Five Reasons Why Retail Forex Is Becoming More And More Popular
In 2008, many small investors got their finger burnt when they lost their lifetime savings in the stock market crash. Many turned towards the retail forex market. The major reason for the growing popularity of retail forex in the investors is its 24 hours liquidity that means that retail forex market is open 24/5 plus no commissions per trade with tight spreads.
If you have some experience of trading stocks or bonds than you can esily switch to forex trading as the fundamental analysis and the technical analysis basics are almost similar. Now, many sophisticated investors are also turning towars forex as well.
In the last decade rapid technological advances were made meaning that there is now more and more price tranparency in the forex market with better risk management using the stop loss and the trailing stops.
Managed forex account also make forex trading easy for many people who don’t have the time to learn forex trading. These managed forex accounts give them the opportunity to profit from the forex market without having to trade it. These accounts are managed by professional traders on behalf of their clients who have full access and control over their capital in the account.
In the last decade, algorithmic trading systems became more and more sophisticated. These automated trading systems are also know as Expert advisors or Forex Robots. Over the last few years, forex robot developers have been able to develop a number of good robots that have been giving consistent performance.
In December 2009, the first ever Forex Robot World Cup (FRWC) was held. FRWC had a cash prize of $150,000 and hundreds of robot developers participated in the competition. This was the first ever live trading competition.
Forex robot developer from Croatia won the cash prize of $100,000. The next round of the FRWC will be even bigger than the first and will start in a few months time. Transparency and tough participation rules meant that the robots that took part in this competition had to really prove themselves in live trading. This live trading started in December and ended in January.
What this all means is the future of retail forex trading is exciting. These robots can be used by anyone. Even those who have never traded forex before can use these forex robots to make money from the comfort of their homes.
Before Short Selling-Know These Shocking Facts
Short selling is one of the favorite day trading strategies employed by many day traders. Many companies hate short sellers as they believe that short sellers were responsible in the fall of their stock prices. Nothing can be far from the truth. Short selling is just like anyother market mechanism that provides liquidity and better price discovery. Short selling can never destroy a company if its’ fundamentals are strong. Many stock brokers now let you short stocks with just the click of a mouse. When you sell stocks from your online brokerage account, the message asks you whether you are selling your own shares or short selling. You just need to click once on short selling and the rest is taken care of by the broker. These shares are a loan to you by the broker that you will have to return at a later date!
In some cases, the brokerage firm cannot borrow the shares as so many people have sold the stock short that there are no more shares to borrow. In that case, you will have to find another stock or use another strategy.
Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down! Day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts.
You have to be careful about the uptick rule as stock exchanges have rules in place to help maintain an upward bias in the stock market. What this means is that you can only short a stock when the last trade was a move up. In other words, you can’t short a stock that is moving down.
Now you have to be careful when shorting a stock as certain risks are involved. In theory, there is no limit on how high a stock price can go high. So when betting on something going wrong, if you yourself go wrong, the potential loss in case of a stock price going up can be immense.
Know something known as Short Squeeze. Once that happens, almost all short sellers get desperate to dump their stocks and exit but when they try to buy back the stock, they get more hurt as the prices go even higher and higher on rising demand for the stock in the market. Now, don’t get caught in the market with short selling when good news spreads about the stock that you had shorted driving its price up.
As said before, companies, investors and many brokers hate short sellers. They think that short sellers had intentionally driven down the stock prices. So sometimes, they will spread rumors of good news to create a momentary short squeeze. Sometimes, a campaign will be started by the owners of a particular stock instructing their brokers not to loan out their stocks to short sellers. So if you have already shorted that stock, you might get a call from your broker to return that stock immediately. In such a case, you will have to immediately return the stock even if it doesn’t make any sense to you!
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