What is FX trading?
Forex is short for foreign exchange; it refers to the act of exchanging one currency for another for a variety of reasons, most often commerce, business, or tourism. Currency exchange rates vary regularly, which means that one US dollar is worthless in your local currency now than it was yesterday or even tomorrow. This is the moment at which currency rate fluctuations might result in profit or loss.
Consider the following example to help explain how forex traders profit from currency exchange rate fluctuations:
Assume a person seeks to convert USD 100,000 for euros at a currency exchange. If the currency exchange rate (USD/EUR) is now 0.84000, they now have EUR 84 000. The exchange rate has slipped to 0.80000 after a few days. After changing the euros to US currency, they now have USD 105 000.
As a consequence of this transaction, this person earned USD 5000.
Currency Pairs :
Currency pairs are defined as the currencies of two distinct pairs that are combined for the purpose of trading in the foreign exchange market. Currency pairs include the EURUSD, GBPJPY, NZDCAD, and other currency pairings.
A cross pair is a currency pair in which the US dollar is not included.
A currency pair’s first currency is referred to as the “base currency,” while its second currency is referred to as the “quote currency.”
Ask and Bid Prices :
The Bid price is the price that a broker is prepared to pay a Client for the currency pair’s first named (base) currency. It is then the price at which clients sell the currency pair’s initial (base) currency.
The ask price is the price at which a broker is willing to sell the currency pair’s initial (base) currency to a client. It is then the price at which the customer acquires the currency pair’s first specified (base) currency.
- Buy orders are placed starting at the Ask Price and ending at the Bid Price.
- Sell orders, begin at the Bid Price, and end at the Ask Price.
Spread is the difference between the Bid and Ask prices of a specific trading instrument, and it is also the primary source of profit for market maker brokers in the financial markets today. The value of the spread is specified in points (pips).
In FXTradium we offer Floating Spreads.
Lot and Contract Size :
The standard unit of measurement for a transaction is the lot. A standard lot is typically equal to 100 000 units of the base currency, which is the most often used unit of measurement.
The contract size is a fixed amount of base money that is included in each lot. This amount is fixed at $100,000 for the overwhelming majority of FX products.
Leverage and Margin :
The ratio of equity to loan capital is referred to as leverage. It has a direct effect on the amount of margin required to trade the instrument on which it is based. The majority of trading instruments are available for up to 1:500 leverage for Islamic and Standard, and up to 1:200 for ECN accounts.
The amount of money in account currency withheld by a broker in exchange for keeping an order open is referred to as margin.
The greater the amount of leverage, the lower the margin.
- Margin always calculates based on the base currency with the formula below;
Lot x Contract size / Leverage
The client traded on 1 lot EURUSD on a Standard account, how much margin is required to open this account? (EURUSD: 1.18297)
Lot x Contract Size / Leverage
1 x 100000 / 300 = 333.33 EUR x 1.18297 = 394.31 USD
Balance/Equity/Free Margin :
The balance is the total financial result of all completed transactions and depositing/withdrawing activity on a single account. It is either the cash on hand before to opening any orders or the cash left after all open orders have been closed.
While orders are processed, the balance of the account stays unaltered.
When you make an order, the total of your balance and the profit or loss generated by the transaction is used to calculate your equity.
Equity is equivalent to the difference between the balance and profit or loss.
As you are probably aware, the margin is a percentage of the money held in reserve once an order is opened. Free Margin is a word that refers to any money that is leftover.
Equity = Free Margin + Margin
Profit & Loss :
The difference between the closing and beginning prices of an order is used to calculate the transaction’s profit or loss.
Profit / Loss = (Opening Price – Closing Price) multiplied by the lot size multiplied by the contract size
Profit or loss is always determined in the currency of the quotation. Assuming the client traded 1 lot USDCAD, the profit or loss is calculated in Canadian dollars and then translated to US dollars.
Margin level/Margin Call/Stop out :
The margin level is the percentage ratio of equity to margin.
Margin level = (Equity / Margin) x 100%
Margin call is a trading terminal notification that a deposit or cancellation of a few positions is necessary to avoid Stop Out. This notification is sent when the Margin Level hits the Margin Call level set by the broker for that particular account.
Stop out is a mechanism that automatically closes transactions when the Margin Level hits the Stop Out level set by the broker for the account.
The stop-out and margin call levels in FXTradium accounts are as follows:
|Margin Call||110 %||110 %||100 %|
|Stop out||10 %||10 %||50 %|
A typical example of completely hedged orders is the Buy of 1 lot of USDCAD and the sale of one lot of EURUSD.
Orders to buy one lot of EURUSD and sell another lot of EURUSD are examples of partly hedged orders.
It is not necessary to use a margin while hedging forex instrument holdings on different accounts (Cent, Standard, and ECN).
