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Forex Trading: Tips, Hints and the Scams to Look Out for While Betting Online

The pound seems to be falling down a bottomless pit as we hurtle towards Brexit. Despite knowing absolutely nothing about the financial markets, I wonder if I can turn this to my advantage? Reports suggest hedge funds could make a killing from “shorting” – betting on a fall in value – of the pound in…

The pound seems to be falling down a bottomless pit as we hurtle towards Brexit. Despite knowing absolutely nothing about the financial markets, I wonder if I can turn this to my advantage?

Reports suggest hedge funds could make a killing from “shorting” – betting on a fall in value – of the pound in the event of no deal. This sounds like a piece of piss, so I’m going to see if I can blag my way to becoming a profitable trader in one month.

Thanks to the internet, in recent years trading has become possible for anyone with a computer and a few hundred quid to spare. The foreign exchange market (usually shortened to forex or FX) is responsible for trading the world’s currencies, and is the largest market in the world – dwarfing even the global stock market. It is open 24/5, with trades taking place across the globe. It’s possible to take part at any hour of the working week with just a few clicks from your phone.

On the face of it, the trading process is pretty simple. Currencies, such as the pound, US dollars and Japanese yen, are organised into pairs. When you place a trade you predict whether one currency will rise in value (buy) or fall in value (sell) against another. This is called a contract for difference (CFD). Get it right and you make a profit, get it wrong and you lose money.

Of course, more often than not, consumer traders lose. Trading platforms therefore carry warnings like this: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

“It’s important to go in with realistic expectations and accept that if you’ve never done it before, chances are you’re going to be part of the 75 percent who lose,” David Jones, chief market strategist at Capital.com, tells me. “Definitely don’t go in thinking it’s easy money.”

With David’s words of warning ringing in my ears, I shop around the various trading platforms and practice with a few demo accounts. Most give you £10,000 of Monopoly money, so it doesn’t really feel like you’re risking anything. I finally settle on Plus500 for my real account, because the minimum deposit of £200 is as low as I find and I don’t have a lot of money to throw away.

For my first real money trade I sell the pound (GBP) against US dollars (USD), thinking that Boris Johnson’s failure to get a Brexit deal through Parliament that day should impact the price of the pound. Traders rely on strategies like this to make money from the foreign exchange market. These vary from studying currency charts for patterns and favourable signals that can be used to predict price movement, to the less nerdy option of using news events as indicators. Really, though, it’s a coin flip.

David says I should trade as small as possible, which sounds like sensible advice, but leverage means this is not as easy as I first thought. Because it’s not actually possible to trade with sums as low as the ones most consumers can afford to invest, retail forex accounts offer high leverage, which involves borrowing the funds needed to enter the market from a broker. On Plus500, my leverage is 1:30, meaning that every £1 I trade is magnified by 30 – increasing potential profits and, of course, losses.

With leverage, the minimum I can trade is £1,000, but this only requires a £33 margin, meaning I’m not risking a huge amount of the £200 I have in my account. I also set a stop loss order – the safety mechanism that ends the trade if it loses a certain amount of money – then I cross my fingers. The trade starts in the red and gets worse from there. It lasts no more than a couple of minutes and I’m already down.

I brush it off and place more trades in the next few days. I try different strategies, setting wider stop loss and take profit orders (the reverse of a stop loss – it cashes you out once you hit a certain profit). I gain a few wins, but these are outnumbered by losses and my initial £200 investment slowly starts shrinking. I chase my losses from my desk at work. I really thought about my first few trades before committing, but I gradually get more impulsive. My early optimism is crumbling. I fairly sure I’m going to be one of the vast number of rubes who lose money.

“It’s the age-old problem: people take their profits too quickly and let their losses run too far,” says David. As well as working within the industry, he also trades off his own back and is under no illusions about how hard it is to turn a profit. “As human beings we’re pretty crap when it comes to trading, because our brains aren’t really geared up for thinking that way.”

With my losses mounting, I look for help the only place I know: Google. Fortunately, there are a huge number of people on the internet willing to help inexperienced forex traders get profitable. Unfortunately, most of them are scammers.

