“leverage in retail forex customer accounts would be subject to a 10-to-1 limitation,”

It seems they are proposing a 10 to 1 maximum leverage for retail traders.

Most retail traders are small account traders compared to institutions.

It may seem that the CFTC is trying to “safeguard” the trading public and marketplace with these new proposed changes. However the reality is that most financial disasters that occur because of over leveraged trading are because of a rogue trader at an institutional trading desk who is trading unchecked and without restraint.

Most retail traders currently trade at upwards of 100 to 1 or even 200 to 1 leverage. Most retail traders also trade less than 10 standard size lots which is less than 1 million dollars worth of currency. The current standard leverage amounts allow traders to control $100,000 worth of currency for a $500 or $1000 margin.

If the new rules are enacted  it will mean traders will have to put up $10k to trade a standard size lot of foreign currency, instead of $500 or $1000.

This will put most retail traders out of business and many retail forex brokers will go with them by the wayside. Instead institutional FX trading desks will continue to thrive and trade higher leveraged amounts.

Instead of safeguarding the industry the new rules will put a damper on the industry in general yet still allow institutional traders to continue to trade with the higher unchecked leverage amounts.

In other words the new rules will do nothing but curb the growth of one of the fastest growing sectors in the financial services and markets.

Since forex dealing desks and retail brokers are highly computerized and mark to market on a tick by tick basis, there is virtually almost zero chance that a retail trader would go into the red on a bad trade. His position would be liquidated well before the balance on his account went into negative territory.

On the other hand, many institutional transactions are done with a phone call and a promise and not marked to market tick by tick, but by daily accounting, the promise to deliver funds on a trade are as good or as big as the institution behind the trade. Because of this, we unfortunately hear of over leveraged trading desks at times almost bankrupting a bank or trading firm because of a rogue trader.

We think the new 10 to 1 rule will cause retail traders to open accounts outside the USA and existing brokers will just funnel their retail USA business to a foreign trading desk.

The FX market is the larget market in the world.

Although the CFTC may appear to be doing something good for the industry, the bottom line is that it will ultimately end up not making much impact and become difficult to implement effectively.

If you are just starting out in the stock trading business or if you are already in it, you may have heard the term Forex trading quite a few times, but you probably might not have a clue on what it may actually mean.

Forex or foreign exchange trading is actually the largest and a fast-rising financial industry in stock trading these days. Here is a quick introduction to trading in foreign exchange.

What Is Forex Trading?

The Foreign Exchange market (Forex) is actually the largest financial market in the world. It actually makes a volume of over 2 trillion U.S. dollars a day, and as compared to its counterpart –the New York Stock Exchange (NYSE) which usually only trades a volume of 25 billion dollars each day, this industry is so huge that it becomes a profitable playground for many investors including central banks, large banks, multinational companies and even governments.

What is actually traded on the foreign exchange is money. It actually consists of the concurrent buying and selling of currencies, which are traded through brokers and are traded in pairs.

When you are buying currency, it is like you are investing on the economy of a particular country. For example, if you buy U.S. dollars then it is as if you are buying a share of the U.S. economy. Whatever the market thinks about the current health of a country’s economy would directly be reflected on the price of its legal tender and this is how currencies go up or down.

Forex Trading For The Masses

Originally the whole concept of trading in the Foreign Exchange was only intended for huge companies and banks, but not for normal citizens. After all, you could only take part in the trade if you have around ten to fifty million dollars minimum.

However, with the rise of globalization through the Internet, trading is now offered to retail traders. And these days, almost anyone can now invest on the foreign trade. All you really need to join is some small amount of money, a computer and a high-speed Internet connection, and you can sign up for an account with online Forex trading firms.

There is no exact physical office for Foreign Exchange unlike its counterpart in New York. However, the three main centers for this trade are United States, United Kingdom and Japan. These countries handle majority of Forex transactions and trades goes on for 24 hours everyday.

