One: when operating in a demo account is very easy to win.
Two: when operating in a real account is more difficult.

In principle, operate with real money is a most difficult task to operate in a test platform.

And why the difference?

Neither more nor less because the operator, without doubt, has not been detached from the emotions.

In a test account operator does not give importance to what they earn. No such gains associated with their wallet. With the real account is different: losses and gains will permanently remember how hard it was to get those funds.

The goal, the challenge for operators is to treat forex as a business: emotion out.
An operator that passes from a demo account to a real account, because they feel safe in itself, has felt comfortable with its operations and is able to successfully repeat, must be able to control their emotions to stick to your plan.

The operator must incorporate into their professional discipline essential to enable it to continue its pre-determined, regardless of the emotions that appear when you are in the market or trying to open a position or handling a transaction done.

If you are able to understand this business like a business in itself and manages to control his emotions, the operator will get the same results as a test account.

So … how do we make the transition from one account to a real test?

First things first.
The demo account, the test will give you many opportunities to develop your plan, know the market and yourself. You can “do that …” without risking your capital.

The road follows step by step, gradually.
Then, when 1) you have taken your time sharpening the pencil on the demo account 2) have accumulated some gain 3)’ve prepared your plan 4) you feel safe and comfortable you can move to the next step: the real account. 1) 2) 3) and 4) are conditions sine qua non. All.

Obviously, step by step means that beginning with small operations, this is a mini-batch, or 10,000 units. No more for now.

This has the advantage of helping you control your emotions: the potential losses are not important. Gaining or losing just lets you act as you did in the demo account … that’s the idea.

When you are able to earn profits through winning a series of operations, increases the size of the transaction, such as 2 mini lots.

Repeat the steps until you believe it is easy to do and that you are able to generate profits.

At this level you must understand you are not operating Forex to make money but to accumulate knowledge. Is the price of market entry. This is key.

What we’re doing is to develop an emotional comfort from increased volumes and the sequencing results. And here is an error of most traders: very often people work too much money to risk it can endanger your account. As a result the nerves appear and the lack of control leads to disaster. In this case they “want,” “beg” to analyze and operate.

If you are in this situation, close the open position, operations and do not reconsider. Maybe you should start the process again.

Following the steps above, surely you will notice that your focus is more on the business, analysis and operations in the money. And that is the truth and the key to the business.
Take care to make the Forex “your business”, treat as such and then the money will come as something natural.

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Probability of earning on Forex is based on the fact that every national currency is a good, as well as wheat or sugar, and a medium of exchange, as gold or silver. As the world is changing so fast, economic conditions of every country (production, inflation, unemployment etc) are getting more and more dependant on each other, as a result, the rate of a currency changes against other currencies. This is the main reason of the process of rate fluctuations.

All currencies are traded in pairs and each is assigned with an abbreviation.
Table 1. Currency Abbreviations
Abbreviation Interpretation
EUR Euro
USD US Dollar
GBP British Pound
JPY Japanese Yen
CHF Swiss Franc
AUD Australian Dollar
CAD Canadian Dollar
NZD New Zealand Dollar
SEK Swedish Krona
DKK Danish Krone
NOK Norwegian Krone
SGD Singapore Dollar
ZAR South African Rand

Currency exchange rate is the rate at which currencies are exchanged one for another. For example, «EUR/USD exchange rate is 1.2505» means that one Euro is exchanged for 1.2505 US Dollars.

The exchange rate of any currency is usually given as the Bid price (left) and the Ask price (right). The Bid price represents what will be obtained in the quote currency (US Dollar in our example) when selling one unit of the base currency (Euro in our example). The Ask price represents what has to be paid in the quote currency (US Dollar in our example) to obtain one unit of the base currency (Euro in our example). The difference between the Bid and the Ask price is referred to as the spread.
Table 2. 1.0 lot size for different currency pairs
Currency pair↓ 1.0 lot size Necessary margin for 1 lot 1 pip size