There are a few places to look for help for free, including YouTube tutorials and babypips.com, but retail forex has a whole scam industry orbiting it. Ultra-aspirational social media culture – think Wolf of Wall Street memes and traders posting pictures of them standing next to other people’s Ferraris – has fed the idea that there is easy money to be made in forex. Scammers prey on this by offering “signals” for a fee to novice traders, or signing them up to fake trading platforms and falsifying profits. They promise big returns if you follow their trading tips, but many offer bad advice or simply vanish after taking your money.

“Even if the firm is genuine and not a scam, there are still huge risks in forex trading for retail consumers, particularly if they are promising high returns, because forex dealing is one of the riskiest types of trading you can engage in,” Mark Steward of the Financial Conduct Authority – the body in charge of regulating financial services – tells me. He also points me to the FCA’s ScamSmart page, which has information on how to spot and avoid investment scams.

Searching for help, I find a number of forex accounts on Instagram offering unrealistically high profits in exchange for signals or commission fees. One account, @forex_syndicate, says he can offer average returns of £180 per week on a £300 investment. With a consistent 60 percent return rate like that, your £300 would grow into £1,416,709 after just 18 weeks if you reinvested all your earnings.

When I confronted him, the person running the account would not reveal his identity, but denied running a scam and said: “We simply provide training and share tips on how to trade the financial markets, which reduced the chance of people losing money if they were to start trading blind.”

Another account, @finemariam_, offered me a return of £1,500 to £2,000 on an investment of £500 and said she could not be a scammer because she is a practicing Muslim, before sending over a copy of her ID. She then ruined all the hard work she had done in winning me over by saying her trades are 98 percent accurate, higher than any legitimate trader could guarantee.

Finally, @theonlykeke offered me a £3,000 return on a £600 investment by “buying US dollars for under a third of the original value” on my behalf. If only trading forex were that simple. Neither account replied to multiple requests for comment after I suggested they were running scams.

“I was following signals from an individual and it would be a real rollercoaster – not just in terms of emotions, but results as well,” Tom, an experienced forex trader, tells me. He lost money on dodgy signals when he was a rookie, but continued paying out of a misplaced sense of pride. “It was only after a while I thought: ‘This guy doesn’t know any more than I do. I might as well be throwing darts at a dartboard.'”

Tom has been trading for 15 years and he now does it full-time after quitting his HR job at a bank and moving to Mexico. Although he has been profitable for the past five years, he says it is only really in the last two years that those profits have given him consistent returns. He also supplements his forex income with matched betting and other remote work. “You can go to work and come back poorer than you started,” he says. “That’s probably the biggest hurdle to get your head round.”

With the scams too much of a minefield to navigate, I push forward alone. My biggest win comes off the back of a piece of news: an MRP poll, which is seen as a reliable general election result predictor, forecasts a Conservative majority and GBP rises quickly against the Euro because markets tend to prefer the Tories to Labour. This is as close as I get to my “big short” moment – but it’s not enough to make up for my losses.

I had stopped trading by the time the general election rolled around, and it was probably for the best. I thought Labour might do better than expected, perhaps snatching another hung parliament, but in the end they were crushed by the Tories. In the immediate wake of the exit poll the pound surged more than 2 percent, its biggest one day rise since January of 2017. At the time of writing, Brexit anxiety has crept back in to dampen the gains, but would I have predicted any of this accurately enough to make money from the turbulence? Probably not.

Before I started trading forex, I thought I’d either scrape a profit, or lose it all in a blaze of glory. Either would have made for better copy, but in the end it turned out to be far more dull than that. My £200 ebbed away, only for a few winning trades to edge it back up again slightly. I finished with £172.89, 8.5 per cent down on my initial investment. I made 35 trades in total – 15 were profitable and the rest lost money. Like three-quarters of retail forex traders, I proved to be a flop.

“People coming into it are quite naive,” says David. “If you can make 1.5 percent month-in, month-out, you’re a superstar hedge fund manager. I’m not saying it can’t be done – clearly there are people who make lots of money – but if you’ve never done it before, why do you think you’re going to be making money hand over fist?”

