Last modified on 2009-04-27 18:13:14 GMT. 0 comments. Top.
Communication is the core of trading between ones value for another. In Forex understanding order types is vital! Forex platforms were designed as the vehicle that allows traders, investors, and companies interact in the world of currency exchange. Familiarizing with basic definitions and relations to the currency pairs are notably essential before we approach to take a trading position. Using a demo account is the best form of practice in which you can relate and recognize the logics of the market. All brokers nowadays use the same markets terms, like any other market good communication is decoded and encoded properly to eliminate errors. This is true unless you start dealing with more advanced forms of trading, which will be discussed in a later tutorials.
Order Types:
Market Order:
Whether you want to buy or sell a currency pair using the platform tools, order positions can be taken in a few different ways,. A market order is an order placed immediately after the click of the mouse. A market order does not guarantee an exact price, but it does execute itself in real time. No delay is being taken as you presume the position.
Limit Order:
A limit order is an action assigned to the platform, in which you specifically order to enter a position at a precise price. If you want to buy a currency pair, a limit order has to be set at a price lower than the actual current price quote. In the other hand, if you want to sell a currency pair, a limit order has to be set at a price higher than the actual current price quote. Specifying a position and a duration on a transaction, gives the market the option to keep its course, and enter your transaction in the market if the position of the limit order is executed. For example: The EUR/JPY is currently at a market value of 118.08 and your strategy is asking for a buy at 117.60 using a limit order. Limit order takes action when the market reaches your desired price of 117.60 where your position will be then opened.
Stop Order:
A stop order is an action assigned to the platform, in which you specifically order to enter a position at a precise price. If you want to buy a currency pair, a buy stop order has to be set at a price above the actual current price quote. In the other hand, if you want to sell a currency pair, a sell stop order has to be set at a price lower than the actual current price quote. Specifying a stop order position is used when you want to gain from the momentum of the currency pair and enter your transaction at market when the currency pair exceeds the price you have set. For example: The EUR/JPY is currently at a market value of 118.08 and your strategy is asking for a buy at 118.25 using a stop order. The buy stop order takes action when the market exceeds your desired price of 118.25 where your position will be then opened. Technical traders will place stop orders at critical points like above or below swing highs, swing lows, key support or resistance levels, and major moving averages. The second variable that could be specified to the order is the ability in placing a stop loss order and/or a take profit. Additionally, you can specify the duration of the order entered like (GTC or GFD)
Stop Loss order:
Specifying an order to close the position at a precise value against your desired outlook, it’s referred as a stop loss order. Although its already part of your money management strategy, all platforms give you the opportunity to enter a value to close a position and control your losses. For example, you are long on the EUR/JPY at 117.60 and you don’t want to loose more than 100 pips you would apply a command to close your order if it reaches the 116.60 level. By doing this you will eliminate the psychological involvement of “hope” and prevent the order to continue to go against you
Take Profit:
Take Profits, T/P is also a command given to the platform in which you are setting a limit to the amount of profits you want to lock in. For example, you are still long on the EUR/JPY at 117.60 and you want to T/P at 118.20 because you are confident of the market will reach the level; however your system is unsure of the movement after that. The pair will reach the 118.20 and your take profit order will automatically be executed locking in the profits. A Good till cancelled or (GTC) is the assignment of a position on a pair, using a limit order. The order will remain active until you cancel it, restricting the broker from using an authorized cancellation. A Good for the day or (GFD) Works the same way, except it has a specific cancellation date. The limit order is schedule to stay active for a certain period; and schedule to close at the end of the brokers 24 hour cycle.
Last modified on 2009-04-27 18:13:19 GMT. 0 comments. Top.
An introduction to Forex trading requires understanding the complexity of the various factors that make the market work on a daily basis. The system of swapping currencies, one for another, for the sole purpose of raising our worth value has revolutionized the form we do our trading and our investing nowadays. In today’s market, technology has enabled us to make daily transactions automatically, without being delayed by any reason. In Forex, over the counter trading, is only a downloadable computer platform and an internet connection away that enables us to make transactions and investments. Having the right Forex broker is a very important part of your trading.
Choosing a Forex broker:
In order to proceed with online currency trading, setting up an account is a fairly simple process. Picking the correct broker, completing a brief registration form, and transferring funds to a broker are the basic steps. However, there are a few things that should be reviewed, in order to understand more about trading Forex.
Regulations:
Like any other form of trading, make sure these financial organizations “brokers” are registered by the appropriate regulatory agencies. In U.S. make sure to check the CFTC and NFA, U.S. Commodity Futures Trade Commission and National Futures Association for more info. Please be certain your broker is well capitalized, click here to view a complete list of U.S. regulated brokers and their financial statements. * Brokers outside of the U.S.; make sure they are completely regulated by the corresponding local authorities.
