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How To Choose A Forex Broker

We are often asked which Forex Brokers we would recommend and why?  Choosing a Forex Broker or finding the Best Forex Broker to suit your particular needs can be confusing and often even overwhelming, when you are learning how to trade Forex or other financial instruments.

Best Forex Brokers (Non-US Citizens Only)

Firstly, we would offer the following 20 or so pointers when choosing a Forex Broker:

  • Choose a broker in your own country if possible.
  • Ensure that the Forex Broker is registered and fully regulated in your own country e.g. the UK and regulated by the Financial Conduct Authority (FCA). You might want to consider a Forex Broker based in Australia to get around the new ESMA Leverage restrictions.
  • Ensure that all client monies are segregated from the Forex Brokers own company money, this will be the case if regulated in the UK.
  • Ensure the Forex Broker uses the Electronics Communications Network (ECN) with its’ trading platform. (An automated system that matches buy and sell orders for securities such as Forex.  An ECN connects major brokerages/market makers and individual traders so that they can trade directly between themselves without going through a middleman).
  • Ensure the Forex Broker’s trading platforms offer the relevant charting facilities and tools such as Metatrader 4 or 5 or their own bespoke trading platform if better.
  • Do they offer you a Demo account to first check out the trading platform?
  • How long is the Broker’s Demo account available for, before being closed?
  • Do they provide a decent range of financial instruments to trade such as Forex majors, minors, exotics, commodities (such as Gold, Silver and Oil) and Indices (DAX, FTSE, Dow Jones, S&P500 etc, Cryptos)?
  • Do you want a Spread Bet facility or not, remember that when spread betting you are essentially trading against the broker and this also adds a middleman into your trading model.  Our view is that whilst Spread Betting can be very profitable and at the time of writing is Tax Free for UK Residents, until you can consistently make your Capital Gains Allowance every year (currently £11,700 in Tax Year 2018-19) then stick with a standard Broker model whilst you learn how to trade Forex.  Once you are consistently profitable then that would be the time to consider opening a Spread Betting Account..
  • Check out the Spreads/Commisions (if any) offered by the Broker – are they competitive?
  • Check out the overnight Swap Rates – are they competitive?
  • Do they offer Micro and Mini-Lot trade position sizes as well as Standard Lots?  When you eventually start trading a Live account, we recommend you start by trading Micro-lot sizes, where you would be trading cents per pip and the smallest trade size offered would be 10 cents a pip.  If you choose to Spread Bet then make sure the Forex Broker offers the facility to trade pence per pip and normally the lowest trade size would be 10p a pip.
  • Do they offer a ‘No Negative Balance Guarantee’?
  • Does the Forex Broker provide excellent customer support when you need it?
  • How easy is it to withdraw your money from any trading accounts you may open or transfer money between multiple accounts?
  • If relevant, does your Introducing Broker (IB) provide a consultation service to help you find the most suitable or best Forex broker and do they offer to act on your behalf should there be any problems in the future with the selected broker? It is worth noting that if you go straight to the Broker of your choice to cut out the IB then your chosen Broker will take any commission/cash back due to be shared between you and the IB.  Using a decent IB will normally get you a better deal.
  • Does the Forex Broker provide an online portal to allow you to access your accounts, make deposits and withdrawals and move money between trading accounts etc?
  • Does the Forex Broker provide Cash Back based upon your trading volume and /or reduced spreads?
  • Nice to have: Does the Forex Broker pay interest on your Trading Account Capital?
  • Nice to have:  Does the Forex Broker offer decent trading education online and at live events etc?

When taking all the above into account we would recommend the following Forex Brokers that are listed at the website link below because they have been scrutinised and checked, but in no particular order.  Plus you can get advice and help to choose the right Forex Broker for you, from the website concerned:

Best Forex Brokers (For Non-US Citizens Only)

Top Trading Tip:  Don’t rush into choosing the first Forex Broker that you come across, spend some quality time doing some research, get advice from a decent Introducing Broker (IB) and make a list of the things that you would need/want and like of a Forex Broker.

