Using trading software in the Forex market
Foreign exchange (Forex) trading today is recognized as one of the lucrative ways to earn money online. To trade Forex, all you need is a computer with an 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 basically work freely regardless of location and time. Despite its high daily turnover volume (nearly $2 trillion per day), it is surprising to learn that only a few currencies are actively traded: US dollars, Australian dollars, Japanese yen, British pounds, Swiss francs, Canadian dollars, and the Euro. Dollars are the main seven.
As a fact in FOREX trading, FOREX is mainly traded in large international banks, even after its opening to the public in the year 1998. According to the Wall Street Journal Europe, 73% of the trading volume is covered by the top ten. Deutsche Bank, topping the table, had hedged 17% of total foreign exchange transactions; followed by UBS in second and Citi Group in third; taking 12.5% and 7.5% of the market. Other big financial co-ops on the list include HSBC, Barclays, Merrill Lynch, JP Morgan Chase, Coldman Sachs, ABN Amro and Morgan Stanley.
For the market participant segment, approximately half of the transactions carried out were strictly between intermediaries (ie, bank or large foreign exchange intermediary); others are primarily between merchants and non-financial institutions.
In practice, traders often use one or more than one trading system/software to trade Forex online. This software often comes in a package when you open an account with Forex brokers. In short, this is how this software works: the Forex trading software is connected to the broker’s system via the Internet, currency prices are updated live, and you place your trade call through the software. Such commercial software often requires minimal computer power, so it can run on most home computers today, as long as you’re connected to the Internet.
Some basic things you will see in most Forex trading programs:
1. Trading Rates Window – Displays prices of currency pairs with live updates. Normally, the low-high market will also be displayed in this window.
2. Open Positions window: Shows the number of tickets (trade) you had bought. Basic information such as ticket number (trade reference number), trade amount, currency, open positions, current closing position and orders are normally displayed in this window.
3. Closed Positions Window: Shows the number of tickets (trade) you have sold. Good trading software will show you the summary of your trade in this window, for example gross profit/loss, open/closed positions, trade amount as well as interest sum.
4. Account Window – A window that displays your overall status. Your account cash balance, equity balance, daily profit/loss, your overall profit/loss, usable margin and actual equity. Keep an eye on the usable margin of this window. Always keep a sufficient amount in margin to avoid “margin calls” that force you to close all trades.
5. Automated Trade Orders: In the normal case, the trade order functions are built into the Forex trading software. For Forex trading, stop loss order and limit order are the two most used functions.
Automated Trade Orders in Forex Trading
Order limit:
As a trader, you can place these orders when you want to buy/sell the currency at a better price compared to 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 to sell all at 1.2700. The order will be automatically executed when the price reaches 1.2700.
It is important to know that limit orders can only be placed at least the minimum distance from the current market price. In addition, you can cancel or modify such an order at any time, provided that the price of the limit order is established beyond the minimum distance allowed.
Stop orders:
Stop orders, or sometimes known as stop loss orders, are automated orders used to restrict and limit losses on an open position. It can also be used to lock in a profit on your trade when the market is going in your preferred direction.
Stop orders work similarly to sell limit orders, predetermining the lowest price to sell on certain trades. For example, EUR/USD 1.2693 with a stop order at 1.2685, the system will sell its portion of USD if the price touches the level of 1.2685. The 1.2685 price is guaranteed in such a case, which means that even if the market sinks too fast and drops below 1.2685, you can still sell your money at the price you set earlier.
Stop order works perfectly well in managing your risk profile. However, it is recommended that the order be used with care as it provides a space for the market maker to cheat your money.
As the article is intended for Forex trading beginners, you are probably one of the newbies looking for some Forex trading learning resources. Apparently, there is no immediate solution to make you a professional trader. The only answers will be education. Take as much time as you need to learn this new trading skill well – practice everything you learn with a demo account before considering “live” with your own money. Seminars, eBooks, Internet and video courses are all your needs to participate.