Categories
Full User Guide - MetaTrader4 (MT4) Trading Platform
- Introduction
- Getting Started – Beginner’s Guide to MT4
- Trading on MT4 – Order Types
- Trade Management
- Advanced Features of MT4
- What are PIP and Point?
- 6 Types of Orders on MT4
- What is Leverage?
- Are you new to Forex market?
- Everything about Forex explained
- Why you should trade Forex?
- Forex market is Open 24 Hours, 5 Days per Week
- Forex market is Superior Market Liquidity
- High leverage is available
- Profit Potential in both Rising and Falling Markets
- Low Transaction Costs
- Currency pairs
- Forex market price quotes
- The dealer
- Slippage
- Market Order
- Buy/Sell Limit Order
- Buy Stop Order
- Sell Stop Order
- GTC Order
- Range Trading
- News Trading
- Swing Trading
- Carry Trading
- Position Trading
- Discretionary Trading
- Fundamental Analysis
- Long Position
- Short Position
Introduction
The Foreign Exchange Market
The FX market is the single biggest trading market in the world.
There is no central exchange that can report the volume traded, but it is estimated that over $4 trillion is traded every day.
Because the FX market has such high liquidity, is open 24 hours and can have quite high volatility, it is very attractive for traders.
MetaTrader4 (MT4) trading platform
The retail FX market is dominated by the MetaTrader 4 (or MT4) trading platform.
MetaTrader 4 is a highly sophisticated trading package which is largely based around charting and automated trading strategies.
It allows traders to fully customise their trading experience using a variety of tools.
This guide is an introduction to the tools that are available within MetaTrader4.
Getting Started – Beginner’s Guide to MT4
1. Market Watch Window (Pricing)
The Market Watch window provides a quick view of the current market price across a range of Symbols.
It is also the central point to drive the charting and trading functionality from.
The menu shown here can be accessed by right clicking on a symbol.
You can set-up the symbols that are displayed by selecting “Hide”, “Hide All”, “Show All” or “Symbols”.
The last of these options lets you set the individual symbols that are shown.
It is also possible to display the High Bid and Low Offer for the day as well as the last time the price was updated.
We recommend that you only have the Symbols displayed that you are using.
By hiding the remaining symbols, you will reduce the amount of data that your broker sends you which may speed up your platform in a fast moving market.
2. Market Price Charts
MetaTrader 4 is designed around charting.
You can have as many charts open as you need.
Each chart can be tailored to each users specific needs.
The first place to look for customising charts is in the Properties section.
Change chart colours, chart type (bar/candle/line)
From here you can set the chart colours, chart type (bar/candle/line), as well as a variety of other options.
Charts can be viewed for one of 9 time scales (1 min, 5 mins, 15 mins, 30 mins, 1 hour, 4 hours, 1 day, 1 week and 1 month) by selecting the appropriate option from the right click menu or from the tool bar.
Adding Technical Indicators on MT4
The charts in MetaTrader 4 really come into their own when you start adding Indicators to them.
These are graphical visualisations of any sort of analysis.
They range from standard analysis like Moving Average, MACD or Bollinger Bands to anything you can imagine.
To see the Indicators that are available, look at the Navigator Window.
To add an Indicator to a chart, you just need to drag and drop the Indicator description onto the chart.
When the Indicator has been dropped onto a chart, a dialogue box will pop up to configure it.
Each Indicator has different parameters, so read the documentation for each one to see how they should be configured.
The example shows a configuration screen and the resulting chart for a Gator Oscillator Indicator.
You can add as many indicator as you like to each chart.
Invest Online with MT4 Brokers
Trading on MT4 – Order Types
1. Market Execution
Market Execution orders are also known as At Market orders.
They are a request to trade an amount of a Symbol at the current market price.
To trade, you can double click on a symbol in the Market Watch window or right click on a chart and select “New Order” from the “Trading” menu.
A new window will pop up where you enter the number of lots you are going to trade and if you are buying or selling.
If you decide to trade, click on Buy or Sell, the screen will either confirm the trade has been executed or report some sort of error (e.g. Market Is Closed or Not Enough Money Left).
