Recommended Forex Brokers

FXOpen — one of the most popular MetaTrader Forex brokers with an easy entry limit and a really fast execution (they constantly invest into new trading servers):

• Welcome bonus system
• $1 to start trading
• WebMoney, LibertyReserve, CashU, E-Bullion and other payment options
• Traders’ contests with real bonuses
• 1-2 pips spreads on majors

InstaForex — known for their aggressive bonus and competition promotions, this broker offers extremely flexible leverage and has a very dedicated support:

• MetaTrader trading platform
• Flexible leverage — from 1:1 to 1:500
• WebMoney, Moneybookers, e-Bullion and other payment methods
• Starter’s bonus — from $30
• Open account with only $1

FXcast — Forex broker that is famous for its multi-national and multi-lingual team with a support available in almost any language spoken:

• MT4 trading platform
• Leverage up to 1:400
• No slippage during high volatility periods
• Start trading with $10
• WebMoney, c-gold, LibertyReserve, StrictPay and many other e-currencies

Forex4you — ultimate decision for small-scale traders. With Forex4you you can trade even with cents:

• Deposit with WebMoney, LibertyReserve and other ways
• Ultra-micro lots — 0.0001 of a standard lot
• MetaTrader platform for trading
• Get paid an interest on your account balance

Forex Chart Patterns

Trading with the chart patterns can be easy if you know how to distinguish them and how to place the entry and exit orders correctly. There are many different chart patterns recognized by the expert financial traders. But in my opinion, in Forex trading there are five most important and rather frequently appearing patterns: ascending, descending and symmetrical triangles and rising and falling wedges. Here you will find the models of these patterns and their descriptions:

Ascending Triangle
Generally, it’s a bullish continuation pattern but the breakout in each direction is possible. If you like taking risk you can go long immediately after you spot this pattern. But if you want to be careful it’s recommended to wait until breakout appears in either side. The most important parts of the ascending triangle are the horizontal line and the upwardly sloping line. It’s also important for the price rate to touch each of those lines at least twice before breakout. This rule is vital for all of the 5 Forex chart patterns presented in this article. As you can see on the image, the price has touched the sloping line three times and the horizontal line two times and then broke out through the latter. Stop-loss should be placed slightly below the horizontal line. As the moderate pull-back is possible, consider placing stop loss near 70% level on the way from the sloping line to the horizontal one in place of the breakout. Take-profit should be placed according to the auxiliary sloping line, which runs from triangle’s top-left angle parallel to the main sloping line. Consider placing your target at the auxiliary line’s level in place of the breakout.



Descending Triangle
Generally, it’s a bearish continuation pattern but the breakout in each direction is possible. As with the previous pattern you can go short immediately after you spot it. Wait for breakout in either side to enter a high-probability position. The most important parts of the descending triangle are the horizontal line and the downwardly sloping line. The price rate should touch each of those lines at least twice before breakout. As the image shows, the price has touched the sloping line three times and the horizontal line two times and then broke out down. Stop-loss and take-profit levels are placed using the same principles as with the ascending triangle.



Symmetrical Triangle
Generally, it’s a continuation pattern that breaks out in the direction of the previous trend, but in practice breakout in every direction is possible. As always, you may decide to open a position in the direction of the previous trend immediately as you spot this triangle. If you wait for breakout then you have better chances of success. The most important parts of the symmetrical triangle are the downwardly and upwardly sloping lines and the horizontal line that bisects the angle created by the first two lines. The last line should be really horizontal (several degrees of error are allowable) or otherwise it’s some kind of a wedge but not a symmetrical triangle. As always, the price should touch each of the main sloping lines at least twice before breakout. Symmetrical triangle, which is shown on the image, breaks out downwardly after touching the bottom line three times and the top line multiple times. Stop-loss should be placed near 70% level on the way from the opposite sloping line to the horizontal line in the basement of the triangle (not the breakout point like before). Take-profit can be set near the auxiliary horizontal line, which runs from the top or bottom base angle (depends on the breakout direction) of the triangle and is parallel to the main horizontal line.



