What is a Forex Broker?

 

 

In order to start trading foreign currency, you first need to identify a robust forex broker. A complete definition states that a broker is a firm that enables a trader to access a trading platform in order to place buy and sell actions on various currencies. It is very important to keep in mind that research needs to be carried out first before signing up with a new broker. You need to make sure that they have a positive reputation.

1) The Variety of Trading Tools

It is highly important to invest with the right trading tools at the same time on different trading markets. A smart idea is to pick an FX broker which can provide a wide array of trading markets to access this can also include CFDs, indices, stocks, and cryptocurrencies.

2) Variations in Trading Accounts

A functional broker needs to provide plenty of account options as possible all of them with specific benefits for the user. It is very important to be highly adaptable to different trading styles such as high risk or safer tones.

3) Spreads

A broker with the lowest spreads can be very profitable, but you need to keep in mind that different marketing techniques can be employed and sometimes these schemes can be harmful if you don’t fully understand how they work. A low spread can be great but only the most competitive brokers can focus on granting such options.

4) Optional Leverage

Forex is a market that is often traded with leverage. To manage a trading position and account, being aware of your leverage allowance is very important.

 

USDJPY forecast - Impact of Abe's resignation on the Yen

 

 

 

The Japanese Yen (JPY) is one of the most traded Asian currencies in the financial markets. And its pair with the US Dollar – USDJPY, forms one of the four major currency pairs, which are some of the most traded currency pairs in Forex.

Since December 2016, the USDJPY has been on a bearish trend implying the Japanese Yen has been bullish. And that trend played well into the current economic crisis around the world due to the COVID-19 pandemic.

The US dollar has had the hardest blow following the effect of the pandemic in the US, which has greatly affected businesses there.

On August 27, 2020, U.S. Federal Reserve Chairman Jerome Powell, unveiled Fed’s tactic to the current inflation. However, the speech hinted that the current low rates will continue for a longer period. Following Powell’s speech, the USD index used to track US Dollar greenback against other currencies registered a drop of about 0.09%.

As the strength of the US Dollar continues to drop, the Japanese Yen, on the other hand, seems to be gaining ground.

Shinzo Abe’s Resignation

Following the announcement that the current Japanese Prime Minister, Shinzo Abe, will be stepping down, there was scepticism of how the Japanese Yen will behave in the market with some fearing that there could be a shift in policy in Japan.

However, since the ruling Liberal Democratic Party in Japan still holds power, experts do not see a significant shift in Policy. The party is to elect its leader on September 14, 2020.

The biggest threat to Japan’s policy continuity

Shigeru Ishiba, who is the former Japanese Defense minister is seen as the biggest threat to the Japanese policy community. If elected, there could be ramifying policy changes, which would affect the Japanese Yen standing in the international market.

Ishiba currently seems to command a huge following in the public opinion though he lacks the Liberal Democratic Party’s support.

Best bet according to analysts

Yoshihide Suga who was the chief cabinet secretary under Shinzo Abe announced that we will be running for the prime minister’s post two days after Abe’s announcement that he would be resigning.

Suga has good support of the Liberal Democratic Party and is expected to continue with Abe’s policies if elected to become the next prime minister.

One of the main things that analysts look forward to is the fiscal and monetary stimulus programs that were rolled out during Abe’s tenure. It would be advantageous to the Japanese Yen if the next prime minister expanded these stimulus programs.

USDJPY – what to expect towards and after the Japan PM elections

At the moment, the USDJPY is expected to continue with its bearish trend mainly due to the weakening of the US Dollar and the Fed’s accommodative shift in how he Central bank responds to the inflation that was outlined in their recent report made through Powell’s speech.

If Suga wins to become the next Japanese prime minister in September, we could see a more determined JPY; meaning a stronger bearish trend for the USDJPY.

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US Dollar Safe-Haven Status In Jeopardy Over Coronavirus Uncertainty

 

Lack of clarity regarding the macroeconomic picture for the U.S. is making the long-term direction of markets more challenging to predict. The unprecedented amount of effort being put into research for coronavirus treatments is providing some hope for risk sentiment in the Forex markets. However, U.S. economic data has been mixed while the Trump administration’s resistance to taking Covid-19 seriously is dampening risk-on sentiment and continuing to isolate the U.S. from the rest of the world.

The race towards Covid-19 treatments provide hope

One of the unknown factors which can have huge ramifications on the market is if and when an effective coronavirus vaccine will be available for widespread use by the public worldwide. On the heels of news of Pfizer and BioNTech achieving Food and Drug Administration (FDA) fast-track status for two coronavirus vaccines, University of Oxford has just reported promising results for recent trials of its own vaccine. Breakthroughs in Covid-19 treatments are providing strength in risk-on sentiment which can be bearish for safe-haven assets, such as the U.S. dollar and Japanese yen.

On the other hand, the future prospects of effective vaccines is far from guaranteed. There is always the chance that promising treatments could ultimately not be deemed viable for public use. However, regardless of a risk-on or risk-off mood in the market there will also be opportunities to make profit in the currency markets. Forex traders who have registered with a reputable currency broker will be able to take advantage of any future market fluctuations.

Mixed picture in U.S.