After a Market Order has been executed, you can add a Limit or Stop order to the trade as described later in this guide.
You cannot set the levels when placing because you do not know exactly what price the trade will be executed at until the fill is confirmed.
2. Pending Orders – Limit and Stop orders
Limit/Stop orders can be placed using the same method as Market Execution above.
This time you need to change the Type to “Pending Order”.
As before, you specify the Volume.
This time you also need to set the price you want to open a position at.
You can also set a linked limit and stop level here.
All the price levels you enter in the ticket are reflected graphically on the tick chart to the right of the ticket and are plotted against the current market bid/offer.
The ticket also shows how close to the market you can place limit and stop orders.
Normally, online FX brokers have no restrictions on price levels that Pending Orders can be placed.
That means you can place limit and stop orders inside the spread if you want to.
3. Close and Close By
Unlike some other trading platforms, trades in MetaTrader 4 do not close using FIFO.
You have to specifically select which trades you are closing.
You can do that by double clicking on an open trade in the Trade Management area (described below).
From the ticket you can click on the Yellow button to close the trade.
If you only want to partially close the trade you can select a different volume in the ticket.
Sometimes you may forget to close a position and unintentionally have two opposing positions.
While you are technically flat (i.e. have no open position), you will still accumulate Swap charges as long as those trades are open.
If this happens you could close each trade, but that would mean paying the spread or commission twice.
There is an alternative where you can internally match the trades against each other to close them out.
To do this, open a ticket to close one of the trades.
Rather than using a Market Execution order, change the type to “Close By”.
This will show a list of open trades which can reverse the trade you are closing.
Select one or more of these trades and place the order.
This will immediately match the trades against each other and realise and P/L you have made.
You have the option to select which trades close out which other trades.
There are more options to close one trade by several other trades.
Open MT4 Trading Account with a Broker
Trade Management
1. Managing open positions (trades)
The Trade tab shows your current trading position.
It shows all open trades followed by a summary bar.
Finally there is a list of all your Pending Orders that haven’t been executed yet after the grey bar.
The information in this screen updates in real time so that you can monitor your P/L and Margin usage as prices update tick by tick.
By default all the P/L values are in the Account Base (or Deposit) currency.
There is an option in the right click menu to change the figures to be the Term currency of the Symbol or the number of points.
The summary screen will always remain in the Account Base currency.
If your position starts moving against you, the grey bar could turn red.
This means you are on margin call.
It means you need to monitor your account carefully and may need to deposit more funds with your broker to maintain your positions.
Alternatively you could close some positions to free up margin which will fund other open positions.
From this screen you can also attach or modify your limit/stop levels that are linked to this trade by right clicking on an Open Trade and selecting “Modify or Delete Order”.
You can also attach a Trailing Stop as described later in this document.
2. Checking Account History on MT4
Your entire trading history can be accessed through the “Account History” tab at the bottom of your screen.
You can right click on the screen to select the time period to report on.
The screen will fill up with all the transactions that have been closed during that period.
At the end of the transactions, there is a grey bar which shows a summary of everything during the period, including your P/L and total deposits and withdrawals.
The data in this report can also be exported so that it can be used in other applications for further analysis by right clicking and selecting “Save as Report”.
3. Symbol (financial instrument) Information on MT4
MetaTrader 4 enables trading across a full range of products.
Each product is configured differently, but there is a way for you to get access to information about the set-up.
The contract specification dialogue can be loaded from the Market Watch window.
First you need to right click and load the Symbols dialogue.
After you have selected the product you want details on, click on “Properties”.
The dialogue below will be loaded.
To find out what any of the fields mean, click on the question mark in the title bar and then click on the title.
Advanced Features of MT4
1. Custom Indicators on price charts
MetaTrader 4 comes with a large selection of charting indicators built into the platform.
While this will satisfy a lot traders, there are always new strategies emerging or you may have your own strategies that you want to visualise on your trading platform.
That is why MetaTrader 4 offers Custom Indicators that give you access to unlimited ways of visualising your charts.
You can download new indicators from the MetaTrader 4 on-line library or from other repositories on the Internet.
To show a Custom Indicator, you drag it onto a chart in exactly the same way as a standard Indicator.