Margin is completely applicable in the case of CFDs on futures.
The client opened 1 lot EURUSD Buy and 1 lot EURUSD Sell, Therefore the total margin would be Zero.
In FXTradiium, you can fully hedge your position in all account types.
A scalping trader must be able to enter the market at the optimal time and leave at the optimal time.
The advantages of Forex scalping
The primary advantage of Forex scalping is that it allows traders to earn quickly in a very short period. A scalper who trades with one standard lot and targets 20 transactions per day with gains of 3 pips each trade would earn $600 USD per day, or $12,000 USD per month. That is very advantageous for a trader, but only if his scalping techniques are effective.
It enables you to execute several transactions each day. Numerous individuals choose to be continuously engaged in the industry. The majority of scalpers execute many transactions during the day, which may be very exciting for the trader.
In FXTradium we allow scalping, hedging, using EA, trading during economics.
The Producer Price Index (PPI)
Is a measure of how much money producers are making (PPI) . The Producer Price Index (PPI) is one of the two most significant methods to assess inflation (along with the CPI). The Producer Price Index (PPI) is published at 8:30 a.m. EST during the second full week of each month, and it reflects data from the preceding month. It is used to determine the wholesale price of products. As a result, whereas the CPI measures the cost of products paid by consumers, the PPI measures the amount of money received by producers in exchange for commodities. The Producer Price Index (PPI) measures three kinds of commodities: crude, intermediate, and finished goods. In the manufacturing industry, crude goods refer to raw materials that are utilized in the manufacture of another product, intermediate goods refer to components of a bigger product, and completed products are what are ultimately sold to customers by retailers. The completed products statistics are the most carefully monitored since they are the most accurate indicator of what customers will really have to spend in the future.
Gross Domestic Product (GDP)
Is the total amount of goods and services produced in a country (GDP) , The Gross Domestic Product (GDP) report is the most significant indicator. Essentially, the Gross Domestic Product (GDP) is the broadest indicator of the condition of the economy. It is published at 8:30 a.m. EST on the final day of each quarter and reflects data from the preceding three months. In the United States, the Gross Domestic Product (GDP) is the total monetary worth of all products and services generated by the whole economy during a quarter (excluding foreign activity). The GDP growth rate is the most important statistic to pay attention to. The economy of the United States grows at a rate of about 2.5-3 percent per year on average, and departures from this range may have a significant impact. The growth that exceeds this level is often seen as unsustainable and a prelude to strong inflationary pressures. As a result, the Federal Reserve typically reacts by attempting to cool down a “overheated” economy. The growth that falls below this range (and particularly negative growth) indicates that the economy is operating slowly, which may result in greater unemployment and decreased consumer spending, among other consequences. Remember that each first GDP estimate will be updated twice more than once before the final number is determined: the first report is the “advance,” which is followed by a “preliminary” report about a month later, and the second report is the final report around a month after that. Significant changes to the advance number may create further reverberations across the financial markets as well. The Gross Domestic Product (GDP) figures are presented in two formats: current dollar and constant dollar. Because current dollar GDP is measured in today’s dollars, it is difficult to draw meaningful comparisons across other historical periods due to the impacts of inflation. Constant dollar GDP addresses this issue by translating current information into a standard period dollar, such as 1997 dollars, which is then used to calculate future GDP.
This procedure takes into account the impacts of inflation and enables straightforward comparisons across different time periods. Do not make the mistake of conflating Gross Domestic Product with Gross National Product (GNP). In the United States, gross domestic product (GDP) comprises only products and services generated inside the country’s physical borders, regardless of the nationality of the producer. Products and services generated by foreign businesses are excluded from the gross national product (GNP), while goods and services produced by American companies operating in other nations are included. Suppose a US company has a chain of shops in France; the products and services generated by those stores would not be included in the GDP but would be included in the country’s gross national product (GNP). As the global economy expands, the gap between GDP and GNP for wealthy nations such as the United States is narrowing as well. In the case of smaller, underdeveloped nations, however, the gap may be significant.
Non-Farm Payroll (NFP)
Every month, on the first Friday of the month at 8:30 a.m. EST, the main employment announcement is made. This announcement contains the unemployment rate (the proportion of the labor force that is out of work), the number of new jobs generated, and the number of people that are out of work.
The unemployment rate (the proportion of the labor force that is jobless), the number of new jobs generated, the average number of hours worked per week, and the average hourly wage are all included in this report. To be clear, the labor force does not represent the whole population; rather, it represents a group of individuals who fulfill specific requirements. The unemployment rate is a crucial indicator of the health of the economy, while the average hourly wage has an effect on the rate of inflation. Along with this monthly data, there is a weekly report on first jobless claims, which is the number of individuals who file for unemployment benefits for the first time. Despite the fact that they are much less relevant than the monthly report, these data are useful in determining the state of the labor market.