Rising Wedge
Usually, this chart pattern signals a reversal from the previous trend, but both upward and downward breakouts are possible. You can enter a risky trade immediately when you see this pattern. Wait for a clear breakout to enter a more probable trade. The crucial parts of the rising wedge are the two upwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image below you can see that the price touched top line two times and the bottom line multiple times. The downward breakout is shown. Stop-loss can be set at the auxiliary line that bisects the angle of wedge; set it near the level of the auxiliary line at the breakout. Take-profit is set near the auxiliary line (not shown on the image) that runs from the top or bottom base angle (depending on the breakout direction) of the wedge and is parallel to the opposite sloping line. E.g. in the picture’s example wedge the line should start at the bottom angle of the wedge and be parallel to the top sloping line. Take-profit should be placed near the level of that auxiliary line at breakout.



Falling Wedge
As its rising cousin, this chart pattern often signals a reversal from the previous trend, but both upward and downward breakouts are still possible. To enter a risky trade, open it immediately as you see this chart pattern. Wait for a clear breakout to enter a more probable trade. The main parts of the falling wedge are two downwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image you can see that the price touched the bottom line two times and the top line multiple times. Upward breakout is shown. Stop-loss and take-profit levels are set using the same principles as with the rising wedge.



If you have your own opinion or questions about Forex chart patterns, feel free to leave it in a comment to this post.

Forex Market Regulation

In short, there isn’t any. Not like the Forex trading is completely unregulated, but there isn’t such thing a SEC (Securities and Exchange Commission) for the Forex market. There is no central location and the company that would own the market (like NYSE Euronext owns New York Stock Exchange). Decentralization of the modern foreign exchange market is its greatest advantage and one of its biggest problems. And while the market itself remains unregulated the market participants are, in fact, regulated by various authorities, depending on the country where the given participant resides or does his business.

NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission) are obligatory regulating organizations for the Forex brokers that are based in United States or want to legally deal with the U.S. residents. While spot Forex trading has nothing to do with the futures or commodities, these organizations set the rules for how the retail Forex market should work in United States. Some of the rules protect the traders (e.g. by setting high own capital requirements for the brokers) and some just make traders’ life harder (e.g. the tons of documentations required to register with a broker and the latest no-hedging rule). Anyway, traders (even those from U.S.) still have the option not to trade with the NFA-registered brokers, so, there’s nothing bad in having such institutions as NFA or CFTC.

FSA (Financial Service Authority) regulates the Forex brokers that are based in U.K. or are dealing with the British traders. The  U. K. regulation is much lighter than the one in U.S., so traders usually find no difference when they are dealing with the FSA-registered broker. If you want a regulated U.K. broker, just look if it’s registered with FSA. But don’t expect it to be much more reliable than the unregulated brokers.

SFBC (Swiss Federal Banking Commission) requires all Forex brokers that are based in Switzerland to obtain the real Swiss banking license and thus become a regulated banking institution. That’s a good thing for those traders that are registered with the Forex brokers that got such license, because Swiss banking regulation is one of the best in the world and those institutions that fulfill all the requirements can be certainly considered reliable. On the other hand, obtaining such a license is a long and expensive way; this fact is making some of the Forex brokers to move out of Switzerland.

Some Forex brokers are regulated by the European and other banking laws as they are registered as the banking institutions in the respective countries. Such brokers can be considered the most reliable ones, but for the common retail trader dealing with them isn’t easy as they usually require high minimum account deposit and a lot of paperwork.

The majority of other regulatory bodies provides almost no strict requirements for the Forex brokers and is plainly nominal. If you see a broker registered on Seychelles or British Virgin Islands, or some other «offshore zone» it doesn’t mean that it’s thoroughly checked and audited. Of course, it doesn’t also mean that it’s a scam broker. Some Forex brokers prefer to stay offshore for a lot of advantages and some traders prefer those brokers for their own reasons. When you choose your broker, be sure to select the one with the appropriate type of regulation that fully fits your trading needs.

If you have your own opinion or questions on Forex market regulation, feel free to leave it in a comment to this post.

Introduction to MetaTrader 4

The MetaTrader 4 is possibly the most recognized and efficient home broker trading application nowadays on the market. It is free and available for download from the MetaQuotes Software Corporation website, the producer of MetaTrader 4. If your broker offers the possibility of having MT4 as your main trading platform, it will be likely to provide a download link directly when you sign up for your trading account. Even if many brokers have their own platforms, MT4 it is still a powerful and reliable tool for Forex, stock, and commodity traders. If your broker doesn’t support MT4, you can freely access real data from several servers on MT4, the currency pair rates differ a bit from MT4 servers and your broker, but it is not something that will significantly affect your trading performance.