2. Custom Scripts on MT4
Scripts are simple tools that are similar to Macros.
They allow you to automate simple tasks as well as more complicated combinations of tasks that need to be performed regularly and sometimes quickly.
Scripts are designed to be used when there is a discrete task that completes almost as soon as it starts.
Common examples are deleting all pending orders, closing all open trades, or simply placing a trade.
To run a Script, all you need to do is drag it from the Navigator section (below the Custom Indicators) and drop it on a chart.
That will give the Script the information about which Symbol you want to run the script on.
Everything else should just happen.
3. Expert Advisors for automated trading
Expert Advisors (or EAs) take the Macro concept, combine them with Custom Indicators and extend then to take over all your trading.
That might sound scary to a lot of people, but for others it is perfect.
A lot of traders use charting strategies to determine every trade they place.
Often, these strategies break down as soon as human emotion or human delays kick in.
So if you have a strategy that you are fully committed to, why not use EAs to take the emotion out of your trading, make your strategies work faster and run 24 hours a day?
Like the other advanced features in MetaTrader 4 there are thousands of examples to download from the platform itself, and even more available to download from the Internet.
All of them can be tested on our demo system before you commit to using them on your live trading account.
Using an Expert Advisor couldn’t be more simple.
All you need to do is add the EA to a chart in exactly the same way as an indicator (see the Charting Section above).
When you add it to the chart, some extra configuration parameters appear.
These are important to set-up correctly so that the EA performs the way you are expecting.
The configuration is across two tabs:
The first tab lets us set-up some general trading behaviours.
The key ones here are if you want to allow live trading, and if there should be some sort of manual confirmation before placing a trade.
A slightly more technical option is “Allow DLL imports”.
This should never be selected unless you completely trust the developer of the EA.
By selecting the option, you are allowing the EA to use third party libraries which can add significant power to your trading but can also expose you to other unknown functionality.
The second tab sets up all the parameters the EA needs to execute it’s strategy.
These will vary between EAs and so we can’t go into any detail here.
There is a common option for most EAs; the Lots or LotSize.
This sets the size of any trades the EA will place for you.
Care should be taken when setting up these parameters, especially the Lots.
You can see when an EA is installed on a chart because there will either be a smiley face (for active trading) or a sad face (when Live Trading has not been selected).
4. MetaEditor – programming
The features we have talked about so far in this section give unrivalled flexibility and power.
Other than the ones provided with the software by default, there are a huge number of Indicators, Scripts and Expert Advisors available to download on the Internet.
If you can’t find what you are looking for, all is not lost – you can create your own.
MetaTrader 4 provides a fully featured programming language so that you can create your own Indicators, Scripts and Expert Advisers.
We understand that this may be more than a lot of people want to take on by themselves.
If you have custom requirements we will make every effort to introduce you to people who may be able to help deliver your requirements.
All the custom scripts can be tested on our demo system quickly and simply for no charge.
5. Trailing Stops
A Trailing Stop is a tool that allows you to set a target for a maximum loss for an open position that moves in your favour as the market moves in your favour.
It is a great tool for conservative and long term traders.
You can place a Trailing Stop by right clicking on a position and selecting “Trailing Stop”.
From here you can set how close to the current market price the stop should be set.
There are a number of pre-set levels or you can set your own.
From here, a Stop Loss order is placed as soon as the position is in profit by at least the selected number of points.
Each time the difference between the market price and the stop order is greater than the trailing limit, the system will modify the level of the stop order.
If the market moves towards the stop order, it is not modified.
6. VPS – Virtual Private Servers
A Virtual Private Server (or VPS) is a server that is running in the “cloud” 24/7.
If you are interested in using the advanced features listed in this section, it is important that your MetaTrader 4 system is connected 24 hours a day during the trading week.
If your system is not connected for any reason, it is possible that you will miss targets set by your strategy.
Many online FX brokers offer a VPS service which offers a cost effective and reliable solution for staying connected to their MetaTrader4 system.
What are PIP and Point?
Pip is the smallest increment of the price of a trading instrument on the Forex market.
Pip is a percentage in point, in the 1st point there are 100 of pips.
