Choosing a forex trading platform can be very hard if you dont know what to look for.

In this article you will learn the most important things that a good forex trading platform should have.

Hopefully after reading this article you will have everything you need to choose a good forex broker & platform   So for you to learn how to choose the right platform the will work well for you,you just need to continue reading this article and also refer your friend to this page in other for them to get it right,when choosing a trader platform.

 How reliable a company is. The easiest way to go here would just be to go to some brandname company. Of course, with smaller investments it might be complicated, but many of the big names also offer mini-accounts which start from anywhere between $300 - $2000 minimum. Additionally, get lost into some investing forums and see what other people are suggesting. And then preferrably ask about the platform/firm they suggested in some other forum as well. This way you will get general information about experiences with the firm and additionally, when people are ready to suggest something, it often means that THEY consider the firm reliable

 

- How big are the commissions? For forex and stocks the commissions are usually calculated differently. For stocks there is often a certain fee for a trade – anywhere between $4 - $40 or per trade…eg. $0.02 per stock. With forex the commissions are often automatically added into the spreads ( the difference between the ask and bid price), thus no extra commission is taken. I myself have looked around and considering that… 

 

1. I want to day trade not invest for longer term and

 

2. My initial investing capital will be only $1k-$5k

 

 …the commissions really need to be small. I won’t be looking to earn 10% with a stock and I won’t be working with big numbers. So a $20 commissions on stocks are pretty much killers…buy+sell=$40 only for commissions..and $40 and if I have just $1000 to play with this means that the stock price would have to move to my desired direction at least 4% just not to lose with this deal. And this is a killer. Especially if, as a day trader, I would be happy to take just 1% of profit per deal. So instead I suggest you to find a firm that offers eg. $4 per trade or $0.01 per share.  With forex – I have actually already tried to play on forex, without any knowledge of the market, just to try it out. The firm I used had 10 pip spread for mini accounts ( min deposit $25 )…and as I didn’t know a thing about pips and such ( if you don’t have any clue what pip is, check the forex channel on this site..there will be an introduction to forex markets soon) and only now I can say it’s a killer. Good platforms usually offer only a 2-5 pip spread and this is a lot better, independent of your portfolio value.

 

- With forex and small capital you also want to know what kind of leverage they are offering. Forex is good from the perspective that you might only have $1000 but you could buy currencies for $100k ( this case of course, you are risking all your money, but the possibility here is important). The leverage is different with different online brokers, usually between 50:1 and 400:1. I guess 100:1 or 200:1 is pretty good already while 50:1 might not do it.

 

- How does their platform look? While other people might say that this or that platform is very good, you might end up hating it. So I suggest you to register for free demo accounts on different sites and see yourself which you would be most comfortable with. For example if you don’t have a laptop with you all the time, it might be a good choice to go for a web-based platform, while if you do have access to your computer all the time, I would suggest a non-web-based platform as these tend to be a bit faster to use. But that again might be my personal fetish. And my 10-pip firm had web-based platform so I might not be as objective here as I could.

Tip #1 Real Time Quotes

This is extremely important. Forex trading is done 24 hours a day and you want to have live quotes. With live quotes you can be in full control of your funds and check them whenever you want.

Make sure to check if the broker platform offer live quotes 24 hours a day. This is really important i cannot stress this enough.

Make sure to check so the broker don’t slow the execution of the orders. This way you will enter a market at a different time than you wanted.

So make sure that the broker don’t slow the execution orders.

Tip #2 Easy to Use

The software you use should be easy to understand. You should be able to start trading immediately. Skip systems that take weeks to learn. They should be easy to use, that’s it.

You should also try to pick a software that doesn’t need any download, that you can access from every computer.

You could choose to download a software but make sure that it got live quotes.

Support

This is very important. Your broker shall provide 24 hours support no question about it. The forex market never rests and if you need assistance you should get it fast.

A good tip is to contact their support about any questions you have before you buy their services.

Trading Rates

Be sure to check if the software allows a freeze option when you decide to buy or sell. This way you get the rate you freeze and not the actual rate that occurs when the buy or sell is processed seconds later.

 Spreads

The spread is different from broker to broker. Make sure to check which spread the broker have. If they have larger spreads then the market have to move in your favor more than it would have if the spread was smaller.



harder to make a profit if the spread is larger so try picking a software that have a small spread.

 



By: tunde

About the Author:

When vertical spreads are mentioned, they quite often come with monikers such as ‘bull’ and ‘bear’. This lends most to think of vertical spreads as directional plays which is true. However, vertical spreads can be used to take advantage of two other potential trading opportunities - time decay and volatility movement.

If you are looking for a fully hedged way to take advantage of time decay, a vertical spread can be an excellent tool. Knowing a little about them now, you will recall that a vertical spread has a limited profit potential but also a limited loss scenario for both the buyer and the seller. So, how do we use this covered trade to take advantage of time decay.

At-the-money options have more extrinsic value than their similar month in-the-money or out-of-the-money options. Since it is an option’s extrinsic value that decays away over time, you could set up a vertical spread by selling an at-the-money option and buying either the out-of-the-money option (creating a credit spread) or buying an in-the-money option (creating a debit spread). If the stock holds tight to the out-of-the-money option, the option’s extrinsic value will decay away at a faster rate than either the in-the-money option or the out-of-the-money option due to the fact that the at-the-money option has more total extrinsic value to decay in the same amount of time as the others.