Manufacturing conditions are measured by the National Association of Purchasing Management (NAPM) index, which is published quarterly. It is published on the first business day of the month at 10 a.m. Eastern Standard Time (EST) and contains statistics from the previous month. According to the organization, a score more than 50 percent implies that manufacturing is expanding, while a reading less than 50 percent suggests that manufacturing is contracting.
In addition to giving a good picture of the status of manufacturing (the data is just one day old), the NAPM is also regarded as a leading predictor of inflationary pressures due to its ability to provide an early indication. The most recent report is available by visiting the NAPM website.
Consumer Price Index (CPI)
Is a measure of how much people are paying for goods and services (CPI), The Consumer Price Index (CPI) is the most commonly used indicator of inflation. The report is published at 8:30 a.m. EST on the 15th of each month, and it contains information from the previous month’s report. The change in the price of a basket of consumer goods and services is measured by the Consumer Price Index (CPI). The package contains about 200 different kinds of commodities and thousands of different real items, ranging from meals and energy to high-end consumer goods. The prices are determined by collecting a representative sample of pricing from various shops. In addition to the total CPI figure, it is essential to pay attention to the “core rate” of inflation. The core rate is calculated by excluding volatile commodities such as food and energy from the calculation and provides a more accurate estimate of actual inflation. The overall and core CPI figures will be included in the majority of reporting of the CPI numbers. It is particularly significant because the Consumer Price Index is used to calculate the yearly adjustments in Social Security benefits. There has been considerable discussion over how effectively the Consumer Price Index (CPI) tracks inflation, with some claiming that it is an imperfect method of tracking increasing costs.
Index of Retail Sales
The Retail Sales Index evaluates the number of products sold in the retail sector, which includes everything from large national chains to tiny neighborhood shops, by collecting a representative sample of retail establishments from throughout the country. The report, which is released around 8:30 a.m. EST on the 12th of the month, contains information from the preceding month. This report will be the “advance” report, which means that it will be subject to substantial revisions once the final data have been crunched and analyzed. Many analysts prefer to look at statistics “ex-auto,” which implies that they do not include the very volatile automobile sales figure. It is believed that this figure provides a more accurate representation of overall buying patterns. In addition, since the report does not include money spent on services, it reflects less than half of overall consumption for the month of February 2015. Despite these restrictions, the statistics are carefully scrutinized as a leading indicator of the health of the country’s economic recovery.
Book in Beige
The Beige Book is a publication that is released eight times a year and is used as part of the Federal Open Market Committee’s preparations for its meetings. Approximately two weeks before each FOMC meeting, at 2:15 p.m. EST, the report is published. The book provides a synopsis of the economic situation in each of the Federal Reserve’s regional offices. The report is primarily regarded as a predictor of how the Federal Reserve will behave at its next meeting.
Consumer Confidence Index
Is a measure of consumer confidence. Consumer confidence is often regarded as a critical component of the overall economic picture. The survey, which is released on the last Tuesday of every month at 10 a.m. EST, evaluates how confident consumers are in the health of the economy and their ability to spend. The notion is that the more secure individuals feel about the security of their earnings, the more inclined they are to spend their money on things like cars and furniture.
The Consumer Confidence Report utilizes a sample population of about 5,000 homes as a basis for its findings, and it even counts the number of help needed advertisements published in newspapers to get a sense of the condition of the labor market. Many economists think that a high level of consumer confidence may alleviate many of the ills that plague an economy. When the majority of the data indicates that the economy is in a downward spiral, strong consumer confidence and steady expenditure may assist to cushion the impact or accelerate the recovery.
Durable Goods Orders
Consumers’ spending on long-term purchases (i.e., items that are anticipated to last more than three years) is measured by the Durable Goods Orders report. In addition to being released at 8:30 a.m. EST on the 26th of each month, the report is considered to offer insight into the future of the manufacturing sector. It is possible to separate the reports by industry, which helps to reduce the impact of specific volatile sectors such as military expenditure. Investors are concerned with the big picture, and broad trends across a wide range of sectors have a significant impact on the markets.
Employment Cost Index (ECI)
It is also essential to monitor inflation via the ECI. The Employment Cost Index (ECI), which is released at 8:30 a.m. EST on the last Thursday of January, April, July, and November, measures the cost of labor, which includes pay, benefits, and bonuses. The reason why the ECI is considered to be an indication of inflation is that when wages rise, the additional cost is often passed on to consumers in the form of increased prices soon afterward (inflation). The ECI, when used in conjunction with the productivity report (see below), may determine whether or not the rise in the cost of labor is justified.
Trading and investing are two different things.