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The difference between being a consistently profitable trader and a inconsistent or losing trader is a fine line. To stay on the Profitable side of the line requires a trader to have mastered the many facets of trading, including planning plus employing robust risk and money management and be very structured in their approach to the markets, by having a pre-determined set of rules they will apply and adhere to at all times.

By developing a proven structured approach to trading, a trader starts to stand a chance of being profitable. By having structure, rules and plans helps the one tricky area of trading which is the Trading Psychology or Mindset aspect.

By having an overarching, well developed, Trading Plan, conducting regular Top Down Analysis, including ‘What Ifs’ to find sweet spots on the market where price might react or defining a possible long term trend, plus developing individual trade plans for every trade you take, can help enormously, and starts to manage the over-arching uncertainty of trading the Hard Right Edge of any chart. Such structure can assist you in knowing what you are going to do if price does A, B or even C and not being like a startled rabbit in a set of head lights and failing to move with the associated consequences.

The more a trader can do to manage uncertainty through planning and self-improvement as a trader, the better. So as well as having a Trading Plan it is also advisable to keep a Trading Journal, rather like a personal Diary. Here you can reflect periodically on your progress, mistakes, individual trades, your psychological state or mood or feelings prior to, during and after your trading sessions. Plus from all this should come Areas of Required Improvement and Updates to your overall Trading Plan.

As with any new year, (Happy New Year by the way) we often lay out what we want to achieve over the coming 12 months with resolutions, lists or just be expressing our wishes to others. Why not make 2019 the year you get a real grip of your trading and finally develop that Trading Plan, setting out everything you should and maybe shouldn’t be doing and start adhering to it. So as the clock is already ticking into 2019, which side of the ‘Line’ do you want to be on?

With all that in mind, I shall be covering Planning and all the above plus lots more in my hour slot as a speaker at the online London Traders Forum on Saturday the 12th January 2019 from 9am until midday (ish!)

You can find all the details here:

The London Traders Forum

Top Trading Tip: Professional and consistently profitable Retail traders will have a well developed Trading Plan, will keep a Trading Journal or detailed records, will have a structured approach to their trading, will use and adhere to individual Trade Plans, will use robust risk and money management and will do all that is possible to help them manage the uncertainty of trading the hard right edge of the chart. This helps prevent over-trading, revenge trading, FOMO, Fear of Taking a Trade and reduces the stress of trading real money in a live market. So start to knock your trading into shape with structure and keep on the profitable side of the Thin Line.

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This post is slightly off topic, however, as trader you need to know about money.  It’s merits, it’s pitfalls, it’s worth, it’s opportunities, how to make it, how to grow it and much much more.

I came to trading and really learning about money, relatively late in life, and often think what if I had been taught all this stuff when I was a teenager!  What a different life I might have had and how much better informed I would have been about my financial choices.  Plus I may have known a lot earlier how to generate income (not just from trading) and how to grow that income and eventually wealth and then be in a position to give back.

I just came across a book which is about to be published addressing all the above and it is aimed at teenagers, to try and help them be more money savvy and help them on the road to financial freedom, whilst having some fun along the way – Financial Literacy Made Fun or even Funancial Freedom!

It is structured around 4 key areas – to help them LEAP forward in their financial endeavours:

Learn – Earn – Accelerate – Play

So if you are a Parent, Grand Parent, Uncle or Aunt etc to a teenager and are worried about their financial future in the current economic climate of rising student debt, unaffordable rents and house prices, lack of job security and rising pensionable ages, then I would highly recommend you grab a copy of this book right now, as it is highly discounted for a short period before launch.  What a great Christmas present this would be if it set your teen off on the road to financial security and freedom.

I hope you can help the teens of this world get money savvy and have funancial freedom going forward.  Plus maybe us older types might learn a thing or two from this book too, I certainly did!

