Demo Trading vs. Live Trading Demo Trading Accounts and Live Trading Accounts

 

Demo Trading vs. Live Trading

Demo Trading Accounts and Live Trading Accounts

Demo Trading Accounts

Demo trading accounts are perfect for traders looking to establish the fundamentals and work on their technique. Beginning on a live account means that there’s the possibility of losing real money as you work out which technique works best for you.

Before moving on to a live trading account, it is a good idea to try out a few different approaches, and practice with a demo account. Demo accounts grant traders the opportunity to develop and test their trading skills, without facing the kind of risks you do on a live account.

Traders who want to iron out the creases in their trade before they hit the live markets have a range of demo accounts to choose from.

Live Trading Accounts

After you’ve refined your skills and experimented with different types of analysis and indicators on a demo account, it is time to switch to a Live Account and start trading with real money! Demo Accounts are great for practice, but Live Accounts offer all the real advantages of the FX markets.

Once traders are ready to move on to the live markets, having established a trading strategy which works for them, they can set up their first Live Account. Like Demo Accounts, there’s a huge range of options available for a trader looking to upgrade their trading from Demo to Live.

FX Trading Tools

Different types of trading tools for technical analysis:

When it comes to finding the right tool for daily analysis, a trader has a wide range of technical analysis tools to choose from.

Popular indicators include: the moving average indicator, which filters out price fluctuations to help traders identify trend directions, and Bollinger Bands, which plot two lines, two standard deviations away from the moving average.

Oscillators based on statistical concepts are another common addition to the trader’s toolkit. Oscillators are used to estimate whether an asset is overbought or oversold. Popular oscillators include the RSI (Relative Strength Index), MACD (Moving Average Convergence/Divergence), Momentum, Stochastic and ADX (Average Directional Movement Index).

To identify turning points in the markets, and analyse chart patterns, FX traders commonly use support and resistance, along with Fibonacci retracement tools and Japanese Candlestick patterns.

Aside from these, other FX traders prefer to use chart patterns including head-and-shoulder, double top/double bottoms, and draw trend lines to identify trend patterns.

• Economic Calendar
• Currency Converter
• Margin Calculator
• Pip Calculator
• Profit Calculator

Forex Fundamental Analysis What is Forex Fundamental Analysis?

 

Forex Fundamental Analysis

What is Forex Fundamental Analysis?

Macroeconomic Indicators

These are fundamental indicators which directly or indirectly point towards a weak or strong economy.

Macroeconomic indicators based on the Gross National Product (GNP) and the Gross Domestic Product (GDP) are used to estimate an economy’s efficiency.

This data is then released in reports which have major effects on a country’s currency. Aside from GNP and GDP, some of the major macroeconomics are:

• Unemployment rate
• Bankruptcies
• Retail sales
• Consumer leverage ratio

Geopolitical Events

These types of events have direct or indirect consequences, either worldwide or for a particular set of countries.

Geopolitical events have great psychological and emotional consequences for the equity and currency markets.

A few examples of such events including:

• Trade wars between major countries or economies which arise due to rising tensions among nuclear-armed, powerful countries.
• Major decisions taken by OPEC (Organization of Petroleum Exporting Countries), which have direct effects on oil prices.
• Major events like Brexit, which trigger volatility into worldwide stocks and currency markets.

Gross Domestic Product and Inflation

Gross domestic product (GDP) is a financial economic indicator which measures the total value of goods and services produced in a country, over a designated period of time.

The GDP is one of the most important indicators, and is used to evaluate a nation’s overall economic health. Construction costs, government outlays and investments all contribute to a country’s overall GDP. Inflation is an economic indicator that measures the increase of a country’s prices for major goods and services.

The rate at which prices are rising dictates the rate at which the purchasing power of the currency is falling. In order to maintain a smooth economy, central banks aim to limit inflation and avoid deflation.

Forex Trading Fundamentals Understanding Trading Fundamentals

 

Forex Trading Fundamentals

Understanding Trading Fundamentals

What are Forex Reserves?

Forex reserves are foreign currencies held by a central bank in order to grant greater flexibility and resilience.

