Because the Forex market is highly volatile, many traders refuse to give historical information. They are arguing that the past results do not guarantee the future results. It is therefore necessary that the investor will insist on the application to better understand the trading strategy to be used with its capital, assess the risks involved and define the flexibility and adaptability of the trader against unexpected changes in market trends.
The basic information that every investor should ask include the following:
1. Years of experience of the trader in the forex market.
A trader with several years of experience in the foreign exchange market will delivers increased security. By using a strategy to generate profits in the medium and long term, without taking excessive risks.
2. Percentage of the account that is invested in each transaction.
The percentage of total amount that is invested (risked) in buying and selling of currencies is another important factor to define the degree of risk that is assumed.
3. Leverage used.
4. Percentage of successful transactions in its history.
5. Ratio between gains and losses.
Considering the daily fluctuations, it is useful to know the percentage of successful transactions in the history of the trader and know the ratio between gains and losses.
6. Number of transactions conducted daily or weekly.
If the number of daily transactions is too high, the business may end up being less profitable than expected. Because all brokers charges their clients a commission on each transaction, which could end up with consuming the gains and also being counterproductive method.
On the other hand, if the number of transactions in a week is too low, you run the risk that the trader does not react promptly against a negative change in market trends. Create a loss greater than desired. A good number is between 12 and 30 transactions per month.
7. Traded currency pairs.
If the trader gives you the opportunity to invest in different currency pairs, it is recommended to diversify the investment of a minimum in 3 to 4 different currency pairs. Select among the most traded pairs such as USD / JPY, EUR / USD, GBP / USD, USD / CHF, USD / CAD AUD / USD or any other combinations of these 7 currencies.
8. "Stop loss" and "limits" used.
Define the "stop loss" properly is important to reduce losses in an adverse situation. However there are times when market conditions prevent the trader sell a currency when it reaches the minimum value, mainly due to the shortage of buyers.
9 - Broker and independent ground that works.
The broker must be accredited by an international prestige, but it is also essential that the broker is totally independent of trader. This ensures transparency of transactions and prevents tampering by the trader.
10. Trading system used.
These systems can be basically classified into 3 categories:
- Automated (predictive software.)
- Traders who use technical analysis and fundamental financial information.
- Mixed Systems (traders who are supported by software).
There are very good systems in these three categories. However, the most recommended is the mixed system to be more flexible and adaptable to market changes. It is always useful to have advanced computer systems to enable predictive analysis algorithms using powerful mathematical and statistical calculations.
11. Type of fee charged by the trader.
Finally, the commission charged by the trader is a relevant factor for the selection of it. Those traders who do their best work only charge monthly fees based on the profits generated. Commissions usually range between 10% and 50% of the proceeds.
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