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I’m often asked ‘What is Swing Trading and why do it, rather than Intra-Day trading?  This post is an attempt at answering that question and also to highlight my view on the Pros and Cons of Swing Trading.

Firstly, what is Swing Trading?  My definition is that as a Swing Trader you are trying to catch the higher time frame market moves or waves and hold for longer, maybe days, a week or even longer.  To do this requires the ability to conduct Multi-Time Frame Analysis (MTFA), to try and nail the bigger picture, thus understanding the Context of any potential trades and also looking for potential Confluences in the market where one might be interested in taking a trade, if Confirmed.  This is subtly different from being a Position trader where a trade may be taken based upon one’s longer term market view and underlying fundamentals.

To become good at Swing Trading requires honed Technical Analysis skills (MTFA!!) and the ability to do ‘What Ifs’ in your prior planning and preparation.  If you have a plan and price does what you think it might, then you should know what to do and be able to execute that trade plan, without doubt creeping in at the critical moment.  You also need a good dose of Patience and Discipline, which should help your Timing as to when you  might enter the market, at a favourable point.

If you can behave and think like a sniper or Big Game animal, this may help.  Both wait for there target or prey and only act at the most opportune moment, in order to increase their probability of success in what they are trying to do. So if you can Plan, Observe, Execute, Manage, and then Analyse your trades, you should be able to start to be a market sniper!

Contrary to popular belief you do no have to be in the market all the time, less can be more.  You only need one decent Swing trade a month to do well, provided you can minimise taking unplanned, impulsive trades and not forcing the market!  Let the market bring good swing trades to you.

The Pros of Swing Trading are:

  • that you are trading the higher time frames, 4 hour charts and above, occasionally I may go down to the 1 hour chart to get a better entry, but most of the market information and noise is inside the 4 hour and Daily candles.
  • Plus, you now have THINKING TIME!  If you are waiting for a 4 hour or Daily candle to close, you can do other things as well and can have a life outside trading.
  • You DO NOT have to stare at a trading screen all day long, which inevitably leads to burnout.
  • It is possible to trade around a day job.
  • There is less emotion.
  • Once you have moved to Break Even, you will have thinking and planning time to see if you might even be able to add to a swing trade.
  • It is far less addictive than trading the lower time frames, where, if in either a winning or losing trade, adrenaline is still produced, which fuels addiction.
  • You should naturally take less trades and thus avoid Over Trading, which will kill your account!
  • You can set alerts at levels where you might start to be interested, when you do your analysis.

The Cons of Swing Trading:

  • You have to be good at Technical Analysis and Trade Planning
  • You have to be Patient and Disciplined and develop a sense of Timing
  • You have to hold your trades open overnight and maybe at the weekends when geo-political and economic factors may come into play and affect the market opening on a Sunday evening.
  • You have to sit through periods of draw down within your stop loss parameters some times.
  • Your trade entry will normally be tested
  • If in profit, at some point the market will correct and test your resolve to hold that trade.
  • You can have long periods between decent trade opportunities.
  • If you suffer from FOMO you may struggle with Swing Trading!

I’m sure there are other Pros and Cons of Swing Trading, however, once I realised that less can really be more, it came came down to a Life Style choice, but you decide…

Top Trading Tip:  If you are struggling with intra-day trading, for whatever reason, then give some thought to the potential benefits of Swing Trading.  If you need help learning to Swing Trade then give some thought to our Personal Coaching and Mentorship Programme.

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The London Traders Forum

The Traders Forum is a ‘Mastermind’ group formed with the aim of raising the bar from the usual so-called Trading Events, free Seminars and low-cost workshops. It is aimed at both active and aspiring traders with some trading knowledge.  Plus it is also designed to be a sociable inter-active occasion for net working with like-minded people and for seeking knowledge from seasoned traders without the usual attempts at a hard up sell at the end.

