Trade rights
The Forex Trader’s Bill of Rights (2005) is a non-fiction book about the foreign currency trading market, published by OANDA_Corporation. It is primarily a call to arms for currency traders to call for greater transparency and accountability within the market. The overleaf provided with the printed version of the book states: “Big banks and confederated brokerages have overcomplicated forex: trading costs are inflated, unnecessary risk abounds, and the system is grossly unfair.” Essentially, the book elaborates on this premise, detailing ways in which traders are being unfairly treated and encouraging them to take action.
OANDA is a company that provides currency trading tools for investors, travelers, and businesses. As such, there is an unavoidable marketing aspect to this publication. However, OANDA is not mentioned throughout the book. There has been a clear effort to maintain a relatively neutral point of view. The back cover does state “OANDA is a leading provider of online currency trading…FXTrade…enables all currency investors to change the way forex trading is done”.
The authors believe currency investors have 10 basic rights which are being violated: each short chapter deals with one of these rights. They are:1. The right to immediate, uncensored access to the marketplace2. The right to trade real spot3. The right to know4. The right to trade whenever you want5. The right to equal treatment6. The right to choose and manage risk7. The right to understand cost8. The right to learn – on your own, or through free exchange with other traders9. The right to full disclosure10. The right to pay and receive interest
1) The right to immediate, uncensored access to the marketplace Chapter one argues that when trading traditionally (with banks etc.,) execution and price are affected by who you are (size of your order/ relationship with your market maker etc.), the amount of greed on the part of the market maker, and manual intervention which can delay the trade. The chapter calls for transparency, fairness, and efficiency for traders from market makers.
2) The right to trade real spotChapter two addresses unnecessary delays in settlement of trades, which according to the authors increase risk for investors.
3) The right to knowThe third chapter states that market makers share information based on who you are: in some cases they share information that should not be shared; in other cases they do not share information that should be publicly available. This leads to an unfair advantage.
4) The right to trade whenever you wantThe chapter asserts that market makers may advertise 24 hour trading but they close the books on Friday. However, world events which affect currency price occur on weekends. The argument continues that since the technology for 24/7 trading is available, it should be offered by all market makers.
5) The right to equal treatmentChapter five argues that every trader should be given the same price and spread, and that market makers should not discriminate between traders.
6) The right to choose and manage riskTraders are encouraged to use a market maker who does not require high minimums, lets them trade any amount, and provides immediate settlement as a way of minimizing risk.
7) The right to understand costIt is reasoned that traders have the right to understand spreads, as well as who gets a “cut” and why. This chapter also includes a profitability calculator.
8) The right to learn – on your own, or through free exchange with other tradersThis chapter covers multiple ways to learn about trading, and test new strategies, including trading games offered by online market makers and other sources of Internet information.
9) The right to full disclosureThe book claims that a lack of transparency in pricing, execution, and after the trade needs to addressed. Market makers should publish statistics regarding real spreads and prices and traders should demand that they do this.10) The right to pay and receive interestIt is argued that continuous interest should be introduced, which would make for price flows that are less volatile.
The Game of Forex Trading
Speculating on the price of one currency in relation to another (also called trading the Forex Trading spot market) is like betting on a game; in the Forex market, the game is between the bulls, who want to pull prices up, and the bears, who want to pull prices down. The most successful trader in forex trading will not put himself in the middle of that game just as you or I would not go onto the field in the middle of a professional football game (unless, of course, you happen to be a professional football player). Instead, the successful trader will stand above the game for the best view and the best chance to bet on the team with the winning play. With over one and a half trillion dollars traded each day in the Forex market, it is highly unlikely that any individual trader like you or I would be able to influence the outcome of the game between the bulls and the bears - so we do not try; instead, we try to take our best, informed, educated guess at who will win a given play, and we bet on it - we speculate.
The fact that we are not actually able to influence the outcome of the Forex trading game, that we are simply speculating - betting - on it, is very important to remember, because it means that what matters to us is not so much who has a better quarterback, or whose coach makes better plays. Instead, what matters is what other people think.
Which team are other traders going to bet on? The bulls may be superior in a certain play but if everyone bets that the bears will win, then . .. the bears win.
So trading the Forex is not nearly as much about picking the strongest currency, identifying which country's particular economic, social, and political situations make its currency the best buy that day. Trading the Forex market is about foreseeing which currency the crowd will pick, picking it before they do, and being right.
You want to be able to predict where the herd is going, but you don't want to get trampled by it in the process. That's why judgment-based indicators (charts) and mathematics-based indicators (technical indicators) can work so well in the Forex trading market if you do it right - because you are not betting on which currency is stronger, but on which currency the crowd will think is stronger and, in turn, bet on themselves. The Forex trading indicators we'll talk about in this book don't lead to winning trades 100% of the time. But they do lead to winning trades more often than not.
That's because people are predictable. Based on history, which does tend to repeat itself when people are involved, we can make well-informed, and educated guesses about which team the crowd will pick based the crowd's past picks in similar situations. So, in essence, trading the Forex spot market is much more about speculating on people's behavior than on the strength of one currency relative to another.
In the Forex market, a bull refers to increasing prices, where the forex trading period's close is higher than its open. This means that in that trading period the bulls won the tug-of-war: they succeeded in getting the market to close at a higher price than it opened. A bear is the opposite; it refers to decreasing prices, where the trading
period's close is lower than the open. In a bearish period, the bears succeeded in getting the market to close at a lower price than the open.
There is not, unfortunately, any way to guarantee that your trades will be profitable 100% of the time. In fact, they won't. Even the most experienced, disciplined traders take losses. The difference between experienced, disciplined traders and reckless novice traders is that the disciplined, experienced traders trade based on sound equity management principles so that in every trade they are managing their potential loss (the risk) in forex trading. While no one can show you a way to make profitable trades 100% of the time, you can greatly increase the probability that many of your trades will be profitable.
You increase the probability that you will profit overall by educating yourself. Learn to read charts. Learn to use chartbased indicators and technical indicators to know when to enter and exit the market. If you educate yourself on the ways to maximize the probability that you will profit, and if you follow the lessons you have learned, then you will profit on more trades than you lose on.
Introduction to the Forex Market
The Foreign Exchange market, also referred to as the "Forex" or "FX" market is the largest financial market in the world, with a daily average turnover of US$3.2 trillion.
"Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).
There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.
For speculators, we believe the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
A true 24-hour market from Sunday 5:00 PM ET to Friday 5:00PM ET, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.
The FX market is considered an Over The Counter (OTC) or 'interbank/interdealer' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.