EURUSD EUR 100,000 1000 EUR 0.0001
USDCHF USD 100,000 1000 USD 0.0001
GBPUSD GBP 100,000 1000 GBP 0.0001
USDJPY USD 100,000 1000 USD 0.01
AUDUSD AUD 100,000 1000 AUD 0.0001
USDCAD USD 100,000 1000 USD 0.0001
EURCHF EUR 100,000 1000 EUR 0.0001
EURJPY EUR 100,000 1000 EUR 0.01
EURGBP EUR 100,000 1000 EUR 0.0001
GBPJPY GBP 100,000 1000 GBP 0.01
GBPCHF GBP 100,000 1000 GBP 0.0001
EURCAD EUR 100,000 1000 EUR 0.0001
NZDUSD NZD 100,000 1000 NZD 0.0001
USDSEK USD 100,000 1000 USD 0.0001
USDDKK USD 100,000 1000 USD 0.0001
USDNOK USD 100,000 1000 USD 0.0001
USDSGD USD 100,000 1000 USD 0.0001
USDZAR USD 100,000 1000 USD 0.0001
CHFJPY CHF 100,000 1000 CHF 0.01

Let’s assume that exchange rate for EUR/USD is 1.2505/1.2509. You may have made market analysis and decide the EUR/USD rate is moving higher (at least to 1.2600). You buy 0.1 lot (minimum contract size) of EUR/USD at the 1.2509 (ask price). Table 1 will help you to define what the contract size is: i.e. 1.0 lot for EUR/USD is 100 000 EUR, then 0.1 lot (our contract size) is 10 000 EUR.

This means that you bought 10 000 EUR and sold 10 000×1.2509=12,509 USD. So, in order to make a deal you don’t have to sell total amount of 12.509 USD but 100 times less just $125.09. The rest sum of the money (in our example $12,383.91) is leveraged to you by a broker (a company you entered the contract with to enter the market).

Leverage is the term used to describe margin requirements: the ratio between the collateral and borrowed funds: 1:20, 1:40, 1:50, 1:100. Leverage 1:100 means then when you wish to open a new position, then you must have deposit 100 times less then the contract size.

So, you forecast that EUR/USD is moving higher and you buy 10.000 EUR and sell 12.509 USD. Assume you are right and EUR/USD reaches 1.2599/1.2603. You close the open position by the opposite one, in our example, you close short position (sell position) by long position (buy position), i.e. you sell 10.000 EUR (0.1 lot* 1.0 lot size for EUR/USD) and buy 12.599 USD:
Transaction EUR USD
Open a position — buy EUR and sell USD + 10,000 – 12,509
Close a position — sell EUR and buy USD – 10,000 + 12,599
Total: 0 + 90

You get a profit of 90 dollars. And you didn’t operate with 10.000 EUR ($12,509), but only $125. So, the profit is 90 pips. Pips or point is a minimal rate fluctuation. For EUR/USD 1 pips is 0.0001 of the price (see table 2). Our profit is 1.2599-1.2509=0.0090, i.e. 90 pips.

So, you invested $125 and take a profit of $90. The time period for this can take from 10 minutes to several days. But anyway to make profit of $90 for several hours isn’t a bad return at all. But be aware, that all this can work against you and magnify your losses. Only money management will help you to minimize the risks, moreover to reduce them to zero, and increase the return of your funds from 10% to 20-30% and higher per month.

One question is left: what is broker’s charge for the leverage he provides? If you open and close a position till 2:00 Moscow time, a broker provides the leverage for free. If you leave your position after 2:00 Moscow Time, he credits to your account or debits from you account a storage — charge for the overnight position. It can be both positive (credited to your account!) and negative (debited from your account). It depends on the interest rates in those counties which currencies you trade.

For example, ECB interest rate is 4.25%, FED interest rate is 3.5%. Assume, you have a short position on EUR/USD per 1.0 lot. You sell 100.000 EUR. This means you borrow them at 4,25% per annum. You sell euro and buy dollars, which can be deposited at 3.5% per annum. As a result, the costs are (4.25-3.5)% per annum or 937.5 dollars per year (if EUR/USD rate is 1.2500), or $2.57 per day. This means that your account will be debited on $2.57 everyday per one lot if you have a short position (selling position) on EUR/USD. And your account will be credited $2.57 everyday per one lot if you have a long position (buying position) on EUR/USD.

In practice the debited amount is a bit higher than 2.57%, and the credited amount is a bit lower than 2.57%. The difference goes to a broker as a payment for the rollover (see Contract Specification).

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Finally, Forex represents a market of interbank transactions, and under currency and interest rates fluctuations we should consider interbank foreign exchange market.

Large international banks, daily operation volumes of which reach 1 bln dollars, have the most important impact on the world exchange markets. These are such banks as Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank and others. Large transaction volumes that may cause significant changes in quotations or currency prize are the most evident distinction of these banks. Large players are usually divided into bulls and bears. Bulls are the market participants who play for the currency prize increasing; bears are the market participants who play for the currency prize decreasing. The market is usually in balance between bulls and bears, and the difference in currency quotations usually fluctuates in quite a narrow range. Although when bulls or bears overpower, currency rates quotations fluctuate quite sharply and significantly.