On the Forex market, the instrument price is indicated in a four-digit form, after a whole number, or five-digit.
For example, the quotation for the currency pair EUR/USD may have Bid price 1,3551 and Ask price 1,3553. In this example, we can see that the spread is equal 2 points.
If the quotation has 5 characters after a comma, it means that the price of the trading instrument is presented accurate to the pip.
For example, the quotation of the currency pair EUR/USD may have Bid price 1,35510 and Ask price 1,35535.
In this example, we can see that the spread is equal 2,5 points or 250 pips.
Japanese Yen (USD/JPY) is an exception – the price of a pair can display 2 or 3 decimal values after a comma.
In order to control the risks Traders set certain amount for a point – volume.
Example 1:
Transaction volume: 1 lot
Cost per point: $10
Price passes 50 points in a positive for a trader side: profit will be $500
Price passes 50 points in an opposite for a trader side: a losses will be $500
Example 2:
The price of the pair EUR/USD goes from 1.3550 to 1.3380, so there is a difference in 30 points.
Each point is equal to the point of profit or loss, you set independently the price of the point, the minimum price of which will be $ 0.1.
6 Types of Orders on MT4
Forex Orders are instruments to manage the risks.
The most common ones are the followings:
1. Market Order
Market Order is a request for a sale or purchase, which must be made at the current price quotes of the trading instrument.
If your request cannot be executed, you can use the “at best” function, which will process your request to the following, the best available price.
2. Entry order
Entry order is a request, which is executed, when a particular price level is reached and/or broken.
Execution of such orders remains in force until the Client cancels the order.
3. Stop order
Stop order is processed, when the exchange rate breaks a certain level.
Placing the entry stop order, the trader suggests that when market movement strikes a predetermined level, the deal would work and the price will continue to move in the same direction.
4. Limit order
Limit order is processed, when the exchange rate touches (not brakes) a certain level.
Placing the entry limit order, the trader suggests that after touching a predetermined level, the price will bounce in the opposite direction from the previous one.
5. Stop-loss
Stop-loss is an order associated with a particular position, set in order to close it and prevent further losses.
Stop-loss remains active until the transaction will not be liquidated or the client cancels the stop-loss.
6. Take Profit
Take Profit is an order that is associated with a certain position with purpose to consolidate gains on an existing position.
Take Profit remains active until the transaction will not be liquidated or the client cancels the Take Profit.
What is Leverage?
Leverage on Forex currency market is a borrowed certain sum of funds, which needs to be invested in something.
In the case of online trading on the Forex market, this money is usually borrowed from a broker.
Forex does offer high leverage as the initial margin, the trader is able to build and monitor a large amount of funds.
It plays an important role in Forex trading.
Leverage is one of the most important tool in Forex
One of the main reasons for the popularity of Forex, is the leverage.
It allows you to open positions on larger volume than the amount of money on your trading account.
To trade in amount of $ 100 000, with a margin of 1%, the investor will need deposit of $ 1000 on his/her margin account.
How does Leverage work?
For example, 200:1 leverage means that for every investor’s dollar broker adds $200 on top, which makes trading account in 200 times bigger.
Thus, when depositing the account on $1 000, 200:1 leverage allows you to control the sum of $200 000.
Margin trading is also built on the use of the leverage. Leverage requires you to raise a small percentage of the total trade lot.
For example, if leverage is 100:1 and you want to trade the sum of $100 000 with a margin of 1%, your initial deposit amount will be only $ 1,000.
Leverage can also increase loss
The disadvantage of leverage in the Forex is the amount of loss that could be incurred if the trading conditions are changing for the worse, and your trading moves in the opposite direction of the forecast.
In this case, leverage can multiply the size of potential losses.
Although the losses are the normal thing when trading on the Forex market, an incorrect understanding and use of leverage can lead to significant losses.
List of online Forex and CFD brokers
Are you new to Forex market?
Completely new to Forex?
Before doing anything else you should get yourself familiar with the basics of Forex trading.
We’ll try to help you in this any way possible. Check out our vocabulary page, where we provide you with the knowledge you need to start trading.
Once you feel confident with the basics and have a clearer picture of how you want to trade, open a demo account and get familiar with the trading interface.