@HaydenVernon / @lilylambie_kiernan

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Daily Financial News

ECB Minutes show no indication of exit discussion – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the release of the minutes from the September ECB policy meeting were pretty clear with the focus still very much on ensuring continued monetary stimulus.

Key Quotes

“The minutes stated that “there should be no doubt” that the Governing Council is determined to execute asset purchases and also emphasised that it would adopt further measures as required to reach its price stability goal. The minutes also showed that the Governing Council felt it was “crucial” to maintain the high level of monetary accommodation.

Add to that, we had comments yesterday from key ECB Council members to emphasise the maintenance of the current stance. Executive Board member Praet stated that recovery would stall if stimulus was removed prematurely while Constancio was more direct stating that the report on the ECB nearing a taper consensus was simply not correct.

So the stance of the ECB is unlikely to change and we maintain that the ECB will extend QE in December at the current pace with alterations recommended by staff committees allowing for an extension. While that in itself might not drive the euro weaker, it certainly limits the upside as we move toward that key meeting in December.”

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Daily Financial News

Is Your Portfolio’s Performance Satisfactory? (WMT, VOO, BOND)

What’s your investment portfolio’s performance? Do you know? Just 57% of U.S. adults are “financially literate,” according to a study from Standard & Poor’s titled the “2015 Global Financial Literacy Survey.” Another study by a large insurance company found that people are more frightened by planning their finances than dying.  What’s wrong?

Part of the problem is structural: Fewer than half of all U.S. states require high school students to enroll in a personal finance course.

(Audio) Portfolio Report Card on a $4 Million Account for T.R.

The other problem is psychological: People are fearful when it comes to saving and investing money.

Once a person has overcome these obstacles and gotten started with their investment plan, how can they know if their investment portfolio is making progress?

The Case for Benchmarking
The concept of “benchmarking” boils down to measuring the performance of your investments against relevant yardsticks. “Relevant” is key, because measuring performance against irrelevant yardsticks will inevitably lead to irrelevant results.

For example, racing a collie against a field of greyhounds could lead observers to incorrectly assume collies are slow. On the other hand, racing each dog against its corresponding breed will result in a more accurate view of canine speed. If your collie is able to easily outrun a field of competing collies, you have a fast dog. And if he/she can’t outrun a pack of greyhounds, it’s mainly because he/she isn’t a greyhound.

Beyond choosing relevant yardsticks, the exercise of measuring investment performance should become a consistent routine for all investors. Why? Because failing to periodically measure your portfolio’s performance, either by choice or by ignorance, leads to a distorted view of satisfactory results. Moreover, just because you’re comfortable with portfolio’s results doesn’t necessarily make the results satisfactory.

Level 1 Analysis
Benchmarking your investment performance is a layered process. Layer 1 is what I refer to as the “big picture” because it examines your portfolio’s investment performance against relevant passive yardsticks using an asset weighted approach. Let’s look at an example:

Portfolio ABC
30% U.S. stocks
10% International developed stocks
40% U.S. bonds
10% Global real estate
10% Money market (cash)

Comparing the performance results of a portfolio with exposure to different asset classes (like our example of Portfolio ABC shown above) against the S&P 500 (NYSEARCA:VOO) is a common mistake. In this example, the vast majority of Portfolio ABC (70%) has non-U.S. equity exposure, which makes an all U.S. equity benchmark like the S&P 500 an irrelevant yardstick for all but Portfolio ABC’s 30% U.S. equity exposure (NYSEARCA:IWB).

Properly measured, the other assets like bonds (NYSEARCA:BOND) and real estate (NYSEARCA:ICF) should have their performance compared to relevant passive benchmarks over the exact same time frame. And together, the asset weighted returns for the passive benchmarks will explain whether portfolio’s performance has been satisfactory or unsatisfactory. Simply put, outperformance over identical time frames is good whereas underperformance isn’t.

Level 2 Analysis
Analyzing investment performance at level 2 is less “big picture” versus level 1. Why? Because level 2 analysis focuses on the performance examination of individual securities versus their respective peer group. Put another way, level 1 analysis is comparable to using a telescope whereas level 2 is comparable to using a microscope.

