FOREX INNER WORKINGS
THE OTHER SIDE OF THE WIRE
WHO CAN MOVE THE PRICE?
GAMES OF THE BIG PLAYERS
IS PRICE ACTION RANDOM?
WHAT MOVES THE PRICE?
TRADING INDUSTRY FOLKLORE
DEVELOPING A STRATEGY
DEFINE WHAT YOU GONNA DO
DON'T BLOW YOUR ACCOUNT
INTRO TO ALGO
DON'T PLAY A ROBOT, MAKE ONE!
CHOOSING FOREX BROKER
FOREX TRADING TIPS
FOREX TRADING MISTAKES
FOREX PITFALLS OVERVIEW
Arbitrage refers to the practice of buying an asset then selling it immediately to take advantage of a difference in price.
The ask refers to the price at which you can buy an asset or security from a seller. It can be variously referred to as ask, the ask, or asking price. Long positions are opened at the ask price.
Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.
Automated trading system (ATS) is a computer program designed to trade stocks, options, futures or foreign exchange products based on a predefined set of rules which determine when to enter an order, when to exit a position and how much money to invest in each trade.
Account balance is the amount of the money someone has in his account when there are no open positions.
In trading the term base currency has two main definitions: the first currency quoted in a FOREX pair, or the accounting currency used by banks and other businesses.
The bid is the amount a party is willing to pay in order to buy a financial instrument. Short positions are opened at the bid price.
A breakout is a price movement of an instrument through an identified level of support or resistance, which is usually followed by heavy volume and an increased amount of volatility. Traders buy the underlying asset when the price breaks above a level of resistance or go short when it breaks below a level of support.
In general, a broker is an individual or company that places trades on behalf of a trader. In FOREX however, the trades can be only virtual operations performed within a closed system run by the broker. This depends on the type of broker. See CHOOSING BROKER for more on this.
Contract for difference, or CFD, is a type of financial derivative used in CFD trading which is a speculation on financial markets without actually buying the asset.
Commission is the charge levied by an investment broker for making trades on a trader’s behalf.
Day trading is a strategy based on short-term positions kept for minutes up to a few hours.
Brokers with a dealing desk (DD) make a market for your trades. They sit on the other side of your trades and, for this reason, profit when you make a loss.
A derivative is a financial product that enables traders to speculate on the price movement of assets without purchasing the assets themselves. Because there is nothing physical being traded when derivative positions are opened, they usually exist as a contract between two parties.
An ECN broker uses electronic communications networks (ECNs) to provide its clients direct access to other participants in the currency markets. Because an ECN broker consolidates price quotations from several market participants, it can generally offer its clients tighter bid/ask spreads than would be otherwise available to them. Since an ECN broker only matches trades between market participants, it cannot trade against the client, an allegation often directed against some unscrupulous retail FOREX brokers. Because ECN spreads are much narrower than those used by everyday brokers, electronic communication networks brokers charge clients a fixed commission per transaction.
Equity is an account balance plus the floating profit/loss of all open positions. When there are no open position, the account equity equals account balance.
An Expert Advisor (EA) is a computer program written specifically for the MetaTrader Platform. EA can just provide trading signals or can be programmed to automatically execute the trades on a live account. In such a case, the term EA is equivalent to "FOREX robot" or "Automated trading system".
A computer program based on a set of FOREX trading signals used to determine whether to buy or sell a currency pair at any one time. Synonymous to "Automated trading system".
Free margin is the difference of account equity and the open positions' margin.
Fundamental analysis is a method of evaluating assets on the basis of external events and influences, as well as financial statements on the asset itself. It is used by traders to make decisions on different assets by measuring the economic, financial and market conditions that can affect its price.
Futures contracts represent an agreement between two parties to trade an asset at a defined price on a specified date in the future. They are also often referred to simply as "futures". Currencies can also be traded as futures.
A hedge is an investment or trade designed to reduce your existing exposure to risk. The process of reducing risk via investments is called 'hedging'. In FOREX trading, hedging simply means keeping parallel short and long positions in the same pair.
High frequency trading (or HFT) is a form of advanced trading platform that processes a high numbers of trades very quickly using powerful computing technology. It can be used to either find the best price for a single large order, or to find opportunities for profit in the market in real time.
Leverage is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital. See also 'Margin'.
In investment, liquidity is the ease of buying or selling a particular asset in the market without affecting its price. It can also refer to the facility of converting an asset to cash quickly and easily.
A limit entry order (sometimes just limit order or entry order) is a market entry order that includes special instructions preventing it from being executed until the market price reaches the specified level.
When used in trading, long refers to a position that makes profit if an asset’s market price increases. Usually used in context as "taking a long position", or "going long".
A standard lot represents 100,000 units of any currency, whereas a mini-lot represents 10,000 and a micro-lot represents 1,000 units of any currency. A one-pip movement for a standard lot corresponds with a $10 change.