You can use it for an unlimited period of time and it’s completely free.
Trading in demo environment is the same as trading a live account except for the fact that you do not incur any real gains or losses.
This is an excellent tool to get yourself started, without the fear of actually losing your investment.
Forex trading takes a lot of practice and patience, so don’t rush into it, without learning the ins-and-outs of it.
Check out our trading platforms and trading conditions to find what suits you best.
We provide multiple trading solutions for all trader types.
When you start making consistent profits and feel confident about your strategy, open a live account.
Remember, to be careful with leverage.
Leverage can work both for and against you.
Rest assured, there is no difference in trading conditions you see in demo and live so you should not get any unpleasant surprises when getting to the real deal and start trading live.
Or if you feel yourself familiar with the basics, you should go ahead and open a live account.
Choose your online Forex and CFD brokers
Everything about Forex explained
The FOREX Market is one of the best kept “mysteries” in the world of investing, and until few years ago only the financial institutions, brokers and banks could participate in it.
This well kept “mystery” is the biggest financial market in the world; over 3.0 trillion dollars worth of transactions take place on the Forex Market every day!
This amount exceeds by far all of the other combined equity markets in the world.
However, recent changes make this market accessible to a larger public and the individual investor.
So, individuals can now trade the same market that the banks, industrial corporations and brokers have found so lucrative and kept to themselves.
Here below, please note the elements composing the Forex trading.
1. Why you should trade Forex?
There are many benefits and advantages to trading the Forex market.
Here below please note a few reasons justifying why so many investors prefer to trade in the FOREX market.
2. Forex market is Open 24 Hours, 5 Days per Week
The FOREX Market never stops. It is a 24 hour, 7 days a week market.
Actually, a currency trader may exploit all profitable opportunities of this market, virtually, at any time.
There is no waiting for the opening of an exchange as in the case of trading stocks, derivatives or other financial instrument.
It is a 24-hour; continuous, currencies trading, that never stops.
For those who want to trade on a part-time basis the Forex market is very suitable, because they can choose when they want to trade, morning, noon or night.
Because of the world time zones you can actually effectively trade, 5 days per week.
Even during the weekend major market makers are making transactions between each other.
3. Forex market is Superior Market Liquidity
With $3.0 trillion daily worth of transactions, the FOREX market is highly liquid.
With a click of a mouse you can instantly buy and sell as you please.
Whether it’s 8 o’clock in the morning or 10 o’clock in the evening, somewhere in the world there are always buyers and sellers actively trading in Forex.
You are never blocked in a transaction.
You can even use the online trading platform to open a new position or to close your position at your desired profit taking level, and/or close a trade if it is going against you (stop loss).
4. High leverage is available
FOREX investors are permitted to trade foreign currencies on a highly leveraged basis up to 3000 times their investment.
Leverage allows traders to make substantial profits and at the same time keep low the risk of the capital they may use.
5. Profit Potential in both Rising and Falling Markets
In FOREX trading you can profit in both rising and falling markets.
A trader can easily “short” a particular currency pair, as easily, go “long”, on another.
Currencies are traded in “pairs”.
Thus, when you buy a particular currency, you simultaneously sell the other currency in that particular pair.
As the market changes, one of the currencies will increase in value versus the other.
Of course, it is up to the trader to choose the correct currency to be long or short in a pair.
Since currency trading always involves buying one currency and selling another, there is no structural bias to the market.
In this way, a trader has equal opportunity to achieve profits in both, a rising or falling market.
6. Low Transaction Costs
Active traders of other financial instruments like, stock and futures face substantial reduction of their gross profits going to commissions, exchange fees, and data/chart feeds.
Usually, in FOREX there are no commission fees.
In FOREX what you see is what you get.
In the Forex market, costs are further reduced by the efficiencies created by a purely electronic marketplace that allows clients to deal directly with the dealer, that can be a physical person or automated trading systems which significantly increase the speed of operations.
Because the Forex market offers round-the-clock liquidity, traders receive tight; competitive spreads both for intra-day and night trading.
Unlikely, stock and derivatives traders, who can be more vulnerable to liquidity risk and typically, receive wider trading spreads, especially during afterhours trading.