Compare the Spreads:
Compare the amount charged in the spreads between various Forex brokers. The spread is the difference between the price you can buy or sell the currency pair and where the broker makes its commission. When comparing brokers, you will see the difference between spreads; there is no need to pay for higher spreads.
Leverage ratios:
Understand the leverage ratios offered by your broker. Determine your risk level in your risk management plan and agree to one with your brokerage. 100:1 leverage is the most common between brokers and the most recommended to lower risk.
Margin requirements:
Because you are dealing with borrowed money from your broker, understanding the margin requirements is very important. Brokers vary the minimum amount required to deposit to open in a Forex account and they also have restrictions on your margin balance. Make sure you check your margin requirements as brokers can liquidate your order even if you have more funds to sustain the position. *Since you are borrowing money from a broker, a margin agreement is required in signing, when registering a new account.
Forms of Account:
Standard Accounts: A standard account is known for its regular lot size and uses standard trading lots of $100,000 per trade. With a leverage of 100/1, $1,000 of your risk capital should be available in your margin account in order to trade single lots. A $10 per pip is the most common form of valuing the basis points in a trade using a standard account. The advantage of trading big size of lots, is the potential for higher gains. Mini Account:A mini account is a type of account that allows traders to take smaller positions using the same type of leverage as a standard account; nonetheless working with a mini account, traders are allowed to enter the markets using only a fraction of lot size used in standard accounts. Normally positions are taken using $1 per pip, reducing your trading size to $10,000 per every $100 at risk. Institutional Accounts:An institutional account trades similar to standard accounts with the only difference being tighter spreads. The broker’s commission is usually payed separately as the spreads are set by the real interbank market.
Forex Support:
We recommend traders to work with brokers who are available 24 hours a day for full client support. Before choosing a broker, compare the reliability these brokers offer and see which ones are the most available to your needs. Being a 24 hour market, having full client support and trade desk is very beneficial. Many unfortunate things can happen, (Computer freezes, internet down, etc..); if you have an open position and need to close it, choosing a broker with a 24 hour trade desk will be correct way for you to begin.
Currencies Available:
Brokers offer a wide variety of currencies available to trade. Search for a broker that specifies in the currencies you are most interested in trading. Most brokers offer a standard list of the most common currencies seen in the market, other specialized brokers display up to 100 or more pairs for you to trade.
Trading platform:
The trading platform is the essential tool that you would need in order to start trading. This piece of software is a downloadable application offered by most brokers and it channels information back and forth between your broker and your computer. This trading tool enables you to see information like quotes, charts, and accounts summaries in real time. Brokers also offer web based software allowing you to place trades from any computer with internet access. It is important for traders to familiarize themselves with online brokerages and understand the form of relationship they are about to establish with a broker. It is easy to comprehend the material by reading all the forms and documents given. Please read all the fine print given by the brokers, it is essential for you to understand these basic rules in order for you to succeed in this type of market.
Last modified on 2009-04-27 18:13:24 GMT. 0 comments. Top.
Currency pairs and leverage
In order to define a currency to trade, the international standard ISO 4217 established a system to help identify currencies by assigning a three letter code to each currency. Normally, the first two letters are the alpha code of a respective nation, like the U.S., and the third letter usually represents the actual name of the currency, like the dollar, for example U.S. + D = USD. Chart of most popular currencies
In Forex trading, currencies are traded against one from another in form of pairs, the quotations of the pricing structure is determined by the comparison of the first currency called the “base” and the second normally refer as the “quote” for example EUR/USD priced at 1.4456 The price of the Euro is expressed in U.S. Dollars = 1EUR/1.4456USD In order to increase a potential return on an investment in this case in Forex trading, leverage is a financial tool that increases the trader’s ability to profit from a single trade. Because the daily fluctuation of currencies is generally very small in percentage, the use of leverage increases the value of a trade by borrowing capital from a broker, therefore increasing the trader’s ability to increase profits from a trade. Depending on the size of the account, many brokers offer up to 200 to 1 leverage, meaning that for every dollar worth of a currency a trader is willing to risk from his or her own capital (also called margin), leverage would allow to trade up to 200 worth of that same currency. Usually the amount of leverage provided by brokers is 50:1, 100:1 or 200:1. So if a trader uses $1,000 to open his margin account, using a 100:1 leverage, he or she can trade $100,000 in the Forex market. Although leverage has the ability to earn a substantial profit, it can also work against the trader by amplifying the losses.