Today, the Foreign Exchange, as the largest market in the world, is fast paced and enormous. And it has become a very lucrative arena for many traders who may have had participated in stock trading and in other markets. Many large institutions and even smaller-based individuals have gone out to play in this market.

Although this particular market gives huge promises, remember that there is still too much at stake. It is estimated that around 70 to 90 percent of the Foreign Exchange market is still speculative. And the parties that trade currencies may not always have a plan to actually take delivery of the said currency, and more are still speculating on movement of money.

If you are interested in investing in this particular arena, take time to be familiar with the game and make sure you get the right educational background. Taking the extra mile will all be worth it, and once you have tasted your success in this arena, you will be ready to take on anything in trading.

Day trading is a very controversial endeavor to take on in the stock market industry these days. Many people end up losing so much of their finances through this high-risks trade. And the most common mistake why these people garner such bad results is because they often do not think of the risks involved and only concentrate on making easy money.

What anyone must be familiar with in order to survive this high-stakes industry are the things to look out for. Here are a few things that you need to know about day trading that could help you in making the right decisions about your investments.

You May Lose A Lot Of Money

The very first thing that you need to know about day trading is that you must be prepared to suffer from substantial financial losses. And take in mind that this is not a rare thing to happen among day traders, in fact, a lot of these people, do not even get the chance to earn profit at all.

Therefore if you have limited resources and a have very little experience in making investments or trades, then day trading is certainly not advisable for you. Make sure that you never gamble with money that you cannot afford to lose, such as your budget for daily expenses, mortgages, retirements and so on.

Watch Out For Claims Of Large Profits

One of the main reasons why a lot of people also get scammed in relation to day trading is because of their gullibility towards catchy promises that offer them large profits –most commonly from the Internet. Be wary of any advertisements or claims that try to convince you on how this certain trade can potentially make your rich in a short amount of time.

Also take in mind that most large and successful companies did not make it to the top by taking shortcuts. Most of those who have earned big money through the stock exchange have actually taken more traditional routes in their tactics.

You Need To Be Knowledgeable

Not only does day trading require you to be a wise decision-maker, but most importantly, it also requires you to have a good background on security markets and trading strategies.

To be able to become successful in this endeavor, you have to compete with professional and licensed traders who might have been doing this for a very long time already. Make sure that you invest on your own experience before you attempt on playing this risky game.

You Need To Check With Your State Securities Regulator

If you really are decided on taking part in day trading, one of the most important precautions that you can at least take is to check with your state securities regulator about day trading firms. After all, just like any broker-dealers, such firms must be legally registered with the SEC in order to do business.

At least, through this way, you would be able to determine that the parties you are doing business with are actually legitimate and mostly likely would not scam you.

In conclusion, day trading is a very exploratory strategy. And so, anyone who may not have enough experience and knowledge about the stocks game should not try to gamble without properly preparing him or herself.

This strategy should only be employed by individuals who are sophisticated, well financed and experienced enough to manage complications and bear risks in case the worst-case scenario. And so, if you are thinking about betting on the day trade, make sure that you prepare yourself to be smart in your decisions.

The Foreign Exchange or Forex is the largest market today for stock trading, and it is continually growing with more and more people investing in it. However, as promising as this market may be when it comes to profit, like any other trade it can be very volatile as well.

It is therefore important to be familiar with certain factors that influence trends in the Forex market if you are decided in joining this arena. After all, acquainting yourself with the many scenarios that can cause currencies to go up or down can help you a lot in making decisions for when to buy or sell.

There are basically three major factors that affect the Foreign Exchange –a country’s economy, political conditions and market psychology.

Economy

Economic factors are the most basic things that create changes in a country’s currency. When such economic conditions as a budget deficit or surplus is present within a country, there will surely be reactions in the market and values will be reflected on currencies. Other conditions may also include inflation trends, and the general economic growth of the country.