7. Currency pairs
As mentioned earlier, Forex is traded in currency pairs.
The currency pair consists of two currencies that make up an Exchange Rate usually known as “quote”.
When, one currency is bought by a trader, the other is automatically sold, and vice versa.
The Exchange Rate is the value of one currency expressed in terms of another.
For example, if EUR/USD is 1.5000, 1 Euro is worth US$1.5000.
The Base Currency is the first currency in the pair.
The Quote Currency is the second currency in the pair.
You will always see the USD quoted first with few exceptions such as Pounds Sterling, Euro, Australia Dollar and New Zealand Dollar.
The majority of all currencies are traded against the US Dollar.
The four next most traded currencies are the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP) and Swiss Franc (CHF).
These four currencies traded against the US Dollar make up the majority of the market and are called major currencies.
- EUR/USD = “Euro”
- USD/JPY = “Dollar Yen”
- GBP/USD = “Cable” or “Sterling”
- USD/CHF = “Swissy”
- USD/CAD = “Dollar Canada” (CAD referred to as the “Loonie”)
- AUD/USD = “Aussie Dollar”
- NZD/USD = “Kiwi”
8. Forex market price quotes
When you see any FOREX quote you will actually see two numbers.
The first number is called the Bid and the second number is called the Ask.
If we use the EUR/USD as an example you might see 1.4950/1.4952 – the first number 1.4950 is the bid price and is the price traders are prepared to sell Euros against the USD Dollar.
The second number 1.4952 is the Ask price and is the price traders are prepared to buy the Euro against the US Dollar.
You will also notice that there is a difference between the Bid and the Ask price and that is called the spread.
For the four major currencies the spread normally varies from as low as half pip to a maximum of several pips depending on the market conditions.
The pip will be explained later.
9. The dealer
A dealer usually provides pricing and/or liquidity for trading currency pairs and other financial instruments.
A Forex dealer stands ready to buy or sell a currency pair at the quoted price either as counter part of the transaction, or, as a broker.
A dealer as a counter part of a transaction provides the required liquidity and the pricing for various currency pairs and other financial instruments.
In reality, this dealer takes the opposite side of an investor’s trade.
The dealer (counter party) has the option to offset a position either, partially, or, fully, with other market participants, who manage the aggregated exposure of their clients.
If a dealer chooses to keep the investor’s position without hedging it in the market, the investor’s profit is the dealer’s loss and vice versa, leading to a possible conflict of interest between the investor and his dealer.
Unlikely, the dealer earns his profit from the spread between the Bid and Ask price.
In case a dealer acts as a broker, he uses external liquidity providers to provide pricing and liquidity for its clients.
The liquidity providers send in competing Bids and Asks into the trading platform, resulting in the best Bid and Ask being displayed to the client.
Some brokers/dealers may display the market depth which is the amount of liquidity available at each price.
A greater number of liquidity providers providing pricing to the broker/dealer leads to tighter more competitive spreads.
A broker/dealer may increase the spread to earn its profits.
10. Slippage
The difference between the order declared price and the executed price, measured in pips.
Slippage often occurs in fast moving and volatile markets, or where there is manual execution of trades.
11. Market Order
A Market Order is an order to buy or sell a specified number of lot(s) of a currency pair at current market price.
If the price of your request matches the most recent price on the market, your request – will be executed immediately.
Unlikely, you will receive a new quote, since the price may have moved in the meantime.
Example: Suppose you want to buy 1 lot of the EURUSD pair at its currently trading price of $1, 50 per 1, 00 Euro.
Actually, you want to enter the position as close as possible to the current price 1, 50.
So, you place a Market Order to Buy 1 lot.
Now your broker will execute your order at a price, such as $1, 5010, in case the price moved in the meantime.
The disadvantage of this type of order is that on fast moving market is hard to open and/or close a position at a specific level, because of the rapid changes of price.
12. Buy/Sell Limit Order
A Buy Limit Order is an order to buy a specified number of lot(s) of a currency pair at a designated price, at a price that is below the current market price.
A Sell Limit Order is an order to sell a specified number of lot(s) of a currency pair at a designated price, at a price that is above the current market price.