Once you have successfully downloaded and installed the MT4 software, launch it. It may seem a bit complex for beginners, but all the information is very clear and divided by windows that allow you to control all your orders and a different number of pairs simultaneously. From the Market Watch feature, normally positioned on the top left size, under the menu bar, you have all the pairs available on the server, and with a click and drag mouse movement you can make that pair to appear in any of your chart windows, making it easier and faster to switch from one pair to another, and you, as trader, know how decisive can time be, when you have more than one order opened, mainly during news and market events.

One of the best features that MT4 offers is the option to create templates that fit better each and every trader needs. The profiles can have one or multiple charts. For example, 3 EUR/USD charts with different timeframes, or 3 different pair charts, in which you can totally customize them using the indicators of your choice. From colors to templates, the MetaTrader 4 offers the trader full interaction with his orders, which is often not possible in many broker platforms.

The main disadvantage that MT4 has against other web-based trading platforms is the fact that you have to download it. Many traders have to often check their orders from different places, such as: office or university. So if your broker only offers the MT4 or other downloadable software, it can be quite complicated for you to manage your orders, if you fall into this category. The optimal situation would be the possibility of using MT4 while you are on your computer, and at the same time, the option to open or close orders through your browser, in situations where aren’t using your computer.

Finally MetaTrader 4 is, doubtlessly, a tool that every Forex trader should at least download and be familiar with, in most of the cases, you will make it part of your trading experience, considering its features, for the moment, MT4 has a wide superiority against other trading software.

Heiken Ashi Trading System

Heiken Ashi (or Heikin Ashi, Heikin-Ashi) is the method of representing the charts using the Japanese technique of the balanced bars. Compared to the traditional Japanese candlestick charts the Heiken Ashi charts are more easily read, provide clearer picture of the market and allow easy trend spotting. What is good about this method is that it’s included into the standard set of the MetaTrader 4 indicators. You can find it there under the Custom submenu. I won’t explain how to calculate those candlesticks here because MT4 does it all automatically for you and you don’t have to worry about how those candles are drawn. Here I will tell you how to use Heiken Ashi in trading the trends. You can see the example Heiken Ashi chart:



As you see, white bodies are the uptrend candles and the red bodies are the downtrend candles. The upper shadows are usually absent on the downtrends and the lower shadows are absent when the trend is going up. There are 5 Heiken Ashi scenarios for trends:

1. Trend is normal. Rising white bodies signal ascending trend and falling red bodies signal descending trend.
2. Trend is getting stronger. Rising longer white bodies with no lower shadows for ascending trend; falling longer red bodies with no upper shadows for descending trend.
3. Trend is getting weaker. Candle bodies become shorter and for ascending trends lower shadows occur, for descending trends — upper shadows.
4. Trend consolidation. Small candle bodies with both upper and lower shadows.
5. Trend is changing (not accurate signal). Very small candle body with long upper and lower shadows.

That’s all you have to know to trade on the trends successfully if you are using Heiken Ashi charting method. But I also recommend reading some other article on Heiken Ashi if you want to learn more about using it.

Why do Forex Brokers Pay or Take Overnight Interest?

With most Forex brokers when you leave a currency pair position open over the night you’ll get a swap or an interest payment for it. It can be positive (you actually gain money) or negative (you lose money). That payment is usually very small and the majority of the beginning traders just don’t pay any attention to it, since their direct profit or loss from the trading is much greater than this rollover interest. But why do the brokers pay and take this overnight interest payment or swap? And why do some brokers promote interest-free accounts?

The origin of the overnight interest is the fact that in the retail Forex market the physical delivery of the currencies is absent. If you buy €100,000 with your leveraged $1,000 the broker won’t transfer those €100,000 to your bank account. But you’ve paid $100,000 for those euros, even if you borrowed them from your broker. So, if the Forex broker doesn’t deliver the currency to you they technically borrow it from you. In the abovementioned example you borrow $100,000 from the broker and the broker borrows €100,000 from you. And where you have the debt and the loan, there you have the interest rates. The interest rates for the overnight interbank lending (and that’s what you are doing when trading Forex on leverage) are set by the central banks. For example, the rate that you pay for borrowing the dollars from your broker is set by the Federal Reserve System, while the interest rate that the broker pays to you for borrowing the euros from you is set by the European Central Bank. The difference between those two rates is the final overnight interest or swap rate.