The next London Traders Forum is on Saturday the 6th of October 2018, a one day seminar/mastermind/forum with Q&A interaction and discussion.  Speakers and topics so far include:

2018 Market Analysis

It’s been a very interesting 2018 so far! Kevin Barry of the Traders and Investors Club will be providing us with his excellent market round-up. This is a chance to view the dominant themes so far and discuss the remainder of the year. As always Kevin’s insight into the bigger picture is always fascinating and is worth the entry fee alone.

A Practical Guide To Elliott Waves – The Alternative View

Martin Walker of Forex Trading London will introduce Elliott Waves and how they relate to us, then show you how they can be traded, how to take a relatively simple approach, how to manage your trade expectations and where to look for trades within the wave(s). Attendees will also get access to some supporting documentation.

Rebooting Your Trading

Fund Manager Simon Cotterill will be talking about resetting your trading to help you have a consistent and profitable end to the trading year. Simon will be sharing his experiences form his 8 years of trading to show how a focus on Discipline, Routine and Patience can help you improve your psychology and your profits.

Using Fibonacci Ratios Effectively 

Fibonacci ratios are commonly used in the financial markets to identify support/resistance levels. But the truth is that they are seldom used correctly.  Ironically, even though it is one of the most effective tools of technical analysis, it is also the most misunderstood.  A little known secret is that the Institutes/Banks use these Fib ratios as a trap, since they are aware of the common way that the novice traders use them. Sunil Mangwani has been trading the Forex market for the last 18 years and has an in depth knowledge in trading currencies. He specialises in trading with advanced Fibonacci based techniques like Harmonic patterns, Divergence, Wolfe waves etc.  Sunil will discuss 2 specific Fibonacci techniques that the professionals use to trap the retail traders.  Come along and learn how to stay safe in the markets.

Aggressive Intra-Day Trading

Lets face it, plenty of people are attracted to intra-day trading, but how many can achieve it consistently? It’s a tough gig. Paul Wallace (FxTraderPaul) will explain what he looks for during his Intra-day trading, and some of the tactics he uses to be more aggressive in his trading.

Tickets for this event are now on sale. To get tickets just click the link below:

London Traders Forum Tickets

This special full-day Trading Mastermind event on a Saturday the 6th August 2018 from 9:00 AM to 5:30 PM will include Refreshments and Lunch and will be held in central London at:

Venue:  The Victory Services Club, 63-79 Seymour Street, London, W2 2HF.

Nearest Tube:  Marble Arch, Central Line.

View Map

P.S.  I here Paul Wallace is buying the first round in the bar afterwards!

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Think of a Currency Pair Like A See Saw

How To Trade Foreign Currency‘ is a common question asked online and one I get asked all the time, so I thought why not answer that specific question.  In order to understand how to trade foreign currencies, it is important to know that a currency’s value is always relative to another currency, such as the GBP vs the USD giving the currency pair, the GBPUSD.  Once you have selected a currency pair, then you are ether buying it, selling it or doing nothing.  If you Buy the GBPUSD currency pair, then it is because you think the GBP will strengthen in value against the USD, over time.  Similarly, if you sell the GBPUSD it is because you think the GBP will weaken against the USD, or the USD will strengthen in value compared to the GBP, over time.  Once you understand this concept then there are several ways to trade Foreign Currency:

