Standard Account – The standard forex account is denominated in US Dollars. One standard lot is 100,000 units of currency. For example a long, 1 lot of GBP/USD would be buying 100,000 GBP and selling dollars. The dollar amount sold would depend on the GBP/USD exchange rate at the time of opening the position. Standard Accounts are offered by nearly all forex brokers. As a general rule of thumb, it is not recommended that you trade a standard account unless you have an account balance of at least $100,000. Many brokers will offer standard accounts to clients with a 5 figure account balance. For most trading styles, this would involve using too much leverage and could potentially result in catastrophic losses. A standard account is usually only suitable for experienced traders.

Forex Mini Account – A Forex mini Account the same as the standard account, except it allows the trader to trade mini lots. Mini lots are 1 tenth of the size of a standard lot. If we refer to the same example above of the long GBP/USD position, but instead use 1 minilot instead of 1 standard lot, we would be buying $10,000 GBP and selling dollars. Minilots are essential for traders will a smaller account balance. Most brokers now offer traders the opportunity to open a mini account. For most forex trading strategies, a mini account is suitable for account balances over $10,000. Do not be fooled by brokers allowing you to open a mini account very small amounts. Nearly all these accounts end disastrously in a margin call. A mini account is often suitable for new and experienced traders alike.

Forex Micro Account – A Forex micro account is generally used be new traders who wish to experience a live trading environment without risking a large amount of money. Micro accounts allow the trader to trade microlots. 1 microlot is a tenth of a minilot and a one hundredth of a standard lot. If we use the same example again of the long GBP/USD position, but instead use 1 microlot, the position would mean we were buying 1,000 GBP and selling dollars. Micro account are generally best suited to account balances between $1,000 and $10,000. Although different trading systems can make these numbers substancially different.

Foreign Currency Forex Accounts – In recent years as retail forex trading has grown hugely in popularity, the demand for forex accounts in currencies other than the US dollar have grown. An increasing number of forex brokers now offer forex accounts in many of the major currencies such as GBP, EURO, YEN. Below includes a small list of regulated brokers that offer accounts in currencies other the the US Dollar:

http://www.fxcm.com

http://www.oanda.com

http://www.cmsforex.com

The forex market is one of the best trending financial markets. This makes it an ideal choice for trend trader or momentum trades. However, some pairs clearly have trended a lot better than others in the past few years.

Perhaps the best forex trend pair in recent years has been EUR/USD or fiber. There has been a clear trend to the upside since 2001. In this period the pair has risen from around the 0.81 mark all the way upto 1.6. Around a 100% increase. Now that would have been a nice trend to ride.

Many of the Yen Carry pairs did very well in recent years, but many of those have fallen down in recent months due to all the problems in the global stock markets due to high oil prices and the credit crunch. Historically, the Yen carry trades have had considerable correlation to the global stock markets.

A very interesting website for looking at historical correlations between currencies pairs is here

Another fantastic trending pair is USD/CHF, otherwise known as “swissy”. This pair has essentially been in a very long down trend since 1985. Back in 1985 the pair made a high just shy of 3 swiss francs to one. Today the pair stands around parity, but it did make a low around the 0.96 mark in 2008.

When it comes to the forex trend, it is important to remember that they cannot last forever. It is often the case at some point of “What goes up, must come down” and vice versa. This is not always true, but often. It is certainly often not a good idea to buy pairs when they are making new highs or sell when they are making new lows. This is often to late and can be very risky.

One strategy that some traders use is to identify a strong trending pair. Then draw Fibonacci retracement lines for a desired time frame and then wait for a 50% retracement of the trend, the buy or sell the currency.

However, a trader can end a trading month in positive forex pips and still have post a negative percentage for the month. Let’s look at how this can be.

Let’s say that your favorite trading pairs are GBP/JPY (Geppy) and USD/JPY. Most of know the GBP/USD typically moves a lot more pips than USD/JPY. This can often mean it is highly advisable to trade considerably smaller lots on GBP/JPY trades than on USD/JPY trades.

Lets say that for the month, all of the traders GBP/JPY trades were for 5 mini lots or half a full lot. This would be 50,000GBP on each trade. In this scenario each pip value will be worth 500 yens.

If all of the trades on GBP/JPY at the end of the month are +500 pips. That would net a profit of 250,000 yens.

Now let’s say the trader uses 1 full 100,000 lot on his USD/JPY trades. This would mean each pip value is worth 1,000 yens. And lets say his USD/JPY trades don’t go very well and they end up -300 for the month.

In this above scenario the trader ends up +200 pips. This is the +500 – 300.

However, the GBP/JPY trades end up netting 250,000 yens as menioned above.

But due to the higher pip values the USD/JPY trades end up losing 300,000 yen. So there is a net loss of 50,000 yens.

So as you can see in this example, positive pip values that include more than a single trade, do not necessarily mean positive returns!

The pip values in dollar terms in this example will fluctuate constantly depending on the USD/JPY exchange rate.

Offshore forex trading is an option. There are many offshore forex brokers out there. However, one needs to be very careful in regards to the risk of fraud. Many offshore brokers have no regulation at all so in theory they are potentially unsafe.

The big question I hear you ask is: What happens of my offshore forex broker goes bankrupt?. In many cases you will actually end up losing your money. This is certainly not a risk you would want to take. Forex trading in itself is risky enough without having additional risk of broker fraud.

So what can we do to minimize the risk of offshore broker fraud?

There are many things we can do to reduce the risk. Firstly, An important thing to look at is the length of time the broker has been in operation in it’s current form. If an offshore broker has been around for over a decade, this would suggest that the broker is making a consistent broker. However, if a broker is only two months old, then they will have all the risks associated with setting up a forex broker and may be more likely to fail.

Another thing we can do to minmize the risk is to look online for comments and reviews on a broker. If you do this, be sure to look at many different sources because it is not uncommon for competitors to intentionally write bad reviews about a broker in order to try and steal business.

Below are a list of some offshore brokers. Please note that these are provided for informational purposes only and by no means recommended by fxacademy.net

Northfinance

Forex hedging is when you have an open trade and then open another trade in the oposite direction. The trade in the oposite direction acts as a hedge. The trader can open a 100% hedge by making the oposite position the identical size of the first trade or the hedge trade can be smaller making a partial hedge.

One reason a partial hedge may be used is to lock in profits. There are also many hedging strategies used in the forex market between different pairs.

Not all retail forex brokers allow the trader to hedge in this way. Sometimes when an opposite position is open, it results in closing the initial trade. This is because if you buy and sell the amount you end up with a net zero situation. It is important to check with your brokers policies on hedging if you wish to use hedging as part of your forex trading system. It is also a good idea to practice on demo for a while before trading live.

Perhaps two of the most popular forex hedging systems amongst retail forex traders is the USD/CHF Long and EUR/USD Long. These two pairs are highly correlated and strategies try to take advantage of this correlation.

The other common hedge trade is the long GBP/JPY and short CHF/JPY. This strategy is designed to allow the trader to earn the rollover interest on the long GBP/JPY position, whilst using the short CHF/JPY position to act as a hedge. It is high risk, but historically GBP/JPY and CHF/JPY have shared considerable correlation.

Correlation factors can change over time and often do, so these strategies are very high risk.