Let’s look at this rate calculation. You buy a standard lot (100,000 units) of EUR/USD with your account being in the U.S. dollars with the leverage of 1:100. The current Fed rate is 0.25% and the current ECB rate is 1.5%:

1. You use $1,000 as the margin.
2. You borrow $100,000 from your Forex broker.
3. You buy €100,000 with the borrowed money.
4. You lend €100,000 to your broker (because it won’t deliver the currency to you, anyway).
5. You need to pay 0.25% yearly or 0.00068% daily for your borrowed $100,000.
6. Your Forex broker needs to pay 1.5% yearly or 0.00411% daily for its €100,000 borrowed from you.
7. In the end, the broker needs to pay the difference between €4.11 and $0.68 for each day that your position is open. That’s your positive swap or overnight interest.

What would happen if you didn’t buy that standard lot of EUR/USD but went short on it instead? You’d have to pay that difference to your broker.

The problem is that in reality brokers don’t pay or take the exact amounts for the overnight interest. They minimize the swap if they pay it out and maximize if you do. That way they try to avoid the risks. But that’s certainly not very fair.

Why do some of the brokers claim that they don’t pay or take overnight interest? Because the interest is viewed inappropriate by one of the most popular religions in the world — Islam. Some Forex brokers offer interest-free accounts by request and charge a fixed commission per trade to compensate their interest-based losses. Some brokers provide only interest-free accounts and usually don’t charge any commissions in that case.

How can you gain advantage from the overnight interest? First, you can use it for carry trade. When you feel that the currency pair with the big positive interest rate difference is going to remain stable or move in your favor for a long period of time you can use the broker’s leverage to receive some ridiculously high interest rate from the swaps only. Another way is to open an account with two brokers — one that offers no-interest policy and another — with the common Forex broker. This way you can hedge your positive interest rate difference position with the no-interest rate position on another broker. In this case you won’t be bothered by the market movement but at the same time you will gain advantage from the positive overnight interest. Of course, such practice is usually considered illegal by the brokers with no swaps, so, I wouldn’t recommend using it.

4 Easy Steps to Remove Emotions from Your Forex Trading

Emotions are the one of the greatest problems of the Forex traders. Almost every beginning trader, who starts with the demo account, experiences a great success in his trading, but fails to carry this success to the real money account. What’s the problem? Emotions! When we lose we feel frustration and sometimes even despair. Winning can cause us to lose control over our actions and turn our trading into a gambling or cause a serious overtrading. So here are the four easy steps to stop emotions from ruining your Forex trading:

1. Single loss is not your fault. It’s not even the market’s fault. And it’s not your system’s fault. It’s just a loss. No trader or system can guarantee 100% winning rate. So, losses should happen. If you lose then your system works. It may even lose again, but that won’t change the full picture. Trading doesn’t work with a single loss or win; it works with the loss rate and risk-to-reward ratios. So, next time you lose, remember that there is no one to blame, because there is no guilt in losing.
2. If the losses prevail over the winning positions then check your risk-to-reward ratio first. If each of your losses is less than a third of your single winning position then maybe your system is intended to work with 65% of your positions in the red zone? If your risk-to-reward ratio doesn’t compensate your poor loss-to-win ratio, you still don’t have to blame yourself, the market or your system. Probably, it’s just the wrong system for the market you are trading in. Time changes and the old systems stop working, while the new ones are created. Just switch to something else and continue your pursuit of success.
3. Single winning position is not an indicator of your success. The same as with the losses don’t treat a single win as your accomplishment. It’s just a part of the routine process of trading Forex.
4. If your winning rate is high during the long period of time and the risk-to-reward ratio is rather low then I can congratulate you with finding the right strategy that worked fine for the kind of market you were trading on during that period. That’s it! Stick with it until your winning rate declines below the satisfying level. Then look at the number 2.

Future of the Forex Market

The Forex trading is already a very popular kind of the accessible financial trading. It’s now more like a «people financial trading» with many traders treating it as some kind of the «home business» opportunity. The popularity of the on-line Forex trading (and the popularity of the Forex was insignificant before the on-line era) has began rather recently — about 8-9 years ago. Every new year brings us new changes and developments. What will be the future of the Forex market?

It may seem almost impossible but the Forex market will become even more popular than it is now. A lot of people has already heard about the Forex, but know little about it and never tried trading. If the past several years were dedicated to informing people about the Forex, the next few years will be about getting as many people as possible to actually try trading Forex, at least on demo. The increasing popularity will lead to an increased amount if the related information — analysis, trade ideas, systems, strategies, expert advisors, etc. People will start discussing Forex not only at the dedicated forums and chatrooms, but at the unrelated meetings and parties.

