Before you can make money in the Forex market you need to have the right to do currency trading. Following certain protocols gives you this authority and it starts with signing on with one of the Forex brokers that can facilitate your Forex strategies. The broker acts as the intermediary between you and the market to ensure your trades are executed. Brokers have the direct connection to the market and place your buy or sell orders for you. You communicate your orders directly to the broker or through online software.
Bulls and Bears
A Forex trader can be bullish or bearish in a Forex trade system. These terms were created in the early 1900’s to identify the direction a person was trading. When you learn Forex methods you’ll develop a trading style as a bull or a bear. It means you can take advantage of the potential profits to be made in the currency trading Forex market regardless of the direction it is moving. As a bull, you place your bet on the market moving up. As a bear, your plan of attack is based on your prediction the market will move down. You’ll gain a better understanding of this in a Forex trading course.
Types of Orders in Currency Forex Trading
Earlier it was mentioned that your broker places your orders on the market for you. There are four basic foreign currency trading orders you will use – market order, limit orders, stop orders and OCO orders. The best Forex broker guarantees your orders are executed precisely, otherwise your trade may not go as planned.
Market order. Use this order to enter or exit the market at the current process. Keep in mind you are dealing with a bid and ask price with a 3 to 6 pip spread on the major global currencies. You buy on the ask price and sell on the bid price. For example, if you are trading a specific currency pair with a bid price of 2.2340 and an ask price of 2.2343, there is a 3-pip spread. If you chose to enter the market buying (bullish), you would pay the ask price of 2.2343. If you wanted to enter the market selling (bearish), you would pay the sell price of 2.2340. When you enter in either direction at the exact price it is currently trading, it is a market order.
Limit order. This type of order gives you the opportunity to include knowledge you have acquired from currency trading systems. Entering or exiting the market at a predetermined price is called a limit order. You place your orders ahead of time to buy below current prices or sell above current prices. It gives you the chance to increase your profit margin by executing the trade at a better place from the get-go.
Stop order. These orders are similar to limit orders in currency trading, but a little trickier, using a different set of rules. You place your order at the predetermined price but the difference is they turn into market orders when they reach the price. This is where you can potentially lose some of your potential profit. With this FX Forex trading method of entering the market, your price is subject to slippage.
Sometimes the market moves so fast even reliable currency trading brokers cannot place your order quickly enough to get the price you want. Your buy order will execute above the current market price or conversely your sell order will trigger below the current price. You’re already in a losing position because of the spread, and this is called slippage. In this situation, chances are high the market has decided to go against you and the stop order prevents you from losing a major chunk of the money from your Forex account you have just placed in the market.
OCO order. The best Forex trading system will promote that you create a trading plan before entering the market and then follow it to the letter once you’re in. You need to decide on an entry point and the point where you’ll exit the trade at a profit. You’ll have an exit strategy in place for protecting your money and minimizing the loss if the market moves against you. To allow for the greatest gains and reduce your losses, you’ll basically need to double up on your orders. This means every buy order will have a sell limit order for profit and a sell stop order for loss protection. Likewise, every sell order will have a buy limit order for profit and a buy stop order to protect your money. Some Forex online trading platforms give you the ability to place an OCO (once cancels the other) order. It’s a simple way of saying when one order triggers, the second one automatically goes away so it does not accidentally put your money back into the market. The results could be catastrophic if your money was exposed to the market without protection.
Forex Trading Systems
Earlier we mentioned basing your plan of attack for trading currency on a prediction. Predicting a future result has nothing to do with gambling. Successful 4X currency trading is based an excellent education and developing productive trading habits. Plan to enroll in more than one currency trading course and develop Forex strategies with a sound base to avoid trading with your emotions, especially in Day Trading scenarios. Trading from your “gut” impulse is the quickest way to lose your money, as recklessly as a gambler in a casino. “How to” currency trading programs get you started on the right foot. A currency trading system will provide you with technical and trading knowledge, a fundamental understanding of market movement and it explains the most important part of currency trading – the psychological aspect, or mood of the market.
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