Creating the vertical spread by selling an at-the-money option and buying an out-of-the-money or in-the-money option as a hedge looks like a good idea, but now there are a couple choices. Should you do the put spread or the call spread? Should you buy it or sell it? The decision of what to do from here should first be based on which way you think the stock will move. Although you are playing for time decay and you are assuming an overall lack of movement, you can’t expect the stock not to move at all. So even though you are playing time decay, you still want to form an opinion about in which direction the stock is most likely to move. By doing this, you’ve now give yourself another way of making the trade profitable. You are playing for a lack of movement but now you can still win if you pick the right direction. This scenario presents you with two ways to win and only one to lose.

Now that you have picked which at-the-money strike you are going to sell and you’ve picked your anticipated stock position you still have a decision to make. Do you do the call vertical spread or the put vertical spread? Remember both the vertical call spread and a vertical put spread allow you to participate in either stock direction. For the bulls, you can buy a vertical call spread or sell a vertical if you think that the stock will go up. For the bears, you can buy a vertical put spread or sell a vertical call spread. For each direction there are two choices to decide from. One is a purchase, one is a sale. The best way to decide which to do, other than your own style or comfort ability is a simple risk/reward analysis.

By selecting an at-the-money option to sell as part of a vertical spread, an investor can execute a time decay play with a hedged position.

Much in the same way that a vertical spread can be used as a time decay play, it can be used as a volatility play. We stated earlier that an at-the-money option has more extrinsic value than any other option in its expiration month. This is due to a number of contributing factors including time but it is in no small way due to volatility. Volatility is a huge component of an option’s extrinsic value. An option’s dollar sensitivity to movements in implied volatility is known as vega. Obviously, an at-the-money option will have a higher vega (volatility sensitivity) then will an in-the-money or out-of-the-money option in the same month.

As volatility increases, the at-the-money option will increase in price to a greater degree than will an in-the-money or out-of-the-money option in the same month. As volatility increases, the at-the-money option will increase in price to a greater degree then will an in-the-money or out-of-the-money option whose vega’s will be less. Conversely, the at-the-money option will lose value at a greater rate than an in-the-money or out-of-the-money option should implied volatility decrease. The question now is how to use the vertical spread to take advantage of anticipated movements in implied volatility. Remember, the vertical spread affords you the luxury of being hedged on either side of the trade - both as a buyer and a seller of the spread.

So, if you think that implied volatility is likely to increase, you can set up a vertical spread by buying an at-the-money option and selling either the in-the-money or out-of-the-money option against it. Conversely, if you feel implied volatility will decrease; you can set up a vertical spread by selling an at-the-money option and buy either an out-of-the-money or an in-the-money option against it.

As to how to set it up, you would follow the same guidelines as you would for setting up a vertical spread to take advantage of time decay. Decide which direction you feel the stock would most likely move. If you feel the stock would most likely rise, you will have to decide between buying a vertical call spread and selling a vertical put spread.

Either way, the spread will have to be constructed with the at-the-money option being long if you feel volatility will increase or short if you feel volatility will decrease. If you feel the stock would most likely fall, you will have to decide between buying a vertical put spread and selling a vertical call spread. Again, either way, the spread will have to be constructed with the short option being the at-the-money.

As you can see, the vertical spread does not have to be used only in directional scenarios. It is very versatile allowing the investor several choices among a diverse group of potential uses. It also affords limited risk, albeit limited profit potential, to both the buyer and the seller.



By: Ron Ianieri

About the Author:

What is a credit spread?

Investopedia says… “An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.”

OK I know that is very vague, so lets see if I can do better.

It is a trading strategy in which you buy an out of the money option at a certain strike price and then you sell an out of the money option at a different strike price of the same month. As time goes on the options will decay in value and as long as the price of the stock does not go past the sold strike price at the end of expiration you will receive a full credit winning trade.

For example,it is January and XYZ stock is currently at $54 and it looks as if it is bullish or will increase in price over the next month and you firmly believe that the stock will not go below $50. You would trade a Bull Put Credit Spread on a Feb expiration. You would buy the Feb 45 put for $.25 and you would sell the Feb 50 put for $1.00. This leaves you with a credit of $.75 in your account or actually $75 per contract you trade. The risk of the trade or the amount of money per contract you need in your account is $425 per contract. This gives you a return on investment of 17.5% in how ever many days till Feb expiration.

Lets take it out like a real trade - It is January 13 and Febuary expiration is in 35 days. You place the trade for 5 contracts. So you now buy 5 FEB XYZ 45 PUTs for $.25 or $125 total and you sell 5 FEB XYZ 50 PUTs for $1.00 or $500 giving you a credit of $375 in your account. Now to back the trade up with collateral in case the trade goes wrong you need to have $2125 in your account for just this trade. If XYZ closes above $50 in 35 days you will have received $375 which is a 17.6% gain. There is a break even price of $49.25 that if the stock closes at this number you will neither gain or lose money. If the stock closes between $49.25 and $45 you will lose some money and if it closes below $45 you will lose $2125.

If you like the idea of knowing exactly what your profit will be, exactly when the trade is closed, and exactly how much money you will risk then credit option spread trading is for you. Your profit margins will be between 10 and 20% on each trade - on some of the aggressive credit spreads you can make over 50% - and there are techniques for changing your trade if it becomes a losing trade to help you recover some of the loss and in some cases even make it a winning trade again even though you were wrong on the direction of the movement of the stock.



By: Daniel Beatty

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