Long/Short
Also understood as a buying or selling, long and short is a common terminology in trading, It is not only used in Forex but in other financial markets as well. Determining whether you want to buy means you’re interested in taking a “long position” or “going long”, you are buying the base currency in hope to rise in value, selling it back for a higher price. For example: going long on the EUR/USD = In order to buy the EUR, you are in fact selling the USD first, and buying the base currency EUR, expecting to sell the EUR at a much higher price in order to gain profit. Going short or selling works vice versa from the example above. When you are selling the base currency or taking a “short position” or “going short”, you are buying the quote currency in this case the USD, hoping to see the base currency lose value so you could buy it back at a lower price.
Margin
Margin is best described as the collateral amount being deposited in your account in order to open positions or to have the ability to sustain losses without falling into a negative balance. In Forex, the risk taken is only limited by the amount of margin left in your account; as a result, if your trade is close to going below your margin level or money being deposit in your account, the broker will automatically close your position. In Forex trading, margins are relatively low compared to other markets because of the high leverage. We recommend new traders to familiarize themselves with a demo trading platform before investing real money. A demo account has the same features as a real account, and it would help familiarize you with the ins and outs, and the volatility this competitive market has to offer.
Measuring the exchange rate movement
A percentage in point, or a PIP, is the smallest movement of a price when it changes its value. A pip is the last decimal place, being equivalent to 1/100th of a percent. Normally currencies change the worth value by increment or declines of basis points or PIPs. Therefore, if a currency moves from 1.5065 to 1.5068, an increase of three pips has been added to the same value of that currency, allowing the tool of leverage to increase profits being made in a single trade on such a small increment in a currency.
Understanding the Spread
Because currencies are always quoted in pairs, there is always a bid/ask price called a spread. For example, if the EUR/USD is being quoted at 1.3204bid / 1.3206ask, this means the bid is the price for which the dealer is willing to buy the base currency; in this case it is the EUR out in the Forex market in exchange for the USD. The term ask, or sell, is the price at the dealer is willing to sell you the quote currency; in this case the USD for the original base currency, being the EUR, making the spread between these two currencies equal to 2 percentage in points (PIPs) or 0.0002. If you would like more information or have an specific question about the article, don’t hesitate to let us know.
Educational
Foreign Exchange - Basics of Order Entry
Last modified on 2009-04-27 18:13:14 GMT. 0 comments. Top.
Communication is the core of trading between ones value for another. In Forex understanding order types is vital! Forex platforms were designed as the vehicle that allows traders, investors, and companies interact in the world of currency exchange. Familiarizing with basic definitions and relations to the currency pairs are notably essential before we approach to take a trading position. Using a demo account is the best form of practice in which you can relate and recognize the logics of the market. All brokers nowadays use the same markets terms, like any other market good communication is decoded and encoded properly to eliminate errors. This is true unless you start dealing with more advanced forms of trading, which will be discussed in a later tutorials.
Order Types:
Market Order:
Whether you want to buy or sell a currency pair using the platform tools, order positions can be taken in a few different ways,. A market order is an order placed immediately after the click of the mouse. A market order does not guarantee an exact price, but it does execute itself in real time. No delay is being taken as you presume the position.
Limit Order:
A limit order is an action assigned to the platform, in which you specifically order to enter a position at a precise price. If you want to buy a currency pair, a limit order has to be set at a price lower than the actual current price quote. In the other hand, if you want to sell a currency pair, a limit order has to be set at a price higher than the actual current price quote. Specifying a position and a duration on a transaction, gives the market the option to keep its course, and enter your transaction in the market if the position of the limit order is executed. For example: The EUR/JPY is currently at a market value of 118.08 and your strategy is asking for a buy at 117.60 using a limit order. Limit order takes action when the market reaches your desired price of 117.60 where your position will be then opened.