The situation in the U.S. is challenging to interpret with various positive and negative factors contributing to the forecast for the future. The macroeconomic data has been mixed with strong housing data as well as weak consumer sentiment. Housing starts increased in June by 17.3% which is the highest it has been since March. On the other hand, the University of Michigan’s index of consumer sentiment dropped to near its April low with a reading of 73.2. Although it seems that homebuilders are beginning to feel more confident, it is becoming increasingly more doubtful that consumer strength will be able to keep the housing market afloat.

In situations like this where it is unclear which way the broader economic direction is headed it may be best to concentrate more on the short-term trading opportunities which may provide more profitable setups. As long as you have a trustworthy broker with a solid trading platform, you should be able to identify many short-term investment opportunities in the Forex markets. If you have not yet, register for a trading account now.

Trump response to Covid-19 confusing, lacks commitment

To add to the lack of clarity, the Trump administration’s response to the pandemic has ranged from denying its seriousness to finally wearing a mask in public. At the same time, President Trump has consistently argued for less testing while at the same time pressuring schools to reopen live classroom instruction. These actions leave the market doubting that the U.S. will eventually be able to gain control over the spread of the virus in the way many other countries have been able to do.

U.S. increasingly isolated due to Covid-19, US dollar at risk

Not only has the poor response to Covid-19 by the U.S. government cost tens of thousands of lives and put many more in danger, it has also resulted in the U.S. becoming more isolated from the rest of the International community. At least 33 countries have instituted bans on incoming travelers from the U.S. due to the American government’s poor response. So far, negative news surrounding coronavirus has been bullish for the US dollar due to its safe-haven status. However, if the market begins to view the pandemic and its economic fallout as a more uniquely American issue, USD could experience significant downward pressure.

Therefore, Forex traders should pay close attention to reactions in the US dollar index following negative news regarding Covid-19. If you can see the reversal of the US dollar’s safe-haven status, you will stand to potentially earn significant profit from shorting USD. However, even if USD continues to maintain its safe-haven status, Forex traders can still just as easily go long USD and make profit from market moves. With a good broker providing a user-friendly trading platform, you should be able to make money in the currency markets no matter which direction sentiment moves.

Forex Risk Management Tips | Forex Brokers Live

 

At the bottom of every forex broker’s webpage, there is always a disclaimer that forex trading is risky. But that does not mean it is not a good investment opportunity. Forex trading is one of the best ways of making money online, though only if the risks involved are well taken care of.

What does Forex Risk Management involve? It is simply a combination of strategies that traders can use to minimize the risk of losing their investment or better put, to maximize their profits.

Before we get into the risk management tips, it is important to point out that in forex there is always losses and profits. There is no trading strategy that is 100% accurate to make only profits every time. A successful forex trading strategy is that strategy that makes more profits than losses so that the sum of the two is positive and not negative.

Tips of how to manage forex trading risks

1. Get a reputable regulated broker

Choosing a forex broker is always the first step when starting to trade forex. There are lots of forex broker scams out there and you should do due diligence to ensure you don’t fall into their hands.

As such, you should ensure that the trader is reputable; the broker does not have a bad history with regulatory authorities, no court cases or bad blood with other traders. You can determine a broker’s reputation by going through different reviews online.

It is also advisable to choose a broker that is regulated. The regulatory authority framework ensures that the broker conducts their business within a certain code of conduct that protects the trader’s or investor’s interest. And in case you have any disputes with the broker, the regulatory authority can always act as the intermediary.

Please read our article on how to identify legit forex brokers and scam brokers here.

2. Always start by using the demo account

A demo account is an important tool for forex traders.

Though it is mostly viewed as an account for beginners, it is a great place to test anything before using it on the real trading account. If you come up with a trading strategy, you should first ensure that you test it thoroughly in the demo account first. If you get an automated Expert Advisor, you should also test it in the demo account.

That way, you will be able to come up with a successful forex trading strategy.

3. Before placing any trade, it is important to calculate the odds

You should avoid trading just because you opened the chart and found the market trending in a certain direction. At times markets misbehave due to certain reasons and if you are not careful you could find yourself on the wrong side of the market especially if there is a news release.

Therefore, it is always important to do a technical or fundamental analysis of the market before placing any trade.

Fundamental analysis involves researching the various events around the world affects the economies and value of the currencies of different countries. These events will always affect the market.

You can always use forex technical indicators, which are programmed to identify certain conditions that tell if the conditions are right for placing a trade or not.

4. Use of stop levels (Stoploss, take profit, and trailing stop)

After calculating the odds, it is always important to use stoploss, take profit or trailing stops.

Stoploss levels help in avoiding to make huge losses that you didn’t anticipate.

Take profits and trailing stops ensure that you exit the market once your anticipated profits are hit before the market reverses.

5. Avoid revenge trading

Always remember there are times to make losses and times to make profits in forex. Always follow your trading strategy as long as it has proved to be successful especially after testing it on the demo account.

If you make a loss, don’t be in a hurry to get back into the market to revenge the loss. Always wait for your trading strategy to indicate that the conditions are right to place a certain trade. Revenge trading could lead to larger and larger losses.

6. Avoid having too many trades open at the same time

You should maintain a free margin of about 75% to give the trades room to stay as long as possible even if the market starts by moving against you. Placing too many trades could make you be stopped out in case the losses exceed the stop out level of your broker.

You should also use a reasonable lot sizes.