Once the pair’s price trades down to or below the price you have specified, your lot(s) will then be purchased at that price Example: Suppose you want to buy 1lot of the EURUSD pair, and it is currently trading at $1, 50 per 1, 00 Euro.
You want though to buy this 1lot if the pair’s price drops to $1, 4985 or less, as you feel the EURUSD current price of $1, 50 per is overvalued.
You place a Buy Limit Order @ 1, 4985. Now suppose the price trades down to $1, 4985.
As long as the price will reach 1, 4985, your order would be filled at price 1, 4985 per 1,00 Euro.
The main benefit of a Buy Limit Order is that you may be able to buy the lot(s) that you want at a price that is below the current market price and you are able to set a maximum on how much you’re willing to spend per lot.
Buy Limit Orders are great for buying short-term market pullbacks.
But if the price drops to your limit price and you entered the trade, there is no guarantee that the price will not continue to drop further.
Sell limit order works exactly opposite to buy limit, therefore it should be placed above current market price.
13. Buy Stop Order
A Buy Stop Order is an order to buy a currency pair at a price above the current market price.
Example: Suppose you are looking to buy 1lot of the EURUSD pair if the price shows that it wants to go up.
Assume EURUSD is currently trading at $1, 50 per 1, 00 Euro and you believe that if the price rises to $1, 5020 or higher there will be continued upward momentum.
You place a Buy Stop Order @ $1, 5020.
Suppose EURUSD then proceeds to trade up to $1, 5020.
At that time, your order would become would be filled at the price declared by you – 1.5020.
The main benefit of a Buy Stop Order is that you will only go long on the EURUSD pair IF the price is showing upward momentum.
But, if the pair’s price reaches your stop price, the price may change direction to the downside and you may have just purchased the EURUSD at its high.
Also, under abnormal market conditions, you may be filled at a price higher than your stop order price.
14. Sell Stop Order
A Sell Stop Order is an order to sell a currency pair at a price below the current market price.
Example: Suppose you own 100 shares of Wal-Mart Stores (WMT) and you are worried that if the price falls a few more dollars that it will trigger the beginning of a much larger decline.
Assume WMT is currently trading at $50 per share.
You place a Sell Stop Order @ $48 on WMT. Suppose WMT then proceeds to trade down to $48.
At that time, your order would be filled at the declared by you price of 48.
The main benefit of a Sell Stop Order is that you will sell off your stock IF the price is showing downward momentum, protecting you from steeper losses.
Sell Stop Orders are great for protecting gains and preventing large losses.
But, if the stock price reaches your stop price, the stock may change direction to the upside and you may have just sold the stock at its low.
Also, under abnormal market conditions, you may be filled at a price lower than your stop price.
15. GTC Order
Good Till Cancelled. An order stays in the market until it is either filled or cancelled.
16. Range Trading
A style of trading that attempts to profit from buying and selling currencies between a lower level of support and an upper level of resistance.
The upper level of resistance and the lower level of support defines the range.
The range forms a price channel where the price can be seen to oscillate between the two levels of support and resistance.
17. News Trading
A style of trading whereby a trader attempts to profit from fundamental news announcements on a country’s economy that may affect the value of a currency, usually seeking short term profit immediately after the announcement is released.
18. Swing Trading
A style of trading that involves seeking to profit from short to medium term swings in trend.
Trades can last from hours to days.
19. Carry Trading
A style of trading whereby the trader attempts to profit from holding a currency with a higher rate of interest and selling a currency with a lower rate of interest, profiting from the daily interest rate differential of the position.
20. Position Trading
A style of trading that involves taking a longer term position that reflects a longer term outlook. Trades can last from weeks to months.
21. Discretionary Trading
A style of trading that uses human judgment and decision making in every trade.
22. Fundamental Analysis
A style of trading that involves analyzing the macroeconomic factors of an economy underpinning the value of a currency and placing trades that support the trader’s long or short-term outlook.
23. Long Position
A position in which, the trader attempts to profit from an increase in price. i.e. Buy low, sell high.
24. Short Position
A position in which, the trader attempts to profit from a decrease in price. i.e. Sell high, buy low.
