The advent of the internet and the onset of the recession has led to a greatly increased level of interest in FX online trading. New brokerage web sites are springing up all the time and it's difficult to decide which one to opt for. This article sets out 3 questions you must ask your broker before you open an account.

1. Are you an FCM (Futures Commission Merchant) broker or an ECN (Electronic Communication) broker?

The reason for this question is this. FCM brokers very often have their own dealing rooms and often don't pass on their customers' trades to the actual FX market. They match one customer with another, or alternatively bet against them. With all their facilities and the ability to manipulate the prices on their system you can guess who stands the better chance of winning the trade.

ECN brokers don't have their own dealing rooms, but pass on all trades to the market, as they should. They therefore cannot bet against you, but simply collect the "spread", whether your trade is profitable or not. They also have no restrictions on trading or hedging, and tend to have the best prices and spreads.

2. Where are you registered and how much is your capital?

Make sure that your broker is not registered in an offshore jurisdiction (you don't want problems if you decide to withdraw your money). He should be registered in the US, the UK, a major European country, Australia or Japan, with the appropriate regulating authority. In the UK it's the Financial Services Authority and in the USA it's both the US Commodity Futures Trading Commission and the National Futures Association. Ensure the company's capital is at least $7 million (USD), or £5 million (GBP). Any less and there's a danger it could go bust and take your money with it.

3. Can I trade with covered warrants and ETFs (Exchange Traded Funds) as well as spread bets?

Most brokers will direct you without even asking towards spread betting because that is the most profitable kind of account for them. But there are other methods of trading fx which can, once you master them (which is not difficult), be far more profitable for you.

When you make a spread bet on a currency pairing, for example the British pound and the US dollar (GBP/USD), there will be a "spread" that you have to overcome before you get into profit. This is how the broker makes his money (if he's not actively betting against you, as often happens).

So, for example, as I write, the GBP/USD pair are trading at 1.5107. If your broker has a 3 point spread he may set his sell/buy prices at 1.5706/1.5709, so you can go long (buy) at 1.5709, but the price would have to move up 3 points to 1.5710 (i.e. 1.5709/1.5712 at your broker) before you would be at "break even" point. The same applies in reverse if you chose to sell, or go short. You are always at a disadvantage compared to the market or your broker.

This, coupled with absurdly low "stop loss" levels, makes it almost inevitable that the new trader will lose all his money before long. The low amount of capital required by most brokers to open an account, which is pushed as being generous on their part, enabling the "ordinary Joe" to "open a currency trading account and start profiting", actually works against you.

If you have only a small amount of capital in your account then, unless you are going to risk nearly all of it on each trade (in which case you are doomed to lose all your money even more quickly than normal) you are going to have to trade with tight stop loss levels.

In the volatile fx market, where prices move erratically and seldom go up or down in a straight line, this is crazy. The few successful traders in this market employ large stop loss levels, even on trades they are very sure about. This enables them to ride the volatility of the market.

The only practical solution to this anomaly is to avoid spread betting altogether, and use instead covered warrants and Exchange Traded Funds. Hence this question. You may, however, have to go further than your broker in order to learn how to trade these instruments. But the information is there, if you look.

By Philip Gegan

We made 70 per cent on gold in less than a week. You can join us in trades like this at http://www.onlinefinancialtrading.com

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The Best Way To Start Off Trading Forex On Low Capital

A lot of people assume that forex trading will require a huge capital base. As a result, they would instantly decline to entertain any proposal to start trading in forex, preferring to remain with trading stocks and shares which is more affordable. This is simply not true, because in forex trading, you can start off with minimal capital when you utilise a forex mini account.

There are four main advantages of a Forex Mini Account.

1. Low Minimum account size

$300 will allow you to start a forex mini account. This is affordable for most people to start off with in forex trading. When you consider forex trading as a business, there are very few businesses costing only $300 as a startup capital offering lucrative prospects of earnings within a very short time.

2. High leverage

You can get leverage of 200:1 In the mini forex account, there is a small margin deposit required fixed at $50 for per lot traded. This amounts to a stunning leverage of 200 to 1. One of the key factors to accelerate profits is to use trading vehicles of high leverage, and a forex mini account certainly meets or fulfils the definition of high leverage.

