Forex Platforms

Five reasons why forex markets will continue to grow in 2010

The retail forex market is expected to continue its growth in 2010 – primarily being driven by an increase in the number of experienced active traders moving to forex from asset classes, leading to a significant uptake in trading volumes.

The forex markets appeal to these investors for five key reasons.

Firstly, for sophisticated investors who are looking to put a proportion of their investments into a diversified asset class, forex offers significant advantages, particularly because of its 24-hour liquidity, tight spreads and easy and ready access.

Secondly, the fundamental principles of trading forex are similar to those required for other asset classes. For example, active traders who are following technical and fundamental analysis of the global markets should be well equipped to take a view on the direction of the forex markets. These traders are able to diversify their investment portfolios from traditional bond and equity assets to forex, thus spreading their risk more effectively.

Thirdly, advances in technology are improving and enhancing the client’s forex trading experience – whether that be the use of stop-losses, or trailing stops. Clients can execute their trading plans using combinations of orders to effectively manage their currency risk. Sophisticated investors are increasingly wanting to make their own financial and investment decisions, and are demanding fair and transparent pricing and access to the latest forex research like that which is provided to clients of dbFX, the online margin forex trading platform from Deutsche Bank.

Fourthly, the continuing demand for algorithmic trading systems will drive future growth. After accounting for less than one per cent of trades in January 2009, algorithmic trades accounted for 25% of all dbFX’s trading volume by January 2010 and will continue to attract new entrants to forex markets (although they should only be used to supplement trader’s existing investment strategy).  

Lastly, the growth in popularity of Managed Account programmes like those offered by dbFX.com are adding to the overall popularity of forex markets. Managed Accounts are targeted at investors who want to gain exposure to forex without actually having to trade themselves – but still ensuring they have full access and control over their capital.

Retail forex has a bright future, and the case for long-term and sustainable growth in the market is clear and compelling.  The key to taking advantage of this potential is to educate investors on the benefits of trading forex and provide them with a multitude of ways they can access the market.

Tags: Forex, Forex Markets, Forex Trading

How to Choose a Forex Broker

Forex is one of the fastest growing asset classes in the retail investment community, with an increasing number of investors recognising the diversification and liquidity benefits of trading currencies. 

But as the market continues to grow, so too does the number of forex brokers available for investors to choose from.  While this is an important development for retail FX as a whole, this growth and increase in choice is making it harder for investors to select a broker that not only best suits their forex trading needs, but that is also reliable and offers value for money.

However, and as is the case with making any informed investment decisions, there are a number of questions you can ask to make the process of choosing a broker that much easier.  Firstly, investors should analyse their investment objectives, trading style, and tolerance for risk.  This can be established by asking:

• How much are you are investing?
• What is timeframe for your trading activity?
• What is your trading strategy?
• What is your comfort level with risk?

Risk tolerance is a particularly important consideration, as forex brokers routinely offer leverage of as high as 400 to 1.  The forex market can move by one per cent in a day, which can have a significant impact on leveraged capital and ultimately investment returns, and reinforces the need to be clear on your appetite (or lack thereof) for risk. 

Depending on the investors’ risk appetite, it is also fundamentally important for traders to consider the regulatory environment within which brokers operate, as forex is not regulated (and by default the forex providers) in some jurisdictions.  Regulations are ultimately there to provide traders with a safer environment with which to trade, and investors should look closely at whether a broker is regulated (and by what means).

Finally, before signing up, traders should open a free trial account and test out the platform’s ‘bells and whistles’, familiarise themselves with the way the system works and how it and their strategy performs.  

Only after a solid and prolonged ‘test ride’ should you narrow your choices further to the point where you are ready to make an informed, and well-considered decision on the broker you will select as your trading partner in the long term.  For example, you can trial the dbFX forex trading platform with $50,000 in virtual money to test your trading ideas in real market conditions with no risk.

Tags: Forex Brokers

Transparent and Fair Forex Pricing

Transparent and fair forex pricing

Foreign exchange has become one of the fastest growing investment asset classes for the retail investor, and over the past 10 years or so, there has been a proliferation of brokers and providers coming to market to meet the trading demands of this ever growing community.

One of the key considerations for anyone wanting to trade forex is the pricing offered by the broker. Retail forex traders should look to use a forex broker that not only provides world-class service, support and research, but one that also provides reliable, fair and transparent bid/ask spreads.  Traders should also be careful to look behind the advertised price, and clearly establish the actual or “typical” price, which is often not clear and different from the one advertised.

Spreads in forex are the difference between the bid and offer prices.  For example, if a EURUSD quote is 1.4064 to 1.4066, the spread is 2 pips.  So, as an investor, you can sell EURUSD at 1.4064 and buy EURUSD at 1.4066.

Spreads are affected by the amount of traders in the market at that time, also know as liquidity.  When there are more traders, the spreads should be narrower. Pricing fluctuates according to the time of day and liquidity in the market.  The tightest spreads are typically seen during London trading hours, during which Asia or New York traders are also active in the market.

The dbFX forex trading platform provides its clients with competitive currency spreads, as well as a number of other benefits.  All prices provided by dbFX are fully transparent, neutral and, as they are streamed from Deutsche Bank, one of the world’s largest liquidity providers*, prices are streamed directly from the heart of the foreign exchange market.  These prices will naturally fluctuate according to movements in the levels of volatility and liquidity.  Full anonymity in the market is also provided to all clients, with fully automated risk management.

For more information on forex trading with dbFX, please visit www.dbfx.com.

* Euromoney FX Poll 2005 – 2009.