Key Definitions for FX
• Bid and Ask
-Bid is what we will pay to buy the currency pair (= buy the base currency, sell the quote currency)
-Offer is what we are offering to sell the currency pair (= sell the base currency, buy the quote currency)
-The smallest price increment a currency can make.
-0.0001 for most currencies, 0.001 for pair with RUB+CZK and 0.01 for pairs with JPY+ HUF
• Fractional Pip
-Some brokers now offer fractional pips to provide an extra digit of precision when quoting exchange rates for certain currency pairs
-A fractional pip is equivalent to 1/10 of a pip
-The difference between the bid and offer price EUR/USD bid offer 1.2923 1.2926 spread is 3 pips
-Spread are higher after 23:00 to 02:00 as all markets are closed and therefore very low liquidity
-The minimum upward or downward movement in the price of a security or contract
-The term “tick” also refers to the change in the price of a security from trade to trade
• Trading Sizes
-Currencies are traded in fixed contract sizes, specifically called lot sizes, or multiples thereof
-The standard lot size is 100,000 units of the base currency. Many retail trading firms also offer 10,000 unit (mini lot) trading accounts and a few even 1,000 unit (micro lot)
• Base Currency
Means the main currency of the Client’s account
Means the total financial result of all fully executed transaction and deposits/withdrawals to/from an account
-Means the secure part of Client’s account:
-Balance +/- Open Positions +/- Swap – Commission
-A ‘Swap’ or a ‘Rollover’ is the interest paid or earned for extending a position at the end of the day (5pm ET) without settling.
-The swap rates are calculated as the overnight interest rate differential between the two currencies. Swaps rates can potentially generate extra profit or loss to one’s trade
-On Wednesdays swapped charged is triple in order to take the weekend into account
Leverage is used to increase the buying power and the potential risk of losses of a trader, even if they can only provide a small deposit. On every Friday between 21:00 until 24:00 maximum leverage is 1:100 for any new positions opened during this period
• Bull Market
A financial market in which prices are rising or are expected to rise
• Bear Market
A market condition in which the prices are falling
Buy = Go Long (Bulls)
Sell – Go short (Bears)
In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price
-The required funds that a Client will need to open a position
-Current market quote X volume / leverage = $ Margin required
• Margin Level
-Means: (Equity/Margin) * 100; it determines the conditions of the Client’s account
• Stop out level
-Is a certain required margin level in %, at which a trading platform will start to automatically close trading positions in order to prevent further account losses into the negative territory.
-When margin level is equal to or less than 20% then Client’s positions are automatically closed.
-For zero fixed spread accounts when the margin level is equal to or less than 80%
• Free Margin
-Amount of funds in the Client’s account that can be used for trading
-Free Margin = Equity – Margin
-Pending orders are deleted if the free margin is not enough to cover the margin required for the opening the specific order
• Margin Call
-The Warning from a broker that your account has slipped pass the required margin in %, and that there is not enough equity. The broker has the right to start closing Client’s positions starting from the most unprofitable, when the margin level is less than 40% and less than 100% for zero fixed spread account
Basic MT4 Navigations-
Placing a trade
There are two ways to placing a trade.
1. One-Click Trading
When you are on a chart, hold “ALT + T” and the SELL/BUY button will appear on the top left-hand corner. This will allow you to place trades quickly and you will be able to adjust the stop losses and take profits after.
2. Order Pad
By pressing F9 on your keyboard or by clicking on “New Order” on the standard toolbar of MT4, order pad will pop up as shown in the screenshot below.
A dialogue box should appear. From the drop-down list, select the currency pair you want to trade.
Next, select Market Execution in the Order Type drop-down list.
Enter the size of the position you want to open. Keep in mind that volume, which indicates the size of your position, is expressed in terms of standard lot sizes. Remember, one standard lot is worth 100,000 units. Hence, if you wish to buy 5,000 units of a certain currency pair, you would enter “0.05” in the volume field.
If you have any remarks or notes you would like to include about your trade, you can do so in the comment field. This is optional.
Finally, determine whether to BUY or SELL the currency pair. A dialogue box will appear to confirm that your trade has been executed.
If you believe that now is not the best time to BUY/SELL, you may set a pending order to a specific price level so that the order will only execute when it reaches that price.
This can be done by opening the order pad and clicking on the type of the pending order.
There are four types of pending orders.
Buy Limit – if you plan on going long at a level lower than market price
Sell Limit – if you plan on going short at a level higher than market price
Buy Stop – if you plan on going long at a level higher than market price
Sell Stop – if you plan on going short at a level lower than market price
After you have selected the type of order, punch in the price at which you wish to enter the market. Then, enter the size of the position you want to open in the volume field.
Fill in the stop loss and take profit fields.
Once you’ve filled everything out, click the Place button to enter your trade. A dialogue box will appear to confirm that your trade has been executed.
Following multiple markets
MT4 allows you to customize the layout of your charts. Feel free to try out different layout to see which one suits you best. By default, when you first logon to your trading account on MT4, there will only be four charts but you can add more and drag and drop any instrument from “Market watch” to the Chart to see the historical prices.
Closing your trades
All your trades that are open will appear under the ‘Trade’ Tab. You may close your orders by clicking on the ‘x’ button on the right-hand side of your trades.
You may also access your trading accounts through the MT4 App on Apple Appstore or Google Play.
You will be able to monitor, place and close any trades on your account. (To close your order, you will need to hold onto your existing order till options appear on screen to close or modify your order)
Then select TradeMaxCapital-Live1 for live account or TradeMaxCapital-Demo for Demo account
Type in your MT4 account number and password to sign in