The trends will become less distinctive. The large amount of participants will mean a faster and more flexible reaction to the global events — like natural disasters, acts of terrorism, war conflict outbreaks, commercial news and so on. The volatility will rise also because of the wider range of the systems, strategies and the analytical reports.

The stricter regulation will also influence the market participants, attracting more conservative traders. The unregulated Forex brokers will also remain popular though because some traders will value the cheapness and the easiness of trading more than the comfort of being protected by the state’s laws.

Paid systems and strategies will continue to flourish despite the fact that the free similar version will be widely available. The new marketing techniques will do their work enriching all those who decide to create their own paid «get rich with Forex scheme».

4 Guidelines for Forex Trading I Follow

Forex trading may become a much easier activity if you follow your own or someone else’s well-formulated guidelines. I’ve based my guidelines on my past Forex trading experience and knowledge gained listening to some of the best stock and Forex traders. What’s important is that the guidelines are not the laws and rules — they are not the only way to success, they just help the traders in their endeavor. Here’s the list of my four Forex trading guidelines:

• Risk only 3% of the total trading capital with each trade. Generally it’s quite hard to come up with the comfortable risk percentage value for your trades if you want to keep a good money management and still let your funds grow at a nice rate. For me 3% is the optimal level — safe enough to save and high enough to gain.
• Reward-to-risk ratio should be no lower than 1. Many currency traders prefer trading with the ratio not less than 2 or even higher. That’s a problem of risk/gain balance too. For me the opportunities with the ratio above 2 are very rare — maybe, because I prefer high accuracy trades. If your accuracy rate is far from 90% than sticking to reward-to-risk ratio of 2 would probably be a better decision.
• Don’t leave the positions open through the weekend. The weekly opening gap can be a killer. Don’t underestimate it. As a swing trader, I prefer to open my positions in the beginning of the week and I always close them before trading ends on Friday. The gap in the price rates that usually occurs after a weekend can make your stop-loss trigger far from the levels you planned it to.
• Wait before opening a new order after you’ve just traded. If you jump into another position right after you closed or opened a previous order is a straight road to overtrading and an empty balance. I always wait some time analyzing opportunities and resting from the Forex market before setting up my next order. Maybe, for the extreme scalpers this isn’t a best decision, but for the absolute majority of the medium-term Forex traders it is.

Forex: Tools of Trade

Although, the success in the Forex trading is largely associated with the trading strategies and systems that can be usually bought for money, those are not the real tools of the Forex trader. They can only be considered as the «shortcuts to the riches». Every professional should employ his own tools of trade and the Forex traders should have them too. Independent on the professionalism level of the trader, these tools help to analyze the markets and to calculate all the necessary numbers for money management and position taking:

MetaTrader 4 platform — perhaps the most important of the tools, a successful Forex trader should have. Even if you don’t trade with MetaTrader broker you should still download this free platform and use it for charts and technical analysis. With MetaTrader you can browse charts and the past history of almost all currency pairs, you can apply dozens of standard indicators and use the custom user-tailored indicators, you can back-test strategies using their strategy tester and forward-test your systems and expert advisors on the free demo servers. MetaTrader is your number one tool if you want to go beyond the beginner’s level in Forex.

Risk and reward calculator — a helpful tool if you prefer to know your reward-to-risk ratio before opening a real money position and manage your risks correctly. This risk-to-reward calculator will only for the chart patterns with the distinctive local peak and bottom. It’s based on the Fibonacci retracements.

Pip value calculator — it’s not a trivial task to calculate the value of a pip if you trade exotic currency pairs and/or have your trading account in some exotic currency. Understanding the value of the pip is important to accurately calculate your profits and losses. The on-line pip value calculator tool will help you to determine the pip value with the minimum efforts from your side.

Pivot points calculator — this tool will be useful to you only if you prefer to trade using technical pivot levels. There are many types of pivot calculators available — floor pivots, Tom Demark’s pivots, Camarilla pivots, Woodie’s pivots, etc. I suggest you using the on-line pivot point calculator, which combines the calculation of all the possible pivot point types.

Fibonacci calculator — if you trade via the MetaTrader platform you don’t need a separate Fibonacci calculator because you can use the standard indicator to build Fibonacci retracement levels. But if you use some web-based or some other inferior platform, you’ll enjoy calculating the Fibo levels with the on-line Fibonacci calculator.