Stop Order:
A stop order is an action assigned to the platform, in which you specifically order to enter a position at a precise price. If you want to buy a currency pair, a buy stop order has to be set at a price above the actual current price quote. In the other hand, if you want to sell a currency pair, a sell stop order has to be set at a price lower than the actual current price quote. Specifying a stop order position is used when you want to gain from the momentum of the currency pair and enter your transaction at market when the currency pair exceeds the price you have set. For example: The EUR/JPY is currently at a market value of 118.08 and your strategy is asking for a buy at 118.25 using a stop order. The buy stop order takes action when the market exceeds your desired price of 118.25 where your position will be then opened. Technical traders will place stop orders at critical points like above or below swing highs, swing lows, key support or resistance levels, and major moving averages. The second variable that could be specified to the order is the ability in placing a stop loss order and/or a take profit. Additionally, you can specify the duration of the order entered like (GTC or GFD)
Stop Loss order:
Specifying an order to close the position at a precise value against your desired outlook, it’s referred as a stop loss order. Although its already part of your money management strategy, all platforms give you the opportunity to enter a value to close a position and control your losses. For example, you are long on the EUR/JPY at 117.60 and you don’t want to loose more than 100 pips you would apply a command to close your order if it reaches the 116.60 level. By doing this you will eliminate the psychological involvement of “hope” and prevent the order to continue to go against you
Take Profit:
Take Profits, T/P is also a command given to the platform in which you are setting a limit to the amount of profits you want to lock in. For example, you are still long on the EUR/JPY at 117.60 and you want to T/P at 118.20 because you are confident of the market will reach the level; however your system is unsure of the movement after that. The pair will reach the 118.20 and your take profit order will automatically be executed locking in the profits. A Good till cancelled or (GTC) is the assignment of a position on a pair, using a limit order. The order will remain active until you cancel it, restricting the broker from using an authorized cancellation. A Good for the day or (GFD) Works the same way, except it has a specific cancellation date. The limit order is schedule to stay active for a certain period; and schedule to close at the end of the brokers 24 hour cycle.
Getting Started with Forex Trading
Last modified on 2009-04-27 18:13:19 GMT. 0 comments. Top.
An introduction to Forex trading requires understanding the complexity of the various factors that make the market work on a daily basis. The system of swapping currencies, one for another, for the sole purpose of raising our worth value has revolutionized the form we do our trading and our investing nowadays. In today’s market, technology has enabled us to make daily transactions automatically, without being delayed by any reason. In Forex, over the counter trading, is only a downloadable computer platform and an internet connection away that enables us to make transactions and investments. Having the right Forex broker is a very important part of your trading.
Choosing a Forex broker:
In order to proceed with online currency trading, setting up an account is a fairly simple process. Picking the correct broker, completing a brief registration form, and transferring funds to a broker are the basic steps. However, there are a few things that should be reviewed, in order to understand more about trading Forex.
Regulations:
Like any other form of trading, make sure these financial organizations “brokers” are registered by the appropriate regulatory agencies. In U.S. make sure to check the CFTC and NFA, U.S. Commodity Futures Trade Commission and National Futures Association for more info. Please be certain your broker is well capitalized, click here to view a complete list of U.S. regulated brokers and their financial statements. * Brokers outside of the U.S.; make sure they are completely regulated by the corresponding local authorities.
Compare the Spreads:
Compare the amount charged in the spreads between various Forex brokers. The spread is the difference between the price you can buy or sell the currency pair and where the broker makes its commission. When comparing brokers, you will see the difference between spreads; there is no need to pay for higher spreads.
Leverage ratios:
Understand the leverage ratios offered by your broker. Determine your risk level in your risk management plan and agree to one with your brokerage. 100:1 leverage is the most common between brokers and the most recommended to lower risk.
Margin requirements:
Because you are dealing with borrowed money from your broker, understanding the margin requirements is very important. Brokers vary the minimum amount required to deposit to open in a Forex account and they also have restrictions on your margin balance. Make sure you check your margin requirements as brokers can liquidate your order even if you have more funds to sustain the position. *Since you are borrowing money from a broker, a margin agreement is required in signing, when registering a new account.
Forms of Account:
Standard Accounts: A standard account is known for its regular lot size and uses standard trading lots of $100,000 per trade. With a leverage of 100/1, $1,000 of your risk capital should be available in your margin account in order to trade single lots. A $10 per pip is the most common form of valuing the basis points in a trade using a standard account. The advantage of trading big size of lots, is the potential for higher gains. Mini Account:A mini account is a type of account that allows traders to take smaller positions using the same type of leverage as a standard account; nonetheless working with a mini account, traders are allowed to enter the markets using only a fraction of lot size used in standard accounts. Normally positions are taken using $1 per pip, reducing your trading size to $10,000 per every $100 at risk. Institutional Accounts:An institutional account trades similar to standard accounts with the only difference being tighter spreads. The broker’s commission is usually payed separately as the spreads are set by the real interbank market.
Forex Support:
We recommend traders to work with brokers who are available 24 hours a day for full client support. Before choosing a broker, compare the reliability these brokers offer and see which ones are the most available to your needs. Being a 24 hour market, having full client support and trade desk is very beneficial. Many unfortunate things can happen, (Computer freezes, internet down, etc..); if you have an open position and need to close it, choosing a broker with a 24 hour trade desk will be correct way for you to begin.
