FX:ST - Forex Made Simple

Currency and FX trading

Here you will find news, tutorials and currency tips. You can view all the articles below or filter by section using the menu on the left hand side

{addthis off}

A Simple Forex Course - Forex Charts

Line chart

By plotting the price of a currency pair over time on a graph and drawing a line through the points you get a simple line chart. The data from a chart like this is limited by the timescales set. So the points could be the closing price once a day if you are looking over the course of months or years or the price every minute, to every single price movement in fractions of seconds.

linechart

Bar chart

A bar chart allows you to plot more data on the same area than a simple line chart. Rather than just have the closing price for a particular day, a bar chart shows the opening price, the highest price and lowest price for that day and the closing price. Once again the timescales can be set arbitrarily so a single bar can represent a day, a week or whatever other unit of time is required

barchartjpg

barchart

Candlesticks

Candlestick charts are another popular chart format. They provide the same data as a bar chart but in a format that is visually more appealing. They are easier to read and generally more favoured than bar charts as it is easier to spot patterns

candlesticks

candlestickchart

Next Lesson - Support and Resistance

A Simple Forex Course - Forex Charts and analysis

If you haven’t done so already, you should open a demo trading account. However once you do, even if you have read the lessons so far, you probably won’t know whether you should buy or sell a particular currency.

Traders analyse the data they have to hand to decide which way to trade. While any information pertaining to a country’s economy is relevant, all data falls into two main categories ; news events and historical price movements.

Fundamental analysis

Using the news to predict the price movement of a particular currency is commonly known as fundamental analysis. At the most basic level, if the economy of a particular country is improving, then the value of the country’s currency will rise. Lists of dates for significant scheduled news events and figures disclosed by governments and economic bodies are widely available and known as the forex calender. As well as regular unscheduled news, these events inform the decisions of traders in the forex market.

Technical analysis

Technical analysis refers to using historical price movements to attempt to predict future prices. Quite often patterns occur in the price movement and these patterns tend to repeat. Technical analysis attempts to recognise such patterns to predict future price movement. For example if the price of GBPUSD reached 1.6 then retreated down more than once it can be suggested that this is the most the market believes this currency is currently worth. So unless there have been changes to the economic situation it can be inferred that if the price is currently around 1.6 the future movement will be to retreat downward once again. Technical analysis is synonymous with charts as this is the best way to visualise and analyse historical data.

In order to be a successful trader, both types of analysis have to be used. In addition to this fact, a successful trader should understand that the Forex market is highly emotional since the price reflects not only the analysis of millions of different people but the emotional reactions to all the data available to them also.

Next Lesson - Forex Charts

A Simple Forex Course - Order Types and Lot Sizes

Order Types and Lot Sizes

At the simplest level all of your trades will consist of you buying or selling. So that you don’t have to sit at your computer all day long watching the quote price, you can automate these trades to occur when the price reaches the level you want to trade at.

Market order

This is an order to buy or sell right now at the best market price. One click order (aka no dealing desk) refers to these types of orders so your order is fulfilled within as short a period as possible after you click so the price doesn’t change.

Limit Entry Order

This is an automated order to buy below the market price or sell above the market at a certain price once the market reaches that price.

Stop entry Order

This order is an order placed to buy above the current market price or sell below the current market price at a certain price. This kind of order is placed if you believe the market reaching a certain point is the beginning of a trend or breakout.

Stop Loss Order

An order to buy or sell at the market when a particular price is reached, either above or below the price that prevailed when the order was given. This is done to lock in profits and exit a trade

Trailing stop

This is also a stop loss order to help lock in profits should the market move against you. However the point at which the stop loss is triggered is tied to the market rate trailing by a set number of pips. This allows you to lock in as much profit as possible and lowers the possibility of exiting a trade before the end of a market price trend.

GTC

"Good Till Cancelled". An order left with a Dealer to buy or sell at a fixed price. The order remains in place until it is cancelled by the client.

One Cancels Other Order (O.C.O. Order)

A contingent order where the execution of one part of the order automatically cancels the other part.

