1. The purpose of trade
The purpose of trading in any market - to buy goods cheaper and sell more. Is no exception and the international currency market - Forex. Commodity in this market are currencies of various countries. Like any other commodity currencies have their price.
For performing calculations between partners from different countries, international payments, speculative transactions and so on, banks around the world in the Forex market make foreign exchange transactions. Depending on various trade, economic and other indicators, interest rates, central bank policies, time of day, preferences and expectations of stock market games, on a variety of reasons, and mutual quotation, that is, currency prices are in continuous motion.
The task of a trader - to try to determine the direction of price change of currency and buy foreign currency, the price of which increases, or sell the currency, the price of which falls and then, having made back the deal, make a profit.
Our Dealing you the opportunity to work with MetaTrader 4, with the help of which you are in real time, get quotes from different banks and currencies of the world's largest exchanges - market participants Forex. At the same time you have constructed graphs of the current price of each currency, as well as incoming fresh economic news, which directly or indirectly affect or may affect the future on the headlines.
And finally, you have a special live trading account, which allows you to buy and sell your selected currency. In this case, although your trading account are U.S. dollars, you can begin its activities with the sale of the euro, yen and other instruments, not worrying about what you did not buy them.
2. Currency symbol
Each currency is assigned a three letter code. For example, the code of the U.S. dollar - USD (United States Dollar), the code EUR - EUR (EURo), the Swiss franc - CHF (Confederation Helvetica Franc), Japanese yen - JPY (JaPanese Yen), the British pound - GBP (Great British Pound). Currency codes are defined by standard ISO-4217. Typically, they are formed from the two-letter ISO-3166 country code and the first letter of the currency. Exceptions to the rule a bit, in particular, the European currency euro, which is denoted as EUR, and the ruble, denoted by RUB, rather than RUR, as would be expected.
Rates of exchange ratios of currency units of different countries against each other. Rates are represented by 6-letter words consisting of two three-letter currency codes. In the first place, as a rule, by the code more expensive currency. The rates are expressed in units of the second currency per unit of the first. For example, rates USDCHF (USD-CHF) show the number of Swiss francs per U.S. dollar, but rates GBPUSD (GBP-USD), on the contrary, show how many dollars should pay for 1 British pound. More information about codes of financial instruments can be found in the corresponding table.
3. How to read quotes
Quotations are usually expressed in five-digit number. For example, USDJPY = 114.90 means that 1 U.S. dollar valued at 114.90 yen (ie, $ 1 would pay as much yen to buy or sell). At the same time, GBPUSD = 2.0252 means that 1 British pound valued at 2.0252 U.S. dollars. In general, if the quote XXXYYY = Z, then it means that one unit of XXX give Z units of YYY.
When the quote is changed, for example, USDJPY = 114.92 to USDJPY = 114.93 or GBPUSD = 2.0254 to 2.0255, they say that the price has changed by 1 point. From the previously said that in this example, the yen fell 1 point, and the pound went up by 1 point.
It follows that the only graphics Euro (EURUSD) and the British pound (GBPUSD), ie Rates of "reverse" quotes reflect the actual movement of prices (ie the schedule up - the price above) and growth (ie, motion graphics up) for USDJPY and USDCHF (currency with the "straight" quotes) does not mean increasing , and lowering their quotations (prices).
4. BID and ASK prices
As you know, any transaction is made on a very definite and specific price, while in Table Quote Spread Sheet for each currency accounts for three prices, for example:
Each of the participants of the Forex market at any particular transaction or act as sellers of certain currencies, or the buyer. In this case, the seller offers the currency more expensive, for example, GBPUSD at 2.0254, and the buyer asks the currency is cheaper, for example, GBPUSD at 2.0250. Accordingly, the offer price the seller is called ASK, and the price the buyer - BID. Therefore, if you suspect that the GBPUSD will go up (in your chart GBPUSD curve goes up), then you decide to buy a pound, while it is cheaper in order to sell more expensive. Buy (this is called BUY) can only be a seller who will offer it at a price ASK. When you sell a pound (sale transactions called SELL), the buyer will offer for its price at BID (this is true for all currencies). This clearly implies that if you open a position (the operation is called - OPEN), ie did BUY GBPUSD, and then want to close it (the operation is called CLOSE), ie to sell just bought pounds, you can only do so at a loss, just as it would in any exchange office. Consequently, you get a profit, the price of the currency to be held in the proposed direction you more than the difference between the BID and ASK. The third number is called LAST - the Forex market is the average between the last BID and ASK.
As stated in Section 3, only with direct quote currency rise in price as you move up the chart. Obviously, the rule is that the operation BUY, makes a profit in moving up for some currencies and losses for others, will cause inconvenience. Therefore, when performing BUY for currencies with a direct quotation, not the currency is bought and the dollar, the currency itself is sold. For example, BUY USDCHF at 1.1724 buys a quotation of $ 100,000 for 117.240 francs. Thus, the operation BUY always makes a profit while driving the schedule up and SELL - while driving the schedule down.
In summary, OPEN BUY (up) occurs at a price of ASK, a CLOSE - at a price of BID; OPEN SELL (down) - at a price of BID, a CLOSE - at a price of ASK.
Sometimes the quotes are shown in a pair, for example, 114.88/92. This form of recording denotes a pair of BID / ASK. Written first, the value of BID, and then the last two digits of quotes ASK. Knowing that ASK is greater than the BID, and that the difference between them is less than 100 points, you can always uniquely determine the value of the second quotation. In this case, ASK = 114.92.
5. STOP and LIMIT orders
Now, get acquainted with useful trading tools to a certain extent, protect you from unexpected losses and to fix the planned profit.
This is - STOP and LIMIT. In the previously opened position at any time (during working hours of the market) you can put an indication to close it when the price reaches a particular value of the currency. For example, you enter a position, hoping that the quotes will go up (on schedule). In this case, to insure themselves against significant losses if significant movement of the currency down, especially in a situation where you have no control over, or you can lose control of the market, you bet STOP, ie specify a value price below its current value at which your position should be closed without further instruction. Similarly, if you are open down, you specify how much above its current value. In this case, you should keep in mind that if a STOP will be too close to the current value, then the random prices can rebound to close with a loss of open positions right, and if too far away - losses can be unreasonably high. In turn LIMIT - this is referred to your quote, above which the position will be closed at a profit, ie Quotation of LIMIT - is always higher than the current value, if you play up, and below - if you play down.
There is a very common mistake made almost all new traders. Should always be remembered for a quote - BID or ASK to be executed the warrant. Consider the example of the position BUY. As stated above, BUY position opened at ASK, and closed with a BID. Ie STOP or LIMIT will be executed only when the BID will reach a price. Because ASK on the schedule is always higher than BID, then the schedule is always HIGH ASK, and LOW - BID. Therefore, the graph must pass LIMIT the amount of spread before LIMIT will be executed. A STOP will most likely executed as soon as the schedule will affect prices. As a rule, new traders are very surprised when they discover that their LIMIT does not work, despite the fact that the HIGH graphics on a few points higher than the price LIMIT'a. So it should be, because HIGH should be higher than the LIMIT is not less than the amount of spread.