3. One pip is equivalent to $1

Trading in pips allows the new forex trader to scale down his risk. With such a low denomination, the trader is able to deal with forex trading with less pressure and more discipline. For example, a 20-pip floating loss is approximately $20, so that if you have a 20-pip sudden move against the direction of your trade on a 100K account, that is translated into a $200 floating loss. In every transaction, by using a Mini account, the trader does not end up with a total loss as he loses only a small amount on every losing transaction. This allows him to follow his trading strategy in a disciplined manner.

4. A smaller trade size

The mini forex account trades in smaller contract sizes of 10,000 units which is 1/10 th the size of the standard account. This smaller trade size allows traders an opportunity to trade live with less overall risk. As a result, a beginner can transit or move into forex mini trading quickly from paper trading. While the standard lot is 10,000 units, the beginner trader can increase trading to more lots or units as he gains experience and confidence, and as his profits increase as a result of disciplined trading.

One hidden benefit of trading the mini forex account is that traders can become familiar with the quality and also the reliability of the forex trading platform or trading station of his broker. This is because the forex mini account utilises the same state-of-the art trading software as that for normal sized forex trading.

Mini accounts are recommended for traders with account balances of less than $10,000, allowing them more trading opportunities without over leveraging their account and hence get more staying power in the market.

We will discuss how you can exploit these features of a forex mini account to your advantage in Part #2 of this article so that it is easier to earn a consistent income trading on low capital and lower risk.

By Peter Lim ,CFP

About the Author: Be sure to read Part 2 of this article to discover how you can acquire the powerful trading knowledge from an experienced mentor to trade mini forex and where to secure an online mini Forex trading account. Visit my blog http://1forex-trading.blogspot.com to read Part #2 of this exciting article.

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Due to the fact that 95% of forex traders are losing money right now, the idea of making money with forex seems like an impossibility to some. You can certainly understand why.

But let's examine why there is such a separation between the 5% who are marking money with forex and the 95% who are losing money.  What makes these traders so different from one another.

Some people think that the 5% have some kind of "inside" information that the 95% aren't aware of.  While that certainly may be possible, I seriously doubt that is the case for the entire successful trading public.

Some people believe that it's an intelligence issue.  They somehow feel that this elite 5% had a better education, higher IQs, etc..... that they are able to grasp all the mysteries of Forex trading, while the other 95% are just throwing darts at a dartboard.  Well, that's wrong as well.  I can tell you with great certainty that successful trading has nothing to do with intelligence.  I've met some traders who make 7 figures a year who didn't even graduate from high school.

It really boils down to thinking outside the box. Many people conform to the ideas of using lots of bells and whistles.  For instance, a lot of traders love the idea of slapping a bunch of indicators on a chart, and letting these indicators make their trading decisions for you.  This is where many people go wrong, and this is why the failure rate is so high.  If you want success, you should try to see the markets in its purest form, and for a technical trader, this means using price action.

John Templeton has been a successful forex trader after learning how to trade price action. Once he understood that all he needed to trade forex was on a plain chart with no indicators, his profits soared. He developed his own course, called Trading in the Buff, where he teaches traders how to properly learn forex.

Article Source:http://www.articlesbase.com/currency-trading-articles/making-money-with-forex-is-it-really-possible-948272.html

If you're wondering what 'Greeks' are, they are defined to be the way options normally respond to various factors that govern Forex, such as price fluctuations, time decay, market volatility, and different interest rates.

One such Forex option formula is the Delta. It is described to be the speed with which an option rises or decreases in price as against the underlying price of the currency it has been bought on. A Gamma is a 'Greek' formula derived from the Delta, and describes the odds of any changes that may occur in Delta. A Gamma also serves as an advance warning of any indications of change in the Delta. Gammas are considered positive signals for both a call and put option, and most traders tend to keep an eye on Gamma formulas closely.

A Theta signifies time decay. Options have a prescription period, and as the time of its expiration nears, the value of the Theta approaches zero to negative. If the Theta has a positive number, it means that there is still enough time for a trader to exercise the option. A Vega, on the other hand, reflects how the volatile market affects the option's price. You may notice that an option's price increases depending on how the market's volatility affects the underlying asset. Volatility is a good thing if you are a buyer of an option, but a bad thing if you are about to sell one.

Finally, a Rho describes how the option is affected by the prevailing interest rates. A positive Rho defines high interest rates that are good for the option, and are negative if high interest rates are bad for it.

Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com - He has helped hundreds of people on Trading Forex with Options.

He has recently developed a free e-course showing you a step by step process for starting your Forex Trading easier. To learn how to start Forex Trading with Options without wasting your time and losing more money, visit http://www.NonDirectionTrading.com/members/FreeReport.htm

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