Below we use level 2 analysis by comparing the performance of Wal-Mart Stores (NYSE:WMT) against its peer industry group, consumer staples (NYSEARCA:XLP). Over the past 10-years, Wal-Mart has gained almost +103% against a +173.10% gain for the Consumer Staples Sector SPDR ETF. In other words, Wal-Mart has badly underperformed its peer group by a whopping +70% over the past 10-years!

WMT vs XLP

Had we failed to use level 2 analysis on Wal-Mart by simply accepting the fact that its stock has gained +102.97%, we could’ve been easily misled to conclude that Wal-Mart’s 10-year equity performance  has been wine and roses. However, our level 2 analysis explicitly shows that Wal-Mart’s 10-year performance record has been substandard compared to its peers.

Because virtually all individual stocks will have a corresponding peer sector group, comparing the performance of a company’s equity performance isn’t just easier, but mandatory for all serious and truthful stockholders.

Summary
The proper way to determine satisfactory investment performance is to use relevant benchmarks over identical time frames. Level 1 analysis examines the portfolio’s asset weighted performance against passive yardsticks, whereas level 2 analysis focuses on the performance of individual securities.

Level 2 analysis can also be applied to mutual fund holdings, however, the fund’s underlying asset exposures vs. its peer group classification are far more important for correct analysis. This is a similar approach I use with the Portfolio Report Card grading system that I invented.

It’s crucial to remember that investment performance is directly impacted by your portfolio’s cost, risk, diversification, and taxes.  And while performance measurement is an ultra important step,  focusing exclusively on historical performance results and nothing else will tell you most of the story, but not all of it.

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EasyMarkets Demo Account Review for Practicing Trading

easymarkets demo account review
    • A 10+ Year Veteran of the Forex Market with a Strong Presence in Europe and Asia
    • One of the Few Brokers to Provide Guaranteed Stop Losses and Negative Balance Protection
    • Deep Product Coverage with CFDs on 95 Forex Pairs and Vanilla Forex Options on 23 pairs
    • Use Exclusive Tool Trade Controller More Effectively, Set Stop Loss and Profit Points For Your Trades
    • Personal Assistance with Trade Strategy and Order Execution from Dealing Room
  • stablished –2003
  • Domicile –Marshall Islands
  • Regulation –
  • Cyprus – CySEC (License Number 079/07), Australia – ASIC (AFSL 246566)
  • Restricted Jurisdictions –United States
  • Ownership –Privately Held
  • Segregated –Yes
  • Broker Type-Market Maker
  • Web Security –Verisign
  • Negative Balance Protection Policy –Yes

The EasyMarkets demo account review platform with a Demo account and experience simulated trading under live market conditions.

  1. No obligations,
  2. no cost
  3. no risk.

Feel the thrill ofEasymarkets Demo Account Review

 

trading the world’s markets, discover our trading platform and see for yourself just how easy we are.

this is the way to improve your techniques and professional traders to hone their skills. Try their trading simulator now for eight days. If you like them you can always open a live account, you’ll also get your lifetime demo account to practice trading strategies before you open live deals

EasyMarkets Demo Account Review Trading Features

EasyMarkets guarantees trade execution at pre-set stop-loss and profit points.  EasyMarkets is able to offer this because of its time tested risk management systems and procedures.  Brokers who do not provide these protections may execute an order at a very different level than your stop levels (also known as slippage), causing you to have much greater losses than anticipated.  Please note that this guarantee is only available for trades placed via EasyMarkets ’s web trading and mobile platform.

EasyMarkets is one of the few brokers with a negative balance protection policy.  Traders can incur a negative balance if the market gaps quickly and the broker is forced to close out open trades at a loss exceeding the account’s equity.  While some brokers begrudgingly forgave negative balances after the CHF crisis on a one-off basis, EasyMarkets is one of the few brokers offer this protection at all times and include it in its terms of service.

This Broker has more in-depth coverage of the markets than most forex brokers.   It offers CFDs on 95 currency pairs, 16 commodities, and 15 indices.  However, its coverage isn’t as broad as other brokers, some of which also offer CFDs on individual shares, bonds and ETFs.