  • Firstly, one can hold foreign currency in a special bank account or investment account and then convert that into another foreign currency or you own country’s currency, at an appropriate moment in time, if you think that will be advantageous to you financially, over time.  One can analyse currency pairs on charts and try and determine when they may be at a turning point in their relative values.  So for example, if the EUR has been strengthening against the GBP for a while and you hold Euros, then when you think the EUR might start to weaken against the GBP, then you can exchange your Euros for Pounds Stirling. The same principle applies across all currency pairs.  When you undertake such a Foreign Exchange (Forex) transaction you will be charged a Commission by Banks and Foreign Exchange Merchants.  Some Bank and Investment Broker accounts offer more preferable rates.   Central Banks buy and sell or trade Foreign Currency this way in order to take advantage of currency strength and weakness around the world and to build reserves in strong currencies, in order to support their own currency in times of its weakness.  Central Banks can buy their own countries currency by selling some of their Foreign Currency Reserves and if doing so on a large scale, can support or strengthen their own country’s currency.
  • The next and most common method of how to trade foreign currency is to open a trading account with a Regulated Broker, usually in your own country’s base currency such as GBP in the UK or USD/CHF or JPY and buy and sell currency pairs at the Market price known as the Spot price.  Most brokers offer this service using a financial instrument called a Contract For Difference (CFD).  Professional and Retail traders use this method and often employ a certain amount of leverage in their account to do so. You pay a spread when you take a trade, which is the difference between the buy and sell price at any moment in time.  If you hold the trade overnight or over a weekend you will incur a charge called a SWAP, which is normally based upon the interest rate difference between the two currency’s countries with a bias in the favour of the Broker.
  • Another method is to Buy and Sell Futures contracts of currency pairs which usually last for 3 months but can be rolled over to the next 3 months and so on if the broker offers that facility.  With a Futures contract you will pay a larger Spread on opening the trade but do not pay the overnight SWAP charge and will also pay a charge if the Futures Contract ends and Rolls Over to the next 3 months whilst still in the trade.
  • Lastly, more sophisticated investors/traders sometimes use a financial instrument called an OPTION, where they buy or sell PUTs and CALLs dependant upon their view of particular currency pairs and how they might perform over time.  Options value decay over time, so you need to know what you are doing.

Most people will initially select the second method and learn how to trade foreign currency using that method, which is the method this website concentrates on.  I also use the first method for managing a relatively small amount of money with a view to getting the most advantageous foreign exchange rates over a period of time, in order to maximise my pot of Holiday spending money from year to year.  I use an online bank which provides much tighter spreads, and so keeps my Foreign Exchange costs down.  I am doing that though, using my ability to analyse Foreign Currency pair charts using Multiple Time Frame Analysis.

To learn more with some free articles and videos etc just go here:

LEARN MORE ABOUT HOW TO TRADE FOREIGN CURRENCY

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Really?

Following on from my previous post about the pan-European financial regulator  ESMA (Let’s Talk Leverage) proposals, its’ introduction and the reduction of leverage across the board for those categorised as ‘Retail’ traders, I thought I would highlight something of importance to you.  I have received several emails from the different brokers I use, asking if I would like to categorise myself as a Professional Trader, a title I would consider myself to be.  This would then allow me to trade with leverage up to the maximum those brokers offer (400 – 500 to 1 rather than 20 or 30:1 under the new ESMA rules).  However, to meet the new ESMA criteria of a so called ‘Professional Trader’ one has to meet 2 of the 3 of the following criteria:

  1. You need to have placed 10 trades in each quarter in the last 4 quarters, in “significant” size. (Not sure what ‘significant’ means?)
  2. You need to have €500,000 in liquid assets.
  3. You need to have worked in the trading industry for at least 12 months and be familiar with trading of CFDs.

You may be able to meet 2 of the 3 criteria or be tempted to falsify your answers when asked these questions by your broker, but here is the Rub…………….!

Under the new ESMA Rules, as a Retail trader you will receive certain protections whereas those categorised as Professional traders will or ‘may’ not be protected.

As someone who experienced the Swiss National Bank debacle several years ago when one of the brokers I used went into Administration.  Though it took months, I did get my Trading Account money back through the Financial Services Compensation Scheme.

So here is the question:  Why would I want to be categorised as a ‘Professional Trader’ if there are no guarantees of protection on my Trading Capital, held by whichever broker, despite them being FCA Regulated.

If you want to know more about all this then I suggest you read Tom Hougaard’s (Trader Tom) Blog article on this topic, as it is well worth a read, and will no doubt be enlightening for you.  Once on his blog I suggest you also read his previous article on the new ESMA rules.  I hope this helps in some way to keep you and your hard earned money safe.