Deposit margin is the amount a trader needs to put up in order to open a leveraged trading position. It can also be known as the initial margin, or just as the deposit.
A margin call is the term for when a broker requests an increase maintenance margin from a trader, in order to keep a leveraged trade open. In FOREX trading, margin call can result in immediate automatic closing of losing positions (so called "Stop Out").
A market maker is an individual or institution that buys and sells large amounts of a particular asset in order to facilitate liquidity. In FOREX the term market maker is also used for dealing desk brokers, as they provide virtual market for performing trades.
A market order is an order to buy or sell immediatelly at the best available price.
A way of FOREX trading that provides immediate access to the interbank market. FOREX brokers who use this system work directly with market liquidity providers. When trading through a no dealing desk, instead of dealing with one liquidity provider, an investor is dealing with numerous providers in order to get the most competitive bid and ask prices. An investor using this method has access to instantly executable rates.
A one-cancels-the-other order (OCO) is a pair of orders stipulating that if one order is executed, then the other order is automatically canceled. An OCO order combines a stop order with a limit order on an automated trading platform. When either the stop or limit level is reached and the order executed, the other order will be automatically canceled.
Your open positions are the trades you have made that are still able to incur a profit or a loss. When a position is closed, all profits and losses are realised and the trade is no longer active.
In trading, an order is a request sent to a broker or trading platform to make a trade on a financial instrument.
Percentage allocation management module, also known as percentage allocation money management or PAMM, is a form of pooled money forex trading. An investor gets to allocate his or her money in desired proportion to the qualified trader(s)/money manager(s) of his or her choice. These traders/managers may manage multiple forex trading accounts using their own capital and such pooled moneys, with an aim to generate profits.
A pip is a measurement of movement in FOREX trading, defined as the smallest move that a currency can make. Nowadays fractional pip pricing makes one tenth of pip the smallest possible move.
Pip value is the value attributed to a one-pip move in a FOREX trade.
A position is the financial term for a trade that is either currently able to incur a profit or a loss (an open position) or has recently been cancelled (a closed position). Positions are the way in which a trader will hope to make a profit.
In trading, the quote is the price at which an asset was last traded, or the price at which it can currently be bought or sold.
In FOREX trading the term quote currency designates the second currency quoted in a FOREX pair.
A rally is a period in which the price of an asset, market or index sees sustained upward momentum. Typically, a rally will arrive after a period in which prices have been flat or in a decline.
A rebound means a recovery from prior price drop.
A resistance level is a key tool in technical analysis, indicating when an asset has reached a price level that market participants are unwilling to surpass.
A reversal is a turnaround in the price movement of an asset: when an upward trend (or a rally) becomes a downward one (a correction), or vice versa. They can also often be referred to as trend reversals.
In trading, a rollover is the process of keeping a position open beyond its expiry. In the FOREX market, rollover is the interest paid or earned for holding a position overnight, meaning before and after 5 p.m. EST (New York time).
Scalping is the act of opening and then closing a position very quickly, in the hope of profiting from small price movements.
In trading, short describes a trade that will incur a profit if the asset being traded falls in price. It is also often referred to as going short, shorting or sometimes selling.
When the price at which an order is executed does not match the price at which it was made, it is referred to as slippage.
Social trading allows traders to trade online with the help of others. Traders can interact with others, watch others take trades, then duplicate their trades and learn what prompted the top performer to take a trade. By copying trades, traders can learn which strategies work and which do not work. In its commercial form social trading means paying for being allowed by a broker to copy trades of a chosen trader with a public equity curve and trades history.
In trading, spot refers to the price of an asset for immediate delivery, or the value of an asset at any exact given time. It differs from an asset’s futures price, which is the price for delivery at some date in the future, or its expected price.
The spread is the difference in price between the buy (ask) and sell (bid) prices quoted for an asset.
Spread betting is a leveraged financial derivative. When spread betting, you are making a bet on the direction in which a market will move. The accuracy of your bet determines the profit or loss when the position is closed.
A stop-loss order is a type of limit order linked to a trade for the purpose of preventing additional losses if price goes against you.
An STP broker with Direct Market Access (DMA) aggregates prices from liquidity providers in the FOREX interbank market and forward your trades directly onto these liquidity providers.
A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.
A take-profit order (T/P) is an order used by currency traders specifying the exact rate or number of pips from the current price point where to close out their current position for a profit.
Technical analysis is a means of examining and predicting price movements in the financial markets, based on an asset’s chart history. It is one of the two major approaches to market analysis, with the other being fundamental analysis.
A tick is an individual quote of a financial asset (currency, stock, etc.) provided by the information system. In other words, in the trading platform, a tick is any single change or movement in the quote upwards or downwards.
Trade ticket or position ticket is a unique identifier (number) asigned to each trade/position in the broker's trading system.
A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.
In trading, volume is the amount of a particular asset that is being traded over a certain period of time. It is often presented alongside price information, as it offers an extra dimension when examining an asset’s price history. Volume may also refer to size of an open position.