs are going to be overwhelmingly large. FX has very tight spreads, but you still pay a brokerage cost. Say you pay £5 for a trade - if you're only playing with £200, the market has to move quite a long way for you to take a profit.

Chrismaths

The only other way to do it is to use a spread betting service, but you are still going to butt up against the minimum deal size. Of all the ways to make money, currency is probably the hardest. I'd try something else if I were you.

mroller

Stonk wrote:

I think on that kind of pot, your transaction costs are going to be overwhelmingly large. FX has very tight spreads, but you still pay a brokerage cost. Say you pay £5 for a trade - if you're only playing with £200, the market has to move quite a long way for you to take a profit.

I opened a mini fx trading account with a forex broker with a balance of 500£. Had no problems at all. traded dozens of times.

I can confirm that it's very easy to lose money on this and quite difficult to earn. my balance now is 250£:embarasse

the spreads are very tight, it costs less that 2£ for a single tranasaction (with 10K$ nominals on EUR/USD).

This is not for the faint hearted and the op should stay clear of it if he is inexperienced.

you can open a demo account with most of the brokers and check yourself.

hope it helps.

Stonk

mroller wrote:

the spreads are very tight, it costs less that 2£ for a single tranasaction (with 10K$ nominals on EUR/USD).

But how do you trade 10K when you've got a balance of 500? Unless you're doing it on margin, which is a whole different kettle of risky fish.

I agree, if you can trade 10K and get charged 2, then that's negligible. But if you trade 200 and still get charged 2, then that is significant. That was my point.

I would steer clear too. My day job is writing software for FX trading in an investment bank, in particular for automated trading. Trust me when I tell you: no matter how good you think you are, you have an absolutely minuscule chance of winning in the long term against the kind of technology we throw at it. In FX, the banks win, period.

mroller

Stonk wrote:

But how do you trade 10K when you've got a balance of 500? Unless you're doing it on margin, which is a whole different kettle of risky fish.

It's indeed on margins.

Stonk wrote:

I would steer clear too. My day job is writing software for FX trading in an investment bank, in particular for automated trading. Trust me when I tell you: no matter how good you think you are, you have an absolutely minuscule chance of winning in the long term against the kind of technology we throw at it. In FX, the banks win, period.

Completely agree.
even my broker says that only 10% of the traders make money, all the others lose out.
this is without mentioning the time waste and the associated stress with the huge amounts at stake.

BarryS_2

Thanks for the advice. I know there's a risk in forex trading and have friends that trade successfully on larger amounts. I know also that most people lose money, but you can be successful if you keep your head.

I get daily trading ideas from a site called forexb*stards. I think that if I use their trading signals, along with one of the lower-entry systems like Pip Forex, I might have some fun and also have a chance at making some money. Does anyone have experience with Pip Forex or any other brokers that they can recommend? There seem to be so many sharks out there.

Stonk, what are the potential gains from automated trading? Am I any more likely to make money from forex if I use an automated system? What's the typical minimum account size?

Stonk

BarryS wrote:

Stonk, what are the potential gains from automated trading? Am I any more likely to make money from forex if I use an automated system? What's the typical minimum account size?

I don't really know much about personal trading accounts, and can't really tell you about account requirements. Sorry.

The automation is of benefit mainly (but not exclusively) because it can react quickly to take advantage of good prices - for instance, where an arbitrage opportunity exists. We can see a price change communicated directly from the exchange, make a decision, and send an order back to the exchange - all within a few hundred nanoseconds.

There's no way a small personal user working off prices fed via their broker over the internet could get even remotely close. Assuming average internet transmission times, we will hit the price in a MILLIONth of the time it takes for it to just get to your PC!

So, a personal user wouldn't use an automated system for reasons of speed. The only application would be an automation of some trading system that you have worked out, some formula for making money that you could implement by hand, but would rather have a computer do. How much money it makes depends entirely on how intelligent the system is. All I can say for sure is: if it depends on reacting quicker than other market participants - give up!