EasyMarkets is one of the few forex brokers to offer vanilla forex options on the same platform.  This means you don’t have to switch to a different platform or broker when you want to options.  You can also use the same pool of funds for your option trades.

This means you don’t have to deal with  the hassle of transferring funds around and avoid withdrawal and deposit fees from other brokers.  EasyMarkets allows you to trade options on 23 currency pairs.  While there are no margin requirements for options, however, you will not be able to sell options unless you have an existing position in the underlying.

EasyMarkets offers up to 200:1 leverage on most currency pairs.  Automated trading available with Expert Advisors via Metatrader 4.

Market Analysis and Education

EasyMarkets provides a number of exclusive tools to help you optimize your trading.  The Inside Viewer allows you to see which are the most popularity traded currency pairs, the percentage of bullish / bearish traders, and the average stop losses and profit points on Easy-Forex.EasyMarkets demo account review

 

Trade Controller is a great tool which aids you in setting and modifying stop loss and profit points for your trades.  Its intuitive visual display allows to see profit / loss levels as both dollar amounts and exchange rates.

EasyMarkets demo account review

You are also given access to Reuters news feeds, exclusive fundamental analysis from EasyMarkets ’s research team, and technical analysis from leading independent research firm, Trading Central.  You can set SMS alerts for fills on limit orders, trade closings, and exchange rate levels.

this Broker has a nice archive of educational articles, videos, and eBooks.  They also have a well maintained YouTube channel where they provide videos on timely topics in the forex markets.  EasyMarkets also hosts the occasional webinar and in person seminar.

easymarkets demo account review Trading Features

  • CFD’s –Forex, Indices, commodities
  • Currency Pairs –95
  • Leverage –up to 200:1
  • Cryptocurrencies –No
  • Options –Forex Options
  • Trading Signals –Yes, Trading Central
  • Automated Trading –Yes
  • Social Trading –No
  • Phone Trading –No

easymarkets demo account review –  Trading Platforms

EasyMarkets demo account review Platforms 

  • Metatrader 4 (PC), Metatrader Multi-terminal (PC), EasyMarkets Web Trader (Browser), Metatrader 4 Mobile (iPhone, Android), EasyMarkets Mobile (iPhone, Blackberry)
  • Metatrader –Yes
  • Mac Software –No
  • Mobile Trading –Yes

easymarkets demo account review –  Customer Service

  • Online Support –Live chat and email
  • Phone Support –Yes
  • Multi-Lingual Support –Yes
  • Personal Account Manager –Dealing Desk Access for VIP accounts (USD 20,000 minimum deposit)

easymarkets demo account review –  Account Options

  • Minimum Initial Deposit –$25
  • Base Currencies –EUR, GBP, USD, CNY, AUD, PLN, ILS, ZAR, NOK, JPY
  • Minimum Lot Size –5,000
  • Account Types –Standard, Premium, VIP
  • Payment Options –Visa, Mastercard, Skrill, Bank Transfers

Safety and Security

asy-Forex is a respected veteran of the forex industry with 10+ years operating history. Its parent company is a privately held company domiciled in the Marshall Islands. EasyMarkets has offices in major financial centers around the world including London, Shanghai, Limassol, Warsaw and Sydney.

EasyMarkets is currently regulated by CySEC in Cyprus and by ASIC in Australia. They previously held coveted US licenses but decided to withdraw in 2010 after regulatory capital requirements were increased twenty fold during the recent financial crisis.

Over its more than a decade long operating history, EasyMarkets has been subject to a few small regulatory fines from CySEC relating to its advertising practices in 2010 and compliances lapses in 2009. There is an Israeli class action lawsuit alleging that Easy Forex provided investment advice without proper licenses.  There was a similar suit in 2010 that was subsequently settled out of court.  Overall, there hasn’t been regulatory action in recent years and the issues above didn’t endanger client funds or integrity of EasyMarkets ’s trading system.

Customer funds are held in segregated accounts in a number of reputable European banks and ANZ bank.  Online payments are secured by Verisign and EasyMarkets is subject to yearly audits by PriceWaterhouseCoopers.

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Trading Forex, Stocks and CFDs carries risk and could result in the loss of your deposit, please trade wisely.

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