The more prosperous a country’s economy is, the more investors will be able to adhere to doing trade in a more positive attitude. Such indicators as a growth in a nation’s gross domestic product (GDP), employment levels and retail sales among others will basically attract more investors and that nation’s currency value will likely go up.

Political Conditions

Another very important factor that influence trends in Forex, are the conditions of a country’s political sector. This is because political instability or turmoil can generally create negative fluctuations to an economy. But if such instances occur wherein a country may rise above political obstacles, the opposite may occur and the economy may improve.

Events in a region can surely create negative or positive interest among investors for a nation’s currency. And so, such conditions surely influence the trends for demands and prices of a certain currency.

Market Psychology

Of course, the perception of traders and investors will greatly influence the Foreign Exchange market in so many ways. After all, the market is highly dependent on whether or not people would want to invest on a country’s economy in order to determine whether currency prices will go up or down.

For example, such conditions wherein unsettling international events may happen, then under the “flight of quality” rule, people would generally want to look for a safe haven for their investments. Whenever there is a greater demand for a certain country’s economy, then a higher price will be given to buyers and the currency’s value will go up and become stronger.

Other events that contribute to traders’ perceptions may be long-term trends where people invest based on what they have seen for a long period and time, and even economic numbers where people may base their investments depending on what numbers show a greater value.

The market in Foreign Exchange is often unpredictable and fluctuating. Therefore if you are interested in doing trades in this market, make sure that you take the time to be knowledgeable about good strategies that can help you play the game.

But more importantly, keep in updating yourself with the different economic trends in the international scene. After all, this currency market would greatly revolve upon events that would occur in the different countries. Familiarizing yourself with the factors that affect the Forex will surely help you make better decisions.

There are two major types of investments done in the stock-trading arena these days –short-term investments and long-term investments. If you find yourself overwhelmed and confused in choosing which type would be best, simply take note of the differences between these two varieties and consider the advantages and disadvantages of each to be guided in making the right decisions.

Basically, the major difference between the two investments is the fact that short-term plans are actually designed to show a substantial yield in a short time period. While long-term investments, on the other hand, are designed to last for quite a few years and present a slow yet progressive increase in its yield.

Let us discover more about the differences when it comes to the disadvantages and advantages of each type of investment.

Short-Term Investing and Traading

The major advantages of investing for a short-term plan are the potentials for growth at a very fast period of time, ranging from a few weeks to a few months. Although there may be fluctuating trends that could affect the market, short-term loans can still allow you more control over your money and you it is more likely that you can keep a more watchful eye on your investment.

However, this type of investment may be a bit riskier due to the fluctuations present in such a volatile stock market, as mentioned above. As compared to its long-term counterpart, this type of investment may much easily be affected by unpredictable circumstances because it is in a shorter period of time. And so, even if there is a very huge chance that you can make a lot of money in this type of investment, there are also great chances that you can lose a lot.

Long-Term Investments

For long-term investment plans on the other hand, there is a greater ability for this type of investment to gain small and distributed profits over a longer time frame. And because it has a slow-but-steady pace, it becomes more stable and involves fewer risks.

But of course, a disadvantage for the slow growth of your investments may indicate that you cannot expect to earn profit right away especially when you are badly in need of money. In addition, you may also have less control over your money because your investment would not mature right away.

Also take note that because investments may require a lot of fees to be paid as it progresses and due to occurring fluctuations in the market, most long-term investments may experience down time before they can actually climb up and become productive.

In choosing between these two major types of investments, the most important thing you have to consider in order to gauge which plan would become more beneficial to you is to contemplate on your reasons for investing.

If you invested in stocks with the ultimate goal to earn money fast then surely a short-term plan would suit you. But on the other hand, if you want to invest for future and insurance purposes like in cases wherein you want to have money when you grow old, then a long-term plan for investing is best.

Whatever your decision may be, always remember that there are advantages and disadvantage in all kinds of investments. And ultimately, to become successful in your endeavor, you must be willing to take on minimal risks and make smart decisions in order to manage your trades.

