What is Forex , FX, Foreign eXchange?
The Foreign Exchange market, also known as the Forex or FX market, was created in the early seventies as the international money markets evolved to a floating exchange rate system. Unlike other financial markets that operate in a centralised location via an exchange, Forex is simply a global network of central banks, financial institutions, corporations and individual traders all involved in the buying and selling of national currencies.
Another feature of the Forex market is that it operates 24 hours a day, 5 days a week from all the major financial centres of the world. Opening in Wellington, New Zealand and trading right through to New York via Sydney, Tokyo, Hong Kong and London. The extremely high volumes, estimated at US$ 4 trillion daily, deep liquidity and geographical dispersion characterises Forex as a market attractive to investors and speculators.
How to make money trading in Forex?
The foreign exchange market is the largest and most liquid financial market in the world. Traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney`s annual FX Poll, volumes grew a further 41% between 2007 and 2008.
Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%. In addition to "traditional" turnover, $2.1 trillion was traded in derivatives..
What is PIP?
Pip stands for "percentage in point" and it is the smallest increment by which a Forex cross price changes. Most currency pairs are quoted to four decimal places, meaning that a movement from 1.1850 to 1.1851 for a currency pair would constitute one pip. For a particular position, you can calculate the value of a single pip using the following formula. For instance, you know that the EURUSD is quoted with four decimals, so for a given position you can multiply the position amount by the value of one pip, or USD 0.0001. So, on a EURUSD 100,000 contract, one pip would equal USD 10. On a USDJPY 100,000 contract, one pip is equal to JPY 1,000 because USDJPY is quoted with only two decimals (meaning 1 pip = JPY 0.01).
What are the "long" and "short" positions?
Long position is a "buy" position, meaning that this position will be in profit if price goes up. Short position is a "sell" position, meaning that this position will be in profit if price goes down.
What is margin?
Margin is money you need to have in your broker account to secure your open position. Different brokers require different amount of margin money to keep your positions open.
What is "Limit order"?
Limit orders are commonly used to enter a market and to take profit at predefined levels. Limit orders to buy are placed below the current market price and are executed when the Ask price hits or breaches the price level specified. (If placed above the current market price, the order is filled instantly at the best available price below or at the limit price.) Limit orders to sell are placed above the current market price and are executed when the Bid price breaches the price level specified. (If placed below the current market price, the order is filled instantly at the best available price above or at the limit price.) When a limit order is triggered, it is filled as soon as possible at the price obtainable on the market. Note that the price at which your order is filled may differ from the price you set for the order if the opening price of the market is better than your limit price.
What is "Stop order"?
A stop order (also stop loss order) is an order to buy (or sell) a security once the price of the security has climbed above (or dropped below) a specified stop price. (Note that both bid and ask prices can trigger a stop order.) When the specified stop price is reached, the stop order is entered as a market order (no limit). This means the trade will definitely be executed, but not necessarily at or near the stop price, particularly when the order is placed into a fast-moving market, or if there is insufficient liquidity available relative to the size of the order.
What is "bid/ask" and "spread"?
The difference between the Bid price (at which you can sell the trading instrument) and the Ask price (at which you can buy the trading instrument.
What about risk when trading on Forex?
In the Forex market, risks might be great, but the rewards can be great too. The Forex market is different from other markets. The speed and huge size of the market mean it changes continually. Forex is not the same as any other market in the financial world; it is not able to be controlled. This makes it risky - increased risk means chances for a higher profit, also for higher loss. There are many different ways to invest in the Forex market. However, before you decide to get involved, you should think about what result you want from your investment and your level of experience. Trading foreign currencies is demanding. Do not invest money you cannot accept to lose.
What a minimum capital should I use to start?
Basically more capital is better and means lower risks and vice-versa minimum capital means huge risks. But theoretically you can start with 1000 Eur/Usd.
What is risk capital?
Risk capital is the money that Forex suggests you use for trading in the market. It is money you have that you do not need for day to day living and you can afford to lose.
What is a currency pair?
A currency pair is a Forex instrument, also known as a cross, for example USDJPY. When you trade in Forex, you always trade currencies in pairs. Thus in the example of USDJPY, this pairing indicates that you trade U.S. dollars against Japanese yen. If you buy dollars, you pay in yen, and if you sell dollars you receive yen.
