forex forcasting software

managed forex with performance records

When stocks, futures or options are traded in most cases brokers, who act as an agent in the trade, are used.  At the time the customer buys and sells the broker earns a commission for enacting the trade.

The broker takes the customers order to an exchange. When this is executed as the customer wanted the broker earns the commission.

The Forex market is not a commissions market.  As a principals-only and not an exchange market, FX firms are dealers, not brokers. Investors need to understand this distinction.

Brokers do not assume market risk, while dealers do. Dealers in the Forex market serve as counterparties to investors trades. While they do not charge commissions, they make their money through the bid-ask spread.

In Forex markets investors trade one currency for another. Each ones value is quoted in terms of its price in another currency.

To express this information conveniently and easily, currencies are quoted in pairs (e.g. USD/CAD). The first currency, in this example USD, is called the base currency and the second currency (here the CAD) is called the either the counter or the quote currency (base/quote).

If it took C$1.20 to buy US$1, the expression USD/CAD would equal 1.2/1 or 1.2. The USD would be the base currency and the CAD would be the quote or counter currency.

To calculate their spread, Forex quotes are always provided with bid and ask prices, similar to what you see in the equity markets.

The bid represents the price at which the Forex market maker is willing to buy the base currency (USD in our example) in exchange for the counter currency (CAD).

Conversely, the ask price is the price at which the Forex market maker is willing to sell the base currency in exchange for the counter currency. Forex prices are always quoted using five numbers; so, for this example, let's say we had a USD/CAD bid price of 120.00 and an ask of 120.05. The spread would be equal to 0.05, or $0.0005.

The amount by which the ask price exceeds the bid. This is essentially the difference in price between the highest price that a buyer is willing to pay for an asset and the lowest price for which a seller is willing to sell it. For example, if the bid price is $20 and the ask price is $21 then the "bid-ask spread" is $1.

You pay no commissions and no exchange fees in the currency market because you deal directly with the market maker in a purely electronic online exchange which eliminates both ticket costs and middleman brokerage fees.

There is still a cost to initiating the trade, but that cost is reflected in the bid/ask spread that is also present in all markets including futures or equities trading. Combined with the tight, consistent, and fully transparent spread, currency trading costs are lower than any other market.

Active stock traders often see substantial portions of the gross profits go to brokers in the form of commissions, and the exchanges in the form of exchange and data fees.

While equity brokers may advertise enticing commissions, the spread between the bid and ask is not fixed and may vary with market conditions, particularly with smaller less liquid stocks.

This spread can be 3 to 8 cents or more, depending on the time of day, and results in an added hidden transaction cost much greater than the stated discount commission rate.

Read More Forex Articles