Despite its bad reputation however, many experts would claim that futures trading could only be as risky as you want to make it. And if you take on good strategies and give yourself the proper exposure, then this can make you very rich.

What Are Futures?

Futures are standardized and transferable contracts that require a buyer to purchase a stock at a specific sum and within a certain time period in the future. This contract gives the buyer the obligation of purchase, and the seller the obligation to deliver the specific asset traded.

Unlike options, futures contracts obligate the traders to buy and sell instead of just merely giving them the right.

People basically profit from futures by performing speculations in order to provide liquidity and to assume risks for price fluctuations in the market. These valuable functions provide them with substantial returns and potentially large gains. But take note that along with these, substantial risks are involved as well.

How And Why Are Futures Traded?

Trading futures has become quite popular in many markets, especially in day trading. These kinds of trades offer a wide variety of markets and it can be traded at a low cost.

Futures can be traded in both up and down markets. If a particular trader expects the market to go up, a long trade is usually done wherein the trader buys a contract and then sells it. On the contrary, if a trader believes that the market will go down, and then he will most probably make a short trade by entering a trade through selling a contract and then exiting by buying another contract.

With this system, traders are able to profit regardless of what direction the market trends are going. This is the main reason why most traders are only concerned if the market is moving at all, instead of which direction it is actually going.

In futures trading, instead of taking or making deliveries, a trader merely speculates his position in the market’s volatility by predicting directions of trends. If prices move in the right direction, then the trader would be able to profit. If this does not happen, then a trader would experience some losses.

This particular arena in trading can be very promising, but it involves so many risks as well. But if you are well experienced in trading stocks and have adopted quite an understanding in the different trends, behaviors and strategies that the industry has to offer, then chances are, you may probably do well in this particular playing field.

All of this may sound pretty easy at the moment, but if you are planning to engage in futures trading, make sure that you do your research and prepare yourself with the necessary knowledge and skills to successfully execute transactions.

Along with huge profits possible, there are a lot of risks involved and trading futures without the right background can be very detrimental.

With offices on Wall Street, in the U.K. and Russia they are one of the growing firms in the global forex brokerage arena.

A distinguishing feature of Alapari U.S. is that they are a registered member of the CFTC and the NFA. Which basically means that they have stricter accountablitily in terms of compliance. One such example of this is their maximum leverage ratio of 100:1 for trading.

On a recent phone call with Alpari it was noted that as of November 2009 all U.S. brokers will have to comply with new rules that limit maximum leverage on forex contracts to 100:1 and that firms that offer more such as 200:1 or 500:1 (at least in the U.S.) will be out of compliance and breaking the laws regarding new NFA rules.

Many smaller lot traders prefer trading 200:1 or even 500:1 so these new rules may affect trading strategies.

Alpari offers a micro account which is similar to other micro accounts which are sized at .01 in addition the offer a retail account which is sized at 0.1 which is the usual size for mini accounts at other firms.

Another interesting factor is that the size limits on a  position with their micro account is $100k or one standard lot, and their position limits on their retail accounts have no limits.

Many over the counter forex brokers have a stated 50 lot or 100 lot limit on their positions, but Alpari is one of the few retail FX brokers that have no size limits on their standard accounts.

One thing to note is that Alpari does not guarantee “no negative balances”. Most firms in the retail FX arena do have a “no negative balance” policy, however Alpari does not. So in the very worst case scenario, you could be on the line legally for more than your risk capital. In this day of totally automated and hedged contracts on the broker side, positions usually get closed well before margins are wiped out, however Alpari does leave themselves a legal loophole to their own advantage. This is probably why they can offer no position size limits because they ultimately transfer all risk to the trader. This policy and procedure is pretty standard operating procedure in the futures and commodities markets with futures brokers, but recently in the retail forex arena many brokers offer a “no negative balance” guarantee.

Lastly setting up an account with Alpari is easy and straightfoward. They accept Credit Cards, PayPal, and bank transfers. Withdrawls are by check or wire transfer direct to your account.

