Stopping Losses with Stop Losses and Trailing Stops (Basic Mechanics)

Whereas market orders and entry orders are trade entries, stop losses, trailing stops, and profi t limits (described in the next section) are trade exits. While many beginning traders concentrate almost exclusively on entries, most intermediate and advanced traders eventually come to realize that exits are at least as important, and some say even more important, than getting the entries right. In this section, only the basic mechanics of stop losses and trailing stops will be...

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Entry Orders (Basic Mechanics)

In contrast to the immediate nature of market orders, entry orders are pending positions whose purpose is to trigger when a certain price level is reached. These types of orders can be set to execute well ahead of time, and will only be executed if the specified price is reached. There are two primary types of entry orders stop entries and limit entries. In the retail foreign exchange market, the functional discrepancy between these two entry order types is largely semantic, and many...

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Market Orders (Basic Mechanics)

Depending on the specific strategy or type of trading preferred, foreign exchange traders often rely heavily upon market orders. A market order simply means that a trader wishes to enter a currency position at the present moment, whether it is an order to buy (long) or sell (short) a specific currency pair. The main functionality that differentiates this type of order from others is the fact that a market order is executed at the current market price, as opposed to a future...

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Going Long and Selling Short (Basic Mechanics)

The fact that currencies are traded in pairs differentiates the foreign exchange market from other fi nancial markets in important ways, one of which is the concept of long and short. In trading equities, for example, a “ long ” entry is simply the process of buying shares in a specific security in the hope that it will go up in value. Conversely, a “ short ” entry is to sell shares before actually owning them. This is with the understanding that the shares must be bought back or...

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Anatomy of a Currency Pair (Basic Mechanics)

Major currency pairs The foreign exchange market is traded in a very unique way when compared with other major financial markets like stocks or futures. Unlike these more traditional markets, foreign exchange trading is accomplished using the relative value of the underlying instrument, rather than the absolute value. More specifically currencies are traded in pairs. When forex traders talk about trading the U.S. dollar, for example, they are really talking about trading the U.S. dollar...

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Simple trading rules to become success

Don't Panic! Price moves the same way also when you don't look every minute. Don't make yourself crazy! Plan Trades carefully. Better pending orders at a good price than just “jumping in”. Wait for the price to come back, don't enter at peaks just because you're impatient! If the price runs away without you, don't care so much about it! R/R at least 1:5 (better 1:10)!! Risk no more than 5% of trading balance if applicable! When trade goes in the right direction, set stop-loss at least to...

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Introduction to Foreign Exchange Trading

Trading Money to Make Money Foreign exchange trading is essentially about trading money. There are several reasons why people and institutions would want to trade money. The two primary reasons are currency conversion and speculation. Currency conversion is simply the changing of money from one currency to another for the primary purpose of purchasing goods, services, or assets from a foreign country. For an American company to buy British goods, for example, would necessitate the conversion...

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