Currencies Available:
Brokers offer a wide variety of currencies available to trade. Search for a broker that specifies in the currencies you are most interested in trading. Most brokers offer a standard list of the most common currencies seen in the market, other specialized brokers display up to 100 or more pairs for you to trade.
Trading platform:
The trading platform is the essential tool that you would need in order to start trading. This piece of software is a downloadable application offered by most brokers and it channels information back and forth between your broker and your computer. This trading tool enables you to see information like quotes, charts, and accounts summaries in real time. Brokers also offer web based software allowing you to place trades from any computer with internet access. It is important for traders to familiarize themselves with online brokerages and understand the form of relationship they are about to establish with a broker. It is easy to comprehend the material by reading all the forms and documents given. Please read all the fine print given by the brokers, it is essential for you to understand these basic rules in order for you to succeed in this type of market.
Introduction to Forex Trading part 2
Last modified on 2009-04-27 18:13:24 GMT. 0 comments. Top.
Currency pairs and leverage
In order to define a currency to trade, the international standard ISO 4217 established a system to help identify currencies by assigning a three letter code to each currency. Normally, the first two letters are the alpha code of a respective nation, like the U.S., and the third letter usually represents the actual name of the currency, like the dollar, for example U.S. + D = USD. Chart of most popular currencies
In Forex trading, currencies are traded against one from another in form of pairs, the quotations of the pricing structure is determined by the comparison of the first currency called the “base” and the second normally refer as the “quote” for example EUR/USD priced at 1.4456 The price of the Euro is expressed in U.S. Dollars = 1EUR/1.4456USD In order to increase a potential return on an investment in this case in Forex trading, leverage is a financial tool that increases the trader’s ability to profit from a single trade. Because the daily fluctuation of currencies is generally very small in percentage, the use of leverage increases the value of a trade by borrowing capital from a broker, therefore increasing the trader’s ability to increase profits from a trade. Depending on the size of the account, many brokers offer up to 200 to 1 leverage, meaning that for every dollar worth of a currency a trader is willing to risk from his or her own capital (also called margin), leverage would allow to trade up to 200 worth of that same currency. Usually the amount of leverage provided by brokers is 50:1, 100:1 or 200:1. So if a trader uses $1,000 to open his margin account, using a 100:1 leverage, he or she can trade $100,000 in the Forex market. Although leverage has the ability to earn a substantial profit, it can also work against the trader by amplifying the losses.
Long/Short
Also understood as a buying or selling, long and short is a common terminology in trading, It is not only used in Forex but in other financial markets as well. Determining whether you want to buy means you’re interested in taking a “long position” or “going long”, you are buying the base currency in hope to rise in value, selling it back for a higher price. For example: going long on the EUR/USD = In order to buy the EUR, you are in fact selling the USD first, and buying the base currency EUR, expecting to sell the EUR at a much higher price in order to gain profit. Going short or selling works vice versa from the example above. When you are selling the base currency or taking a “short position” or “going short”, you are buying the quote currency in this case the USD, hoping to see the base currency lose value so you could buy it back at a lower price.
Margin
Margin is best described as the collateral amount being deposited in your account in order to open positions or to have the ability to sustain losses without falling into a negative balance. In Forex, the risk taken is only limited by the amount of margin left in your account; as a result, if your trade is close to going below your margin level or money being deposit in your account, the broker will automatically close your position. In Forex trading, margins are relatively low compared to other markets because of the high leverage. We recommend new traders to familiarize themselves with a demo trading platform before investing real money. A demo account has the same features as a real account, and it would help familiarize you with the ins and outs, and the volatility this competitive market has to offer.
Measuring the exchange rate movement
A percentage in point, or a PIP, is the smallest movement of a price when it changes its value. A pip is the last decimal place, being equivalent to 1/100th of a percent. Normally currencies change the worth value by increment or declines of basis points or PIPs. Therefore, if a currency moves from 1.5065 to 1.5068, an increase of three pips has been added to the same value of that currency, allowing the tool of leverage to increase profits being made in a single trade on such a small increment in a currency.
Understanding the Spread
Because currencies are always quoted in pairs, there is always a bid/ask price called a spread. For example, if the EUR/USD is being quoted at 1.3204bid / 1.3206ask, this means the bid is the price for which the dealer is willing to buy the base currency; in this case it is the EUR out in the Forex market in exchange for the USD. The term ask, or sell, is the price at the dealer is willing to sell you the quote currency; in this case the USD for the original base currency, being the EUR, making the spread between these two currencies equal to 2 percentage in points (PIPs) or 0.0002. If you would like more information or have an specific question about the article, don’t hesitate to let us know.