Firms that realize foreign trade operations
Companies that take part in the international trading have a great demand on the foreign currency (with regard to importers) and offer of the foreign currency (with regard to exporters), and also deposit and attract free currency remains. As a rule, these organizations have no direct access to Forex and make conversional and deposit transactions via commercial banks.

Companies that realize depositing of foreign assets (Investment Funds, Money Market Funds, International Corporations)
These companies represent different international investment funds. They realize policy of diversifying management of assets portfolio, depositing funds in securities of governments and corporations of different countries. They are called just funds in slang of dealers. The most popular funds are «Quantum» of George Soros and Dean Witter.
Large international corporations also refer to this kind of firms. They realize foreign industrial investments: affiliates and joint enterprises foundation, such as Xerox, Nestle, General Motors, British Petroleum, etc.

Central banks
Currency regulation on the foreign market is the main duty of the central banks, particularly, prevention from national currency sharp bounces in order to avoid economical crises, support balance between exports and imports etc. Central banks have a direct influence on Forex. Their influence may be both: direct – currency intervention, and indirect – money funds and interest rates regulating. They can’t be referred to bulls or bears, as they may play both for rising and falling depending on concrete tasks they have currently. Central banks may act alone on the market to influence on the national currency, or they may act together with the other central banks to conduct the collective currency policy on the international market or for collective interventions.

The following banks have the greatest influence on the world currency market: the US Central bank — US Federal Reserve (FED), German Central bank — Deutsche Bundesbank and GB Central bank — Bank of England (Old Lady).

Foreign exchanges
In some countries with transition economy currency markets operate. They realize currency exchange for entities and formation of the market currency rate. The State usually regulates the exchange rate, making use of currency markets compactness.

Currency brokerage firms
Their function is to bring together a buyer and a seller of the foreign currency and to accomplish conversional or loan-depositary operation between them. Broker firms take broker commission in the form of percent from the transaction charge.

Physical bodies
Physical bodies make a great deal of noncommercial transactions as related to traveling abroad, wages, pension and earned income transfer, foreign exchange cash buying and selling. In 1986 due to margin introduction physical bodies got an opportunity to invest free cash on Forex to take profit.

The main volume (90-95%) on Forex is earned by the largest world commercial banks by making conversional transactions both in clients interests and by their own expense. Nevertheless, advance in computer technologies let to find field of application for funds of private and retail investors. More and more brokerage firms and banks give access for private investors to Forex via Internet.

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It should be remembered that the market is subject to all these questions, and it is essential to both present analysis, therefore the operator should understand the two types of analysis mentioned above at the time of trade from some cheap forex ebook.

Unfortunately, many operators do not have time or adequate training to properly evaluate the technical and fundamental analysis, and simply prefer to use trading platforms.
A simple way to test a trading platform is by opening a demo account with a forex broker of your choice, so you can operate but by means of a simulation. Over time, you can analyze whether currency trading is beneficial or not for you. When you find a commercial platform to you, you will be able to collect the information obtained during the test and analyze what is the average benefit that you get every time it operates. If such amount multiplied by the value that you intend to invest in each transaction, you can estimate your earnings for performing transactions using the trading platform in Forex. It is important to note that the transactions through an account in vivo, likely to reduce drastically their results, and it is essential that it is realistic in the time to be spent to operate. Note that the pressure work and family, can limit the number of transactions
you intend to do.

Managing your money

As in any business, managing your money is in the account is critical. That means you have to put a cap on how much money you spend in each session also want to leverage far. Mishandling of funds can cause a brief period in the total loss of their capital.
Therefore, investors are generally well informed about what their limits with regard to research and analyze information, determine what information they wish to deal with, and if necessary, seek a trading system or trading platform to suit your needs.

How to choose a fund manager?
One of the main advantages of participating in a fund that is a professional, or a group of professionals, take the appropriate strategies in place. You will participate in the pool with thousands or millions of players, so this will reduce the cost of managing it. Learn what you need to know when choosing your fund administrator.

Hire a fund administrator
Finding a good fund manager is like finding a good employee. Should consider the candidate’s experience and achievements in the forex market, as well as an analysis before deciding.

