Today’s Foreign Exchange (Forex) trading is recognized as a profitable way to make money online. To trade Forex, you just need a computer with internet connection and an account with a forex broker. Since the market operates 24 hours a day (for 5.5 days a week), Forex traders operate largely independently regardless of location or time. Despite the high volume of daily turnover (around $ 2 trillion per day), it is surprising to know that only a few currencies are actively traded: the US dollar, the Australian dollar, the Japanese yen, the British pound, the Swiss franc, the Canadian dollar and the euro.
As a reality of Forex trading, even after it was opened to the public in 1998, Forex was mainly traded at large international banks. According to the Wall Street Journal Europe, 73% of trade volume is covered by the top ten. Deutsche Bank, at the top of the table, covered 17% of total currency trading; UBS in second place and Citigroup in third; Taking 12.5% and 7.5% of the market. Other major financial contributors to the list are HSBC, Barclays, Merril Lynch, JP Morgan Chase, Coldman Sachs, ABN Amro, and Morgan Stanley.
For part of the market participants, approximately half of the transactions were made strictly between dealers (such as banks, or large currency dealers); Others are mainly among dealers and non-financial institutions.
In fact, traders often use one or more trading systems / software to trade Forex online. These softwares often come in a package when you open an account with Forex brokers. In short, this software works like this: Forex trading software connects to the broker’s system via the Internet, currency prices are updated live, and you make calls to trade through the software. This type of trading software often requires minimal computer power so it can be run on most home computers nowadays as long as it is connected to the Internet.
Here are some basic things you will find in most forex trading software:
1. Dealing Rate Window: Show currency pair prices with live updates. Usually the market low-high will also be shown in this window.
2. Open the position window: Show the number of tickets (trades) you have purchased. Initial information such as ticket number (trade reference number), amount of trade, currency, open position, current closed position and order are usually shown in this window.
3. Closed Position Window: Show the number (trades) of the tickets you have sold. Good trading software will show you the summary of your agreement in this window, for example, total profit / loss, open / closed position, amount of trades, as well as the sum of interest.
4. Account window: A window showing your overall status. Your account’s cash balance, equity balance, daily profit / loss, your gross profit / loss, usable margin and actual capital. Keep an eye on the usable margins of this window. Always keep a sufficient amount in the margin to avoid ‘margin calls’ which forces you to close all deals.
5. Automated Trade Order: In general, trade order functions are embedded in Forex trading software. For forex trading, stop loss order and limit order are the two most used functions.
Automated trading orders in Forex trading
As a trader, you can place these orders when you want to buy / sell coins at a better price than the current market. Limit orders are often used to win automatically when the price reaches a certain level. For example, the current EUR / USD is at 1.2693 and your default limit order is 1.2700. The order will be executed automatically whenever the price reaches 1.2700.
It is important to learn that limit orders can only be placed at a minimum distance from the current market price. Also, such orders may be canceled or changed by you unless the limit order price tag is set higher than the minimum distance allowed.
Stop orders, or sometimes known as stop loss orders, are automatic orders used to limit and limit the loss of an open position. It can also be used to lock the profit in your trade when the market is moving towards your choice.
The stop order works in a similar way. To limit the sale order, it predetermines the minimum selling price in certain deals. For example, EUR / USD 1.2693 with a stop order at 1.2685, if the price touches the 1.2685 level the system will sell part of your USD. In this case, the price is guaranteed at 1.2685, which means that even if the market sinks very quickly and it falls below 1.2685, you can sell your money at a pre-set price.
Stop orders work perfectly well in managing your risk profile. However, it is advised that the order should be used with caution as it provides a place for the market maker to cheat with your money.
Since the article is for beginners in Forex trading, you are probably a rookie looking for some learning resources in Forex trading. Obviously, there is no immediate solution to make you a pro trader. The only answer would be education. Take as much time as you can to learn these new trading skills well – practice what you will learn through a demo account before considering going ‘live’ with your own money. You need to get involved in seminars, ebooks, internet, as well as video courses.