Friday, October 5, 2012

Benefits of NDD Forex Broker Trading


In the evolution of forex brokers, ECN or NDD type of execution has been the preferred way for traders. It is therefore true that ECN or no conflict trading has been the way forward when it comes to trading forex online.

At the heart of the issue, lies the fact that an ECN broker represents a network of liquidity providers such as banks and hedge fund institutions alongside individual and institutional traders as well. With an ECN broker, the middle man is cut off as trading takes place within the ECN network. An ECN network should not be confused with a multilateral trading facility.

ECN forex brokers have made it possible for traders to trade in the live and dynamic trading environment which offers transparency of pricing and an improved execution of trades. Something which lacks when it comes to the traditional forex brokers operating in a fixed spread or a made up market environment.

An ECN operates on the basis of matching or pair the orders placed by the client. In other words, all the orders are collected into a central place and based on the orders  such as market or instant execution, the correct buy and sell participants are matched.

Trading with an ECN broker gives the benefit of trading in a transparent and a no conflict trading environment. No Dealing Desk brokers particularly make their money by charging a commissions on the trades, which is how they operate, thus eliminating the need for taking up counter positions or even having the need for a central trading desk.

Pricing and spreads with a NDD forex broker greatly varies in comparison to a fixed spread broker. Furthermore, the two aspects, namely pricing and spreads can be influenced by the participants themselves, for example if someone were to place a large buy order and vice versa.

When trading in an NDD environment, the advantage you get as a trader is the fact that your trades are anonymous. Meaning that no one really knows your information or your trade strategies. This is in stark contrast to when trading with a fixed spread broker, who in all probability knows who you are, has access to your past trade history, your total profit and loss and other such information which can be used to trade better against you.

As ECN trading starts to get more and more popular, many liquidity providers are coming on board to provide better spreads and pricing. Liquidity providers are made up of banks and also companies such as Integral or Currenex that bring with them their own liquidity providers on their ECN networks. Professional traders usually find it better to trade in a no dealing desk environment compared to trading with a fixed spread broker. Of the many advantages, ECN trading allows you the freedom to scalp or hedge your positions, especially of value is news based trading where price movements can be very volatile and to the right trader gives a great opportunity to make profits within a short span of time.

To summarize the above, it can be safe to say that the benefits of trading with a no dealing desk forex broker brings with it a great level of freedom, transparency and anonimity, which clearly lacks when it comes to trading with a market maker forex broker. For the more professional broker as well as for those who wish to take their trading skills to the next level, ECN trading is the right way to get started.

Tuesday, October 2, 2012

Understanding how Forex Scalping Works


While there are many different forex scalping strategies that are available, one of the most popular and easy ways to scalp forex is trading during significant economic news releases. The fact that the currencies tend to fluctuate quite a bit during such economic releases, makes it one of the easiest ways to scalp the forex markets even for complete beginners to forex.

One of the important aspects of scalping forex during economic news releases is that it involves the use of technical market analysis as well as identifying how the particular markets tend to move as a result of the news, be it positive or negative. The volatility in the pricing arises out of the fact that the news which is being released very rarely comes out to meet the market expectations. This is due to the many variables that come into play which is quite hard for the average economist, let alone a forex analyst to take into account.

The discrepancy thus gives rise for traders to take advantage of the situation and thus set up a robust scalping strategy.

Often, during economic news releases, the prices that fluctuate is largely on account of trader sentiment and the initial reaction. If you observe closely, there are three stages during economic news releases. The first being the instant reaction where the prices tend to fluctuate quite a bit. This is usually triggered by too much buying or selling immediately upon the news that is being released. The second stage is when the markets tend to correct itself and close the discrepancy. Most often, traders with an eye for trading opportunities tend to take advantage in the first step as it usually results in a breakout of the trends and thus placing a proper buy or sell order alongside a stop loss can be quite beneficial.

The third stage is usually when investors digest the information and take into account the news from a larger perspective. In most cases, it is during this stage that the right trends come into play. For example, upon releasing a certain economic news, it could trigger a panic selling, which is later corrected by the markets itself and eventually when the dust settles, traders make the right choice, which is either to buy or sell or hold on to the currency.

The ideal way to scalp the forex markets during news releases is to take up your positions 10 or 15 minutes ahead of the news releases with the right stop losses in place so as to minimize your trading losses in the event the market goes against you. Following a 15 minute chart is ideal in such cases as it enables you to properly monitor the trends in the pricing and place your trades accordingly.

There are many automated systems that tend to scalp the forex markets on your behalf. Such tools, indicators or even EA's does the same job of analyzing the markets and identifying potential trading opportunities. Bear in mind that not all forex brokers allow you to scalp the markets. In fact some brokers do not encourage trading during news releases. For a list of brokers that allow forex scalping, click here.

Scalping itself does not yield instant returns but once you find a discipline and a pattern it can become almost second nature to scalp the forex markets for a few minutes in order to gain a few pips in profits.