Typical Lot sizes

A lot is the amount that is traded on each trade. The typical sizes are

Standard = 100,000 units

Mini -10,000 units

Micro = 1,000 Units

Nano = 100 units

As mentioned previously you can use leverage to trade lots that are larger than your initial deposit. Since the deposit only needs to cover your losses brokers will allow you to trade 100 or even 200 times your deposit size. However it is generally a bad idea to be leveraging more than 3 or 4 times your deposit. Read the article Why forex trading is so risky

Order Types and Lot Sizes

At the simplest level all of your trades will consist of you buying or selling. So that you don’t have to sit at your computer all day long watching the quote price, you can automate these trades to occur when the price reaches the level you want to trade at.

Market order

This is an order to buy or sell right now at the best market price. One click order (aka no dealing desk) refers to these types of orders so your order is fulfilled within as short a period as possible after you click so the price doesn’t change.

Limit Entry Order

This is an automated order to buy below the market price or sell above the market at a certain price once the market reaches that price.

Stop entry Order

This order is an order placed to buy above the current market price or sell below the current market price at a certain price. This kind of order is placed if you believe the market reaching a certain point is the beginning of a trend or breakout.

Stop Loss Order

An order to buy or sell at the market when a particular price is reached, either above or below the price that prevailed when the order was given. This is done to lock in profits and exit a trade

Trailing stop

This is also a stop loss order to help lock in profits should the market move against you. However the point at which the stop loss is triggered is tied to the market rate trailing by a set number of pips. This allows you to lock in as much profit as possible and lowers the possibility of exiting a trade before the end of a market price trend.

GTC

"Good Till Cancelled". An order left with a Dealer to buy or sell at a fixed price. The order remains in place until it is cancelled by the client.

One Cancels Other Order (O.C.O. Order)

A contingent order where the execution of one part of the order automatically cancels the other part.

Typical Lot sizes

A lot is the amount that is traded on each trade. The typical sizes are

Standard = 100,000 units

Mini -10,000 units

Micro = 1,000 Units

Nano = 100 units

As mentioned previously you can use leverage to trade lots that are larger than your initial deposit. Since the deposit only needs to cover your losses brokers will allow you to trade 100 or even 200 times your deposit size. However it is generally a bad idea to be leveraging more than 3 or 4 times your deposit. On a standard MT4 trading account 1 lot is 100,000 of the base currency however you have the ability to trade as little as 0.1 lot which is 10,000. With a deposit of 10,000USD you should only be trading lot sizes of around 0.3 or 0.4 at most. Read the article Why forex trading is so risky

Next Lesson - Forex charts and analysis

A Simple Forex Course - Forex basics 2

Market times and Trading sessions

The forex market is not traded in a centralized location. It is traded between banks 24 hours a day however different currency pairs are traded at different times. These times are called trading sessions. These sessions are listed below

Tokyo	7:00 pm to 4:00 am EST	11:00 pm to 8:00 am GMT
London	3:00 am to 12:00pm EST	7:00 am to 4:00 pm GMT
New York	8:00 am to 5:00 pm EST	12:00 pm to 9:00 pm GMT
Sydney	5:00 pm to 2:00 am EST	10:00 pm to 7:00 am GMT

When the sessions overlap there is more trading activity as more people from around the world are trading at the same time. This means increased liquidity in the market and as a result more volatility and more likely occurrence of larger trends

Profiting from the Forex market

Profiting from the forex market is done in exactly the same way as the stock market; you buy a currency who’s value you believe will go up and then sell it at a higher price once it does. Each set of buy and sell transactions is called a “position”. For example if EURUSD is trading at 1.6 (i.e. you can exchange 1 Euro for 1.6 dollars) but you believe it will go to 1.7 you would buy Euros by BUYING EURUSD (since the first currency is the base currency it is the basis of what is being traded). If you bought 10,000 Euros at a price of $1.6 each ($16,000) then sold them at $1.7 each, you would make $1,000. (This kind of trade is called a BUY position or going long)

Since every forex trade is 2-sided involving a buy and sell, it doesn’t matter which comes first and so you can also profit if you think the price will go down and SELL first and BUY later (AKA a SELL position or going short).

Earning or Paying interest - Rollover

Whenever you have an open trade you have borrowed currency to buy another and as a result you will earn on the bought currency and pay interest on the borrowed. Depending on the difference in the rates you will earn or pay interest. This is usually paid on a daily basis at a cut off time designated by your broker. This paying or earning of interest is known Rollover.

Next lesson - Order types and Lot sizes