A reserve is any currency held by a financial authority which is centralised. The reserve assets can be used to endure market shocks if a particular currency becomes devalued or suddenly crashes. Higher foreign currency reserves ultimately mean lower risks associated with exchange rate fluctuations.

Forex reserves are usually held in US dollars, British pound sterling, euros, Chinese yuan or Japanese yen. This is due to these currencies being the most common on the foreign exchange market.

What are Forex Signals?

Forex signals are trade forecasts usually issued by knowledgeable and experienced signal providers.

The signals are based upon a series of technical analyses or news events, and are used by traders to help them decide whether they should buy or sell a currency pair. Day traders in particular may use a variety of forex signals to inform their next trade. Forex signal systems produce either manual or automated signals.

In a manual system, the trader actively looks for signals and interprets them to choose whether to buy or sell. In an automated system, the software identifies a signal and makes the programmed response.

What is Foreign Exchange?

Foreign exchange is the market where one currency is exchanged for another. It is always done in pairs; for example if a trader wants to buy Euro and sell the US Dollar, then he would be trading the EUR/USD currency pair.

Similarly if a trader wants to sell the US Dollar and buy the Japanese Yen he would be trading the USD/JPY pair. The price of a currency pair is called the exchange rate. It is determined by political, economic and environmental factors.

Transactions in foreign exchange are usually conducted in high volumes. Foreign exchange market has no physical location and hence it is called a decentralised market. It is open 24 hours a day, 5 days a week and is the largest market in the world.

Forex Trading Q&A Popular questions answered

Forex Trading Q&A

Popular questions answered

 

Who is a Forex Trader?

An FX trader is any individual who exchanges one currency for another. Individual traders commonly use different platforms to exchange foreign currency. These include banks, financial institutions, money changers, or FX brokers. Most trades are completed over-the-counter, which means that the trade is facilitated via a bank rather than a centralised entity.

What is a Forex Pip?

PIP is the abbreviation of “point in price” or percentage in point” and it is the smallest unit of price movement in the foreign exchange market. For example, when the exchange rate of EUR/USD moves to 1.1552 from 1.1550, the currency pair has risen by 2 pips (or 0.0002).

What is Forex Scalping?

Forex scalping is a trading strategy which aims to benefit from small price movements in the market. Scalp traders will target intraday price movements and only hold positions for a small amount of time to take advantage of small market opportunities. Forex scalpers must be prepared to monitor the markets all day long.

What is Forex Leverage?

Forex leverage is offered by brokers to enable traders to maximize their trading potential. The forex market offers higher leverage than other markets, and this attracts potential traders. Leverage allows traders to deposit small amounts and trade with high volumes. The term ultimately means borrowing money in order to increase the potential returns on a trade, but this means losses get increased too.

What is a Forex Spread?

The difference between the ask price and bid price is known as the spread. The spread represents the cost of a transaction; the lower the spread, the lower the cost. A spread is influenced by a number of factors: the supply of the asset, the stock’s trading activity, and the total demand or interest in a particular asset.

What is Forex Hedging?

Hedging is a technique designed to reduce the risk caused by adverse price fluctuations. Investors and traders might implement a forex hedge in order to protect their position from risk as exchange rates change. Foreign currency options are a common hedging method, and grant the trader the possibility to buy or sell at a future exchange rate.

What is a Forex Swap?

A swap is simply an exchange of one currency for another. At a later date, the two parties who made the swap will receive their original currency back with a forward rate. The forward rate locks in a specific exchange rate and therefore acts as a kind of hedge. The swap varies significantly among different financial instruments.

What is a Forex Drawdown?

A drawdown is the difference between a relative peak and a relative trough in the value of an investment. After a new high is reached, drawdowns track the percentage change between the previous high and the smallest trough. In this way, drawdowns are useful for determining the financial risk of a certain asset.

What is Forex Slippage?

Slippage refers to the difference between the requested price of a trade and the price at which it is eventually executed. Slippage is usually found when the markets are particularly volatile, and prices have moved quickly during the time it takes for the trade to be ordered and completed. Slippage can have positive and negative consequences.