Top Trading Tip:  Before you place real money with a Broker and trade in the live markets make sure you know what your protections and guarantees are and that you are covered by the Financial Services Compensation Scheme in the UK or similar if you live and trade outside the UK.  OR at least you are aware of the Risks to your money if you decide to do otherwise.

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You may be thinking, ‘what has this blog post title got to do with trading?’.  Well, if you do some research you will find that the greatest volume of trades in the Forex markets are actually SPECULATIVE.

If so, then perhaps you need to think like a speculator.  Speculators are always on the look out for the next big idea, trend or thing and want to get in early in order to maximise their returns.

When trading, it may help to ask yourself the question ‘What’s Next’ in relation to a currency pair or other financial instrument.  For example, if we take the GBPUSD currency pair and ask that question, there are several things which may come to mind at the time of writing this post:

  • Potential tightening by the Bank of England may see Interest Rates Rise this year and maybe in August.
  • Continued pressure from apparent lack of progress in the Brexit negotiations and the seemingly consequential slow down in UK growth and business investment.
  • Rising or falling UK Inflation and Wage Growth.
  • USD strength or weakness with Trumps Trade Wars, North Korea talks progress or other issues Trump may raise. US Growth and Inflation and potential further Federal Reserve Interest Rate Rises etc.

So considering the above, unless the Brexit team pull a rabbit out of the hat or the Bank of England hikes by more than expected or Trump destroys the US economy (unlikely)  then maybe further overall weakness in the GBP against the USD.

(Post publishing note on 3 July 2018: Things can change quickly in the Forex world – currently we are now Bullish GBPUSD on a retracement move up, our initial target is the Daily 200sma and our stretch target is the Weekly 200sma and then we will look for short opportunities – this view is based upon Technical Analysis and that recent forecasts suggest better than expected UK growth but this view could change with events such as FOMC, NFP, BOE and Brexit talks oucomes etc.).

You may have read or heard the old trading adage ‘Buy the rumour and sell the fact’.  Similarly you could also say ‘Sell the rumour and Buy the fact’.  Time and time again these phenomena occur in the financial markets.  Why?  Because speculators are taking positions long before an actual event such as a Central Bank Interest Rate rise, based on earlier hints that this may happen.  If the speculated economic news event does occur, as expected, and does not deviate much from that expectation, then profits will be realised by the speculators on the event occurrence.

So how can you apply this thought process to your trading?

If you can seen an obvious trend then ask yourself what is driving it and if that still has validity, then wait for a pull back to join the trend.

If you can see a currency pair potentially topping or bottoming find out why and then if a turn may be valid have a look at the price action for rejection candles, Lower Highs and Lower Lows, or if basing then Higher Highs and Higher Lows, maybe divergence and even a Head and Shoulders.  If it starts to trend then take advantage of pullbacks.

If something is Range Bound then ask yourself why?  It probably means market uncertainty. In these cases it can be prudent to wait to see if a common pattern emerges such as a Triangle, with a subsequent break, out which may be trade-able on a pull back / re-test.

Technical analysis can therefore go hand in hand with fundamental analysis.  If trading higher time frame charts such as the Daily and Weekly then one may say that all the news of the day is thus priced in when a candle closes and therefore why follow the news or economic events?  I would say that if you can identify why a currency pair is moving – what is behind the speculation – then that can help your trading.  After all a currency pair is made up of two individual currencies which reflect the respective economic picture of their respective countries.  If the related economies appear to be diverging then a trend will occur.  That said I am a great fan of Price Action!

When you look at your charts and do your analysis ask yourself:

  • What Has Price Done? (and Why?)
  • What Is It Doing Now? (and Why?)
  • ‘What Could It Do Next? (and Why?)
  • and ‘Do I Want To Get Involved? and Why?’
  • essentially ‘What’s Next?’