What is Metatrader4?
MetaTrader 4 , often shortened to MT4 by online forum users, is a software program widely used by online Forex speculative traders. It`s developer MetaQuotes Software had previously released Metatrader 3 ( now not used ) and a significantly re-coded Metatrader 5 is currently in public beta testing. Because many forex brokerages provide the MT4 platform. For Example: ActiveTrades http://www.activtrades.com is one of broker using Metatrader as its primary dealing plaform, many third party freelance open source and commercial software developers have written technical indicators and expert advisors ( automated trading software ). The client terminal includes a built-in editor & compiler with access to a user contributed free library of software, articles and help. Lately a number of brokerages have added the MT4 platform as an optional alternative to their existing trading software. Third party developers have written software bridges enabling integration with other financial programs, although MT4 is used as a stand alone complete solution by many brokerages. Provides trade operations, charts and technical analysis in real time. The internal C-like programming language allows users to program trading strategies, indicators, signals. 50 basic indicators are included, each of which can be further customized. Runs on Windows Vista/XP/2000/98. Some users have reported success using WINE on Linux for the client terminal.
What is a Forex Expert Advisor?
A Forex Expert Advisor (a.k.a. Forex Trading Robot, EA, MT-4/5 EA, Automated Forex Trading Software) is a mechanical trading system written in the MQL-4/5 programming language and designed to automate trading activities on the MetaTrader 4 platform. Expert Advisors can be programmed to alert you of a trading opportunity and can also trade your account automatically managing all aspects of trading operations from sending orders directly to your broker`s server to automatically adjusting stop loss, trailing stops and take profit levels. Expert Advisors for MetaTrader 4/5 are all unique and different in the rules they follow to enter and exit the market. Expert Advisors eliminate emotional trading decisions that cripple novice trading accounts. Forex Expert Advisors allow investors to exercise a very strict trading system without falling outside pre-programmed parameters and it is this rock solid consistency one of the features that make these programs so attractive to serious investors. Am Expert Advisors can also eliminate the emotional trading decisions that usually cripple novice Forex trading accounts. Forex Expert Advisors exercise unmatched discipline when trading and can be designed to evaluate more parameters at the same time than any human could keep an eye on at once. All of the technical indicators that are available in the MT-4/5 platform can be brought to bear in the logic used by an Expert Advisor in almost any way that one can think of thanks to the MQL-4/5 programming language. All types of moving averages (simple, exponential, etc.), RSI, CCI, etc. You can also create your own custom indicator and call upon it from an Expert Advisor. There are many different types of MT-4 Expert Advisors depending on their intended application. Some are designed specifically to trade news events and remain out of the market all other times while other MT-4/5 Expert Advisors are meant to remain active 24x7. Experienced traders who have their own fine tuned manual trading systems sometimes hire MQL-4/5 programmers to automate their systems thereby creating custom MT-4/5 Expert Advisors. All expert advisors have the same goal and that is to automate trading operations and generate a profit while doing so.
How does a Expert Advisor work?
The program works by calculating the different indicators that it was designed to use and take actions when the market conditions meet the correct criteria as described in the source code of the Expert Advisor. For example. A simple expert advisor may say something like this: "If the 9 and 20 day moving averages cross with the 9 day MA above the 20 MA and the RSI is higher than 50 then open a long position (buy)" That is just an example. You can assign countless conditions for entering and exiting the market as well as managing trades for trailing stops and multiple take profit levels. An MT-4/5 Expert Advisor is usually divided into three parts: A startup or `init` function, a main function and a `deinit` or cleanup function. The Expert Advisor will run through its startup function once upon startup and will run through its `deinit` or clean-up function once at the end. In the mean time, the MT-4/5 Expert Advisor program runs through a cycle of its main function over and over with every incoming tick while it is attached to a chart and active. Once running, the Expert Advisor will not start another cycle for a new tick if it is still in the middle of processing the previous one.
What is the best Forex trading strategy?
There is none. You should constantly develop your own strategies for every possible market situation, if you want to be in profit. Specific strategies can only be good for a certain period of time and for certain currency pairs.
Can I run multiple EAs on my forex-account?
Yes you can. Modern commercial EA working independently one from other. Using unequally Magic-Number (ID) for each their positions, EAs can operate without any claim for each other.
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