Money management is a term that is used in the field of investment management and is concerned with the issue of how much risk a decision-maker should accept in circumstances where there is uncertainty. When it comes to personal and company finances, better money management may mean having more control over your outgoings and incomings as well as your budget. Establishing budgets and evaluating expenses and revenues, among other things, may help you improve your money management.
Effective guidelines for money management:
– Make a risk with Only a small proportion of a total account
– Make a modest starting balance on your account to get things started.
– Don’t go overboard – use your accounts to your advantage.
– Do not engage in excessive trading.
– Make use of risk that is permissible.
– Stops and targets should be used while trading.
– Make use of trailing pauses.
– Trades with risk-reward ratios of less than 1:2 should be avoided at all costs.
– Do not trade during the hours when you are sleeping.
– Attempt to accumulate a little profit over time.
– Make use of tools that are appropriate for your account size.
Trading strategy that results in effective money management
– Which market should you trade-in?
– Which days and hours are best for trading?
– How many transactions are made each day?
– When should you put your trading account on hold?( Based on profit and losses)
The following are the characteristics of a spike:
There is a considerable price difference.
A rapid increase in the stock market’s value
There had been no significant price movement before its appearance, and it had not been prompted by a news event.
There are two main causes for non-market spikes:
– The market is overvalued.
– A single transaction has been entered into the system by accident.
– Failure on the technical front
In FXTradium, the outcome of an order placed during a spike will be canceled (both profit and loss would be canceled).
Types of Execution
1- Instant Execution
2- Market Execution
With this execution type, the broker commits to either executing the order at the price specified by the trader or not executing the order at all if the trader does not provide a price. The customer has the option of specifying a slippage or a maximum allowed price variation, as well as the price at which the transaction will be completed.
In the case that the price changes during the processing request but remains within the specified slippage, the order will be processed with a price adjustment applied before it is performed. If the slippage parameter has not been specified, the order will be denied, and the trader will get a requote price change notice as a result of the price moving beyond the slippage corridor. In such a scenario, the customer has the option of accepting the revised price and having the transaction performed, or he or she may reject the purchase and have it canceled,but in FXTradium broker we do not have any offquote as we always try to execute our client’s order with the fastest speed possible.
With this execution type, almost every order placed by the trader will be executed at the current market price at the time of order processing, unless otherwise specified. A trader’s price may be greater or lower than what is shown in the terminal’s window at any one time. When a trader uses Market Execution, he or she often has access to the market more quickly.
Type of Orders
Market orders and pending orders. Market orders are the most common form of order.
When a trader opens a position to purchase or sell anything, he or she triggers a market order. The bid is analyzed by the system, and the best current price is chosen for the client to purchase.
Market orders are orders placed by clients for the purchase or sale of securities at the current market price, as opposed to the price of security placed by a broker. This may be defined as a trader’s order or instruction to the broker to fulfill an order quickly at the current market price of the item in question.
When a sell order is placed, it opens at the bid price and closes at the ask price. An order to buy begins with the ask price and ends with the bid price.
A pending order is an instruction issued to a brokerage firm with the purpose of selling or purchasing a financial instrument at a future date and under certain circumstances. This term refers to a client’s request to initiate a position when a particular price level is reached. In other words, pending orders are orders to purchase or sell a financial item at a later date. Pending orders are used by traders when the present market price is unfavorable for benefiting from, but the trader expects to get price levels at which the customer may profit.
Pending Orders are divided into two categories:
Stop Orders: Sell Stop, buy stop, stop loss(SL)
Limit orders: Sell Limit, Buy Limit, Take Profit (TP)
For MT5 there are two extra types; Sell stop limit and Buy stop limit.
Ways to close a Trade
– Full close by opposite order
– Partial close by opposite order
C.Multiple close by
Order 1 is partly closed by choosing a volume that is less than the volume of order 1 in the close/modify order window of the trading platform’s trading platform.
Is an MT4 or MT5 function that enables you to close places in the same instrument by placing them in different orders.
1- Full close by opposite order
2 -Partial close by opposite order
C.Multiple close by
Allows to close more than two opposite positions at the same time
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Advantage Of MetaTrader 5
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Risk Warning : Forex trading has a high degree of risk and may not be appropriate for all traders. Trading and investing in these products, especially those using Leverage, is speculative and carries a significant degree of risk to your financial assets. You should ensure that you understand all of the risks associated with a Transaction before proceeding. You should also obtain independent counsel before proceeding. Accordingly, the Company is not obligated to determine the acceptability of these items in light of your specific circumstances. To be clear, trading in leveraged products such as foreign exchange and contract for differences (CFDs) is high-risk, and losses may much surpass the amount of money invested, including any cash, kept on deposit as margin.
Restricted Region : FXTradium LLC does not offer services to residents of some countries , including the United States of America , Japan , Israel , Syria and the Islamic Republic of Iran.