For their retail account there is a $1000 minimum.

For their micro account there is NO minimum, so they become a good choice for testing new EAs in a live environment.

What we are going to discuss applies purely to speculative trading. If you are hedging a stock position or commodity contract with an underlying option contract, you will have few alternatives other than the option to hedge.

However, if you are considering options trading from purely a speculative trading aspect, then the Forex markets may help you reach your speculative goals more efficiently and effectively.

Here are several key factors and reasons why Forex trading is the largest sector of financial trading in the world.

1. Forex is a true 24/5 market. From the Asian open to the European close all the way to the USA open and close, forex trades virtually 24 hours a day 5 days a week. Compare this to the stock and futures markets which do have global counterparts, however, most of the action is limited to each countries and each markets trading hours. With is this global liquidity you can pretty much initiate and close trades effectively almost at any time around the clock.

2. Massive Liquidity. There are only a handful of currency pairs that offer huge liquidity, such as the EUR/US and US/JPY and other major currency pairs. Of these currency pairs, they are traded around the world by trading firms, banks, corporations, hedgers and speculators.

3. Huge Leverage. Most retail forex brokers offer 100:1 to 200:1 leverage. Some offer even more. What this means is that you can control a $100,000 currency contract for as little as $1000 or even $500. What this means is that if you trade just 10 standard size currency lots, you can usually control a million dollars worth of currency for about ten thousand dollars. What does this equate to in dollars trading? If you traded 10 standard lots of EUR/USD a one pip move is worth $100 up or down to you. The EUR/USD occasionally has moves of over 200 pips and more in a day which means $20,000 of opportunity for $10,000.  This explains why more fortunes are accumulated (and also lost) in the Forex markets, much more so than the stock options or commodity options markets.

4. Automated Trading. Forex trading offers a slew of automated trading options and 99% of the trading and analysis software available are offered completely free by most of the forex brokers. For example a popular charting and trading software being used by many retail forex traders is Metatrader. Metatrader not only has a plethora of charting and technical analysis tools, it also allows you the ability to create what are called “expert advisors” or EAs which are simply automated custom programmed indicators, charting tools and automated trading routines which can enter and close trades and manage position sizes automatically based on any parameters you program. Metatrader can also run pre packaged off the shelf EAs that are sold by others.

5. The Forex market is hardly affected by weather or corporate management or misconduct or earnings reports, but is moved by geo political factors and economic reports of governments. Many of these reports are regular monthly and quarterly reports released at the same scheduled time by government entities.

6. The Forex market continues to get bigger every year. In time, because of the nature of accessible information online, forex trading will become as ubiquitous as stock trading.

7. The ability to start small. Many forex brokers offer mini accounts. Some offer micro accounts with smaller contract sizes that allow new traders and smaller traders to participate with less overall finacial risk.

8. The ability to trade leveraged positions, just like the futures markets and stock trading on margin.

9. The ability to trade via automated signals automatically without lifting a key on the computer or without touching the phone. Similar to a managed forex account but without the commitment or management fees… A new trend in forex trading is “automated forex trading”. You can do it yourself if you have a system and programming knowledge or if you buy a program and do it all through Metatrader. Or you can subscribe to a free service such as ZuluTrade and pick your own forex signal providers and have all of their trades routed to your account. With Zulu Trade you and choose who to trade through at anytime. You have complete control of your account and simply choose the best performing traders and allow ZuluTrade to route thier trades to your account. You pay no extra fees for this. Zulu makes money from a spread rebate though the broker you select, and you make money when your chosen provider successfully trades. The nice thing about ZuluTrade is that you can see and analyze each signal providers past performance before you choose to autotrade with them.

10. A universe of trading information. The world of forex trading has a virtually unlimited amount of information and resources, most of it is free and since the trading community is global you can access information from people all over the world who are trading the same currencies as you are. Once such community is at ForexFactory.