If you need some pointers on where to look to find out what the speculators may be thinking then have a look at some of the websites on our Useful Resources page.

Top Trading Tip:  When looking at your charts ask yourself the ‘What, the Why and What’s Next?’

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For several years now I’ve helped Paul Wallace run the London Traders Forum – a once-a-year all-day event for Traders to come together, learn and socialise with each other.

This year’s London Traders Forum will be on Saturday 6th October 2018 in Central London. Please put the date in your diary and keep your eyes peeled for details and early-bird opportunities.

In the meantime the next event will be the Q3 Online Traders Forum on Saturday 7th July.

Online London Traders Forum

This is a new initiative from traders, for traders. The idea is for it to be a short, intensive 3 hour online seminar that covers various aspects of the 4M’s of Trading: Markets, Method, Money and Myself. The idea is for you to be able to learn some new trading ideas, whilst in the comfort of your own home, and without sacrificing your entire weekend.

The plan is for there to be one Online London Traders Forum the first Saturday of Q1, Q2 & Q3 with the London Traders Forum at the start of Q4, the main all day event.

For the Q3 Event running from 09:00 AM to 12:30 PM BST, we’ll have the following speakers:

Paul Wallace from FXTraderPaul.com and founder of The London Traders Network will deliver the market analysis section focusing on FX, Indices, Commodities (and perhaps some Crypto) and look at where to focus for possible Q3 Trading Opportunities.

Martin Walker of ForexTradingLondon.com will take a deeper look at Price Action, what are it’s constituent parts, and how to identify and read it on your charts. He will show you how to use this knowledge in your trading. Understanding and being able to read Price Action is key to identifying Trends, Breakouts and False Breakouts, Market Turns and much more.

From Dublin, Ian McFadden from the Symmetry Trading FB page will talk about his way of intra-day trading Oil using the CL Futures contract. Ian has traded using Fibs for over 10 years and he will explain how he uses them to analyse Oil and find intra-day trade set-ups.

There is a charge for £20 to attend. Why? Because we’re not selling anything. Its proper educational content rather than a slick pitch in the hope to up-sell you something. Furthermore the sessions will be recorded, and as an attendee you’ll have access to them afterwards.

It promises to be an enjoyable session that will help you grasp the opportunities that Q3 2018 will present. For further information, timings and tickets etc just go here:

Online London Traders Forum

Trade well!

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Today (27th March 2018) the pan-European financial regulator ESMA released its final proposals to govern leveraged trading, which remain unchanged from its original proposals.

Apart from banning Binary Options, essentially it boils down to the following Leverage limits which the FCA is expected to follow in due course:

1.    Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying:

·         30:1 for major currency pairs;

·         20:1 for non-major currency pairs, gold and major indices;

·         10:1 for commodities other than gold and non-major equity indices;

·         5:1 for individual equities and other reference values;

·         2:1 for cryptocurrencies;

2.    A margin close out rule on a per account basis. This will standardise the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client’s open CFDs;

3.    Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;

4.    A restriction on the incentives offered to trade CFDs; and

5.    A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.

So what impact will this have on retail traders?  Well you will need sufficient trading capital, but more importantly if you employ robust Risk and Money Management in your trading then these new Leverage limits should not impact your trading of Major and Minor Currencies, Major Indices and Gold.  Only those foolish enough to trade without using strict Risk and Money Management rules will be significantly affected.  If you trade Individual Equities and Crypto CFDs then there may be an impact.

Using lower Leverage has always been a great way of stopping oneself from ‘Over Trading’, because your trading platform will alert you to the fact you have insufficient funds to open any further trades.  So this fact makes a trader be selective about which trades they take and to manage their position size(s) commensurate with their amount of trading capital and the size of their stop loss.

Lastly,  if you don’t understand the terms Leverage and Margin then check them out before you take another Live trade.

Top Trading Tip:  Always use Robust Risk and Money Management when trading and employ lower leverage to prevent ‘Over Trading’ and exposing oneself to too much Risk.

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