As such there are different types of applicants to work, and there are different types of fund managers, but unlike in the case of a candidate for a job there is only one individual, a fund manager can be a set of individuals . The funds usually work through a decision-maker, which is headed by a manager, but there may be independent of each other and teams that manage individual assets.

Experience
Some journalists talk about the period of experience which must have at least the fund managers. Often ask: How long that manages the fund? And advise that: “Do not participate in a fund where the manager has less than five years of experience.” Despite the approach of the time in the administration of funds, there is no clear evidence of the importance of time lapse in activity. The Journal of Financial Planning found no relationship between the number of years of experience in fund performance. Other studies say something else, but we can say that time is not as important as it usually says.

No need to stress that a fund manager with experience preferred. How long has this person managed funds? Have an adequate academic background? Manages other investments? Does your fund manager is smart? What forex education received? Note that if a fund manager has suffered unpleasant surprises in the past due to market developments likely hesitate to act upon as appropriate.
If you are looking for a new fund or if it changed its administrators, to study the history of it. How long participated in the fund? If you run a different background before taking the current analysis that the performance obtained in the background above and compare with the current.

Achievements
How did they behave the fund administrator to ups and downs in the marketplace? How does the manager compared to his peers?

As it happens in the music industry, not only want success. If the fund manager tops the list in a year with the lowest level does not mean that next year the same thing happens. Be wary of managers who talk too much and do not underestimate the silence of those who do not speak much. Luck seems to be part of the success of many fund managers. Do not confuse luck with skill or talent.

True Style
Is your fund manager has a passion in the investment strategy? Is it true to the fund manager? The selection and allocation of assets is important for the formation of a portfolio of funds that are in line with their risk tolerance and financial situation. The last thing we want is that their fund manager manages them in a way different from what you said.

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Forex trading is a non-delivery trade: foreign exchange market are not physically, but to be more precise, there are foreign exchange contracts to be agreed and implemented.
Both parties to such contracts (the investor and the trading platform) undertake to fulfill their obligations: one party agrees to sell a certain preset amount, and the other party agrees to purchase that quantity.

That includes a deal with Forex?

Forex is an agreement with a contract between an investor and operator of Market. The contract is a commitment to the following components

1. A pair of currencies (the currency for the currency by buying and selling)
2. The equivalent of capital
3. Costs for pre-transaction

As a benefit of Forex?

Obviously, buy low, sell high! Imagine that the cost of change for EUR / USD (euro to U.S. dollar) at 1 pm. is 1.1999. If you bought 1,000 euros at that time, you would have paid 1.199.00 U.S. dollars. But if one hours later, the cost of change is 1.2222, the value of the euro has risen relative to U.S. dollar. You can now sell the 1000 euros and receive U.S. dollars 1.222.00. Then you would be 23.00 U.S. dollars more than when the transaction started an hour ago.

What is “Leverage” (leverage) and because we need it?

The proportion of investments at present value is called “leverage” (leverage). Using $ 100 to buy a Forex contract with a value of $ 10,000 this “leverage” a ratio of 1:100. Your investment of $ 100 is all that you may risk, but could earn more.

As there is risk in trading Forex?

As mentioned above you can never lose more than the amount invested, but like everything that relates to the risks they involve money, we recommend that you never risk more than you can afford to lose.
With eToro, you can open a live account from a very small amount like $ 50, the minimum trade is $ 25 and we offer a variety of leveraged transactions of up to 400:1

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However, in Forex, is simply unprecedented double in most cases. When we talk about leverage in Forex, we usually refer to a four to ten times higher than the balance of your account.
With Forex, brokers can offer you this extremely high leverage because the market is so fluid, almost never have to worry because you will owe money if the transaction goes wrong.

Policies called for replacement of many runners-up have been designed to make a margin call on his replacement has to occur well before any possibility of a negative balance.
However, with some brokers, if the market moves against your position too quickly, may suffer a total loss of their funds and can even result in a negative balance.

Therefore, you are advised to check the policies of the corridor outside to see if this could happen to you. In considering the leverage, many brokers offer several options for the amount of leverage
If you start with, for example, with a 50:1 leverage, you can make a transaction worth fifty times the balance in your account.
So if you have a thousand dollars in your account can make a transaction worth fifty thousand dollars.

If this seems extreme, just remember that some brokers offer leverage up to 400:1. For this reason, you should never use money you need, the funds that you should be operating funds that stand to lose.
It is important to be careful with leverage. A high leverage may seem wonderful, but it is highly risky for their funds.
A very high may result in total loss before your operation has an opportunity to move towards its position.

