There are two kinds of costs involved in fx trading – those that you can see and those that you can’t see. When choosing a bank or broker, you need to keep in mind both of these expense types. Costs that you can see include the fees for executing a trade plus how much you are charged for shorting a “positive interest rate carry” currency pair per day. Costs that are much harder to judge include mathematical errors concerning how much cash you should have in your account, faulty record keeping, wires that disappear for more than 24 hours and horrible customer service. If you don’t have a lot of start-up cash at stake, working with an established broker is okay. However, if the amount of money that you are trading is in excess of $5,000, then find a bank to work with. You will sleep better at night.
Day trading with a 5-minute chart and 2 exponential moving average lines can be profitable. Pick a trending currency – not something dormant.
How Much Money Should You Start With For FX Trading?
There are brokers who advertise that you only need $100 to start fx trading with them. Ah, caveat emptor! This kind of entity is probably “here today and gone tomorrow” – with your money. If do not want to risk much of your capital, find a broker that has been in business for more than 10 years and open up a “mini” or “micro” account. You can probably do it for less than a $500 initial cash deposit. Then, trade very conservatively, slowly building up your cash pile. When it gets to more than $5,000, switch to a forex account offered by a bank. Banks don’t disappear over a weekend. They also usually have good fx trading spreads and excellent record keeping.
Keeping FX Trading Costs To A Minimum
When trading, there are a variety of costs incurred. Some of them you can see easily; some of them, you cannot. If you are a day trader, then your number 1 worry is the pricing of your trades. You should be able to see this clearly, as they occur. If you’re a trend trader, then you need to worry about holding costs. Your fx trading platform should indicate, exactly, what it is costing you to hold a position per every 24 hours. Above and beyond this, you need to consider such “costs” as not having a good charting section on your trading platform or horrible customer service or bad recording keeping – all of which can adversely impinge on your fx trading profitability.
Making Profits Not Losses With FX Trading
For most beginners, learning a profitable day trading strategy on a “demo account” is probably the least stressful introduction to forex trading. Here is what you can do. Open up a 5-minute chart of your favourite currency pair. Add 2 exponential moving average (“EMA”) lines to the chart. The first EMA should have an “input” of 8 “periods”; the second EMA should have an “input” of 34 “periods”. This means that the 8-period EMA will lead the 34-period EMA. So, watch the 8-period EMA closely. When it crosses over the 34-period EMA, follow the direction of the cross and launch your trade. When it crosses back over the 34-period EMA, get out of the trade. Only do this Monday – Thursday.