Forex Trading, Mini Accounts, Online Forex Trading System

Benjamin Franklin once famously proclaimed: ‘Certainty? In this world nothing is certain but death and taxes.’

However, although they may not have always been able to avoid it entirely, rich investors have long been able to hire expert tax accountants and attorneys to get round the tax laws and minimise tax liability. Unfortunately, this sort of legal tax avoidance has been the preserve of the very rich and well-connected among investors.

No longer now.

A relatively new investment product originated in the United Kingdom has turned that around in favour of private investors, big and small.

Enter financial spread betting.

In its purest sense, financial spread betting is simply a form of derivative trading, using a derivative instrument (namely, the spread bet) that mimics the price movements of an underlying financial instrument, such as individual stocks and shares, commodities, various currency pairs, stock market indices, and government bond benchmarks.

In this way, you can think of a stock spread bet as a derivative on a particular individual stock. Like standard derivative instruments, the value of the spread bet is based on the value of the specific instrument that it tracks.

For all practical purposes, the pricing is market-determined and driven by the price of the underlying market. Liquidity is essentially guaranteed as most brokers simply hedge positions in the cash market and spreads are relatively narrow.

This form of trading has a number of distinct advantages over conventional stock trading.

The first is relatively straight-forward. In the UK, share trading is subject to stamp duty which is 0.5% of the transaction value. Using spread bets avoids this cost, adding this gain straight to the bottom-line.

A second important advantage is the ease of multi-directional trading afforded by spreadbetting.

What I mean here is that unlike conventional share dealing where the requirements for short selling are particularly cumbersome, using spread bets, one is able to go short of an index, stock, commodity or currency in much the same way that one is able to go long. There is no added requirement or consideration. To go short, a spread bet trader simply reverses the order of trading transactions, selling first and then buying back at a lower price (if the market moves in your favour).

A big attraction of spreadbetting is the fact that under current legislation in the United Kingdom, profits are free of capital gains tax. Of course, this is only of value to you if you have trading profits to protect from the tax man in the first place.

The editor of the ’spreadbettrader’ website (see author information below for link to spreadbettrader), a professional spread betting analysis website provides excellent assessments of profitable trading opportunities for earning substantial spread betting profits for those who are interested.

It goes without saying that for those who earn substantial returns on their investments, the ability to keep a further 40% of those returns (from potential tax savings for higher-income tax payers) is certainly attractive.

This tax-free feature has led to the rapid rate of growth that spread betting has enjoyed in the United Kingdom over the last five years.

For more extensive insights and additional information on financial spread betting as well as free research on spread betting opportunities, please visit http://www.spreadbettrader.co.uk

The forex markets are open 24 hours a day between Monday and Friday which means that anyone in the world can conveniently trade at some point during the day. However, some times are more volatile and profitable than others.

The most volatile period of the day is between 1.30 and 4.30pm UK time which is around the time that US traders start trading the markets. More significant is the fact that a lot of economic data releases are announced during this period, which can cause dramatic swings and increased volatility in the currency markets, particularly the dollar-related pairs.

However although volatility is good to an extent, it’s not necessarily the best time to trade because these announcements can cause wild and unpredictable swings which generally does not equate to profits. The resulting move in the more significant of the data releases will often counteract conventional technical analysis as well making it extremely difficult to make any profits.

The only people to benefit from trading during this period are the tiny minority of news traders who are capable of benefiting from such swings.

For most of us the ideal time to trade is when you get large market moves and trends that are more predictable, conform well to technical analysis, and is during a time when there are no major economic news announcements scheduled.

Luckily such a period does exist and it is basically the start of the European trading session between 8.00 and 12.00 (or you could even say 6.00-12.00 because you often get strong moves from 6.00 onwards).

This is an excellent time to trade because it’s the most heavily traded session, so you get decent sized moves, and it’s generally free of any market-moving announcements so you can concentrate fully on technical analysis.