To avoid this, exercise the administration of the strong currency. It is recommended that you never enter a position that uses more than ten percent of your available margin balance. This will give you some room for fluctuations which occur in the market.
After all, is in Forex to earn money, not lose it.

If you have any concern about the scope and policies on how to manage their purchases on credit, be sure to talk with your Forex broker and clarify all doubts before having to risk their money.

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We, people who have less than $10,000,000 (ten million dollars) are considered as retail traders. And we are only allowed to trade using retail brokers. We are not allowed to trade in institutional broker. If all retail brokers are scammers, then we are all doomed.
In fact, there are people who have been living comfortable by trading full time, and their account size is nowhere near 10 millions.

I also don’t think that ECN brokers are also doing this. ECN gains no profit / loss by playing with our account. What ECN wants is that you trade more lots. Of course there is a case that if you are counted as 1 of the people with the biggest profit, then the ECN will let the market marker play with your account. But, I think that is your fault also. Why? Because in a big and reputable ecn brokers, there are many successful trader, so your account is not sticking their eyes. If you are choosing a small ecn broker, that is your problem and your fault imho.

What I find true, is that all small traders have the highest risk in this industry. If you are investing, but not trading, in this market, you could survive. If you are trading, you have less chance to survive.

e.g. You are a scalper, you take profit for 10 pips and your stop loss is 7 pips. Because you are successful scalper then your broker is playing with you. They play with slippage between 3 – 5 pips. Your 10 pips take profit become 5 pips profit, and your stop loss become 12 pips stop loss. In some of the EAs here, the TP is 5 pips and SL is 35 pips. After the slippage, the TP would be 0 pip and the SL would be 40 pips. Imho, you’re lost and doomed.

e.g. You are a long term investor, your take profit is 400 pips and your stop loss is 100 pips. Because you are a successful investor, the broker is playing the slippage card, between 5 – 7 pips (of course if the slippage is too large and you still use that broker, then you should move. If not, that’s your fault). Your take profit become 393 pips and your stop loss become 107 pips. Imho, you still win.

That is why, I try to avoid any kind of scalping trading system or EA. I don’t even want to test them. I don’t even download them, it’s a waste of disk space. If it has a good indicator, I’ll download, but I’ll never use the system / EA. Imho, scalpers are at the lowest of the food chain and should really take good care of oneself.

In fact, there are many scalpers who would argue with me about this matter. So, to state that all retail brokers are scammers, is not appropriate IMHO.
After all if all retail brokers are scammers, where should we trade?

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Let me give you the difference’s sample:

Market Maker: Online Retail Broker who will take the other side of your trade (aka: they trade against you, when you buy they will sell and vice versa), they have a somewhat shady algorithm to calculate their net exposure and cover their risk by sending order to interbank market.
eg: Joe buy 3 lots EURUSD and Jane sell 2 lots EURUSD, Market Maker simply match Joe and Jane orders (2 lots) and they sell 1 lot EURUSD to match the rest of Joe’s order. They will also buy 1 lots from interbank market to cover the 1 lot they sell to Joe.

NDD = Non Dealing Desk. It’s about the same as Market Maker. I think it’s more of marketing hype.
eg: FXCM, IBFX claim to be NDD, but we all know they both are one of the biggest Market Maker.

ECN is supposed to pass your orders straight to interbank market, so ECN should not trade against you.

Let me give you more details:
Because for every buy, there must be someone who sell, vice versa.
So for the rest of Joe’s buy order to be executed, someone MUST sell 1 lot EUR-USD. Because nobody else is selling EUR-USD, Market maker MUST sell 1 lot of EURUSD to Joe. After they sell it, they have risk when price go up (aka: when Joe is winning, they will lose). In order to cover that risk, Market maker should buy 1 lot EURUSD from interbank market to cover their risk. (so when price go up or down, they will not lose, cause they have 1 sell and 1 buy).

Market Maker makes money from the spread. let’s say that the spread is 2 pips, so from the example above they will receive 6 pips from Joe, 4 pips from Jane. They also have to pay the spread for 1 lot they buy from interbank which will probably be around 0.5 pips. So they will receive about 6 + 4 – 0.5 = 9.5 pips.

Now, if Joe is constantly losing, some Market Makers won’t cover that 1 lot EURUSD they sell to Joe. They simply sell it to Joe because Joe will lose anyway, and when Joe is losing, they will win.

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