Some Noob Questions

[brownsfan019 17]

The forex bug has bitten me again (not sure why) but got a few noob questions that I am sure I've asked before but it may be easier to ask again vs. hunting those old threads down. Plus it may help a few others along the way.

 

BROKERS

We've all heard about the bucket shops, erroneous fills, stop running, etc. I've also read on TL that there are reputable firms that will not do this. Please provide names, websites, etc.

 

FEES/COMMISSIONS

Contrary to the 'no commission' pitch you hear, obviously the broker is getting paid. So what is best - pay the spread or look for a broker that charges a commission rate? I'm pretty sure I've read on here that some broker(s) do offer a commission type charge (like futures) vs. a spread.

 

SPREADS

If I go the spread route, who has the best spreads?

 

PLATFORMS

I don't need anything special. I like the MetaTrader charting, but order entry (on the chart at least) is abysmal. What other good platforms exist? I remember someone mentioning NinjaTrader had something, which would be nice.

 

DIFFERENCES FROM FUTURES MARKETS

What differences would an experienced futures trader see if trading fx?

 

VOLUME/LIQUIDITY

This one has me a bit confused. I know how liquid the fx markets advertise they are, but looking at my FXDD demo, I don't see it.

 

Example:

 

 

In that screenshot of a 5 min chart, no volume numbers exceed 500. But I'm not even quite sure what that volume is representing. I'm used to shares/contracts. So when it says "112" - what is the 112?

 

NEWS TRADING

I've also heard about issues trading around news announcements. How does that work? Can't trade? Huge spreads?

 

TAXES

How are profits taxed to US traders?

 

 

That's probably a good start.

 

Thanks for the help everyone.

[Rabid 10]

Brokers - Everyone has an opinion, best you can do is pick a few and try them out.

 

Fees - Depends on your lot size. Commissions are usually per mio, so if you're trading small lots spreads will be more competitive than commissions, and vice-versa.

 

Spreads - Shop around, there are a few I like but others would not like them for one reason or another. I'm not comfortable recommending specific brokers for obvious reasons.

 

Platforms - I use a seperate platform for charting and the broker's for placing trades. I like MT4, but most MT4 brokers have poor fulfillment.

 

Differences - Looked into futures, but haven't traded them. So I don't know.

 

Volume - There's no volume exchange in forex, that number you see is just some arbitrary tick data calculation. It means nothing, and I've never seen a reliable system take advantage of it.

 

Liquidity - "Plenty of liquidity" is nonsense. Small trades get executed quickly, big trades still need to find a counter party. The spread represents this.

 

News trading - Problem is liquidity. You have a lot of ppl that suddenly realize the new immediate direction and pull their counter trades, while a lot of other people jump w/ the herd. So the market becomes highly directionalized and the spread widens to find counter parties. Makes it hard to trade the direct release in a conventional sense, but clever methods still abound.

 

Taxes - Section 1256 contract. You get a blended capital gains rate, and there's no wash sale rule since it's all mark-to-market. Part of your gains will be your short-term rate based on your tax bracket, another part will be long term. It's fairly nice. Wish all of the tax code was this simple.

[brownsfan019 17]

Good start Rabid, thanks; but I am looking for details. I would like broker names, etc. Thanks for sharing and welcome to the forum. Hopefully you'll feel more comfortable sharing over time.

[justlurkin 10]

FWIW, my 2 cents:

 

I've traded FX with IB in the past with no reasons at all to complain. Spreads are tightest I've seen on most popular pairs because they have a flat fee (i.e. their commission is transparent and not hidden in the spread). Also a 1 lot transaction (Volume = 1) represents 100000 units of the base currency in any pair. (EURUSD = 100000USD). I've used MT4 as a platform but executed all my trades through FXTrader (IB tool) and I always immediately got better fiils commission included.