Unfortunately not everyone around the world can trade during this time due to time differences and the inconvenience of trading at an awkward time of the day, so for those people the next best time to trade is during the Asian session. The Yen related pairs in particular are the best pairs to trade during the Asian session, as you would imagine, as the other major pairs are extremely quiet during this time of the day.

So in conclusion, the best time of the day to trade the forex markets in my experience is the start of the European trading session where you get large swings and few market-moving announcements to contend with. If you’re trading the major currency pairs, you will find that the other times of the day are either too quiet or too volatile, unless you’re trading Yen pairs which move strongly during the Asian trading session.

James Woolley runs a blog offering tips and strategies related to forex currency trading and a review of Forex Trading Machine

Before you begin to Forex trading, you need to learn the basics of money management first. One of the things you need to do is to decide how much money you can afford to lose on a single trade, but just as importantly, you need to have a system set up that you decide you’re going to follow when you do your trades.

One of the biggest mistakes beginning traders make is that they decide they’re going to try to gamble and try to win the jackpot, but that’s not the way to make true money in Forex trading. Most important is that you make consistently profitable trades with an occasional loss.

It’s true that some people do make money if they “gamble” in Forex trading, but most people don’t. If you truly want to be a successful Forex trader with a consistent profit set up, you’ll need to have a system in place that will make you consistent and regular profits, rather than exceptionally large ones on occasion. This way, you don’t have to simply depend on luck; you can actually depend on your own experience and a set protocol to help ensure profitability.

Just as with anything else, it’s easier to lose money with Forex trading than it is to make it. For example, you can certainly gamble 50% of what you have set aside on a single trade; it’s also true that you can lose that money. What happens, then, if you lose the other 50% on a next trade? When you gamble, you might often talk about a “winning streak” or “losing streak,” but you don’t want this as a Forex trader. You want to have consistent wins you garner yourself through a system you’ve set up, along with an occasional loss.

So instead of thinking like a gambler, think like the casino owner. Make sure that you win more often than you lose. How can you do this?

Trade with just a small percentage of what you have set aside for Forex trading. Let’s say that you have starting capital of $10,000. You are going to come out much further ahead over the long run if you only risk 5% of that capital on every trade instead of 10%. Therefore, go for the smaller percentage per trade and simply make more trades. This means that even if you only come out ahead on 70% of your Forex trades, you’ll not only still make an overall profit, but your losses will be much more comfortable and will be much more readily absorbed. This also helps offset the fact that you may very well have 10 losing trades in a row before you have another winning one.

Take a look at the chart below to see how utilizing 5% of your bankroll instead of 10% of your bankroll per trade will affect you:

10 Percent of Bankroll:

Bank - Trade
$10,000 - $1,000
$9,000 - $900
$8,100 - $810
$7,290 - $729
$6,561 - $656
$5,905 - $591
$5,314 - $531
$4,783 - $478
$4,305 - $430
$3,874 - $387

5 Percent of Bankroll:

Bank - Trade
$10,000 - $500
$9,500 - $475
$9,025 - $451
$8,574 - $429
$8,145 - $407
$7,738 - $387
$7,351 - $368
$6,983 - $349
$6,634 - $332
$6,302 - $315

After 10 losing trades with 10% of your bankroll, you’ll have $3487 left in your account. However, with 5% risked per trade, you’ll have $5,987. This gives you a much greater cushion after each trade to bounce back. Assuming a 70% profitable trade versus 30% losing trade ratio, this means that you should expect to get 10 consecutive losing trades every 1024 trades.

If you risk no more than 5% of your bankroll at any one time, you should be able to ride out even significant losing streaks. In addition, if you choose, you can choose to trade with larger margins once your account amounts increase. This will help you post even greater profits (along with proportionately larger losses as well, of course, although overall your profits may significantly increase).

One note to make trades easier for you is that if 5% of your current bankroll happens to be an odd number, round down to the nearest convenient number, such as $600 instead of $613. This makes the math easier to keep track of.

Ian Armstrong is an avid Forex enthusiast.

He strongly recommends the free beginner’s guide to forex trading, available directly from Forex Trading Systems