Posts in category Forex Guide

Forex auto trading

Forex auto trading is defined as a trading strategy in which the buy and sell orders are placed by an automated system which is fed into the system using a program for foreign exchange market. These orders are finally sent out into the market for execution when the criteria set for the same is met. The active traders make use of auto trading system to form, buy and sell Forex signals that enter and leave positions frequently than any average investor. The technical analysis of the market causes the auto trading criteria to differ greatly.
Forex auto trading dates back to 1999 when the online trading in retail emerged. This took place in this year when the entire internet based companies formed the retail Forex platforms which allowed them to quickly buy sell in the Forex spot market. Forex auto trading is of two types:

Fully Automated Forex Trading also known as robotic Forex trading is very similar to black box trading where the computer algorithm is responsible for deciding the time, price and the quantity that will initiate the order in an automated way. The users have very minor role in this that is tweaking the program and the control of everything else is handed over to the program.

The Signal Based Forex trading is the one in which orders generated by the system is executed manually by the trader.

The automated Forex trading system can make work easy and also generate more trades in each market compared to the human trader. It can also multiply and replicate the same trade in many of the markets and in different timeframes. It is free of the bias that may result due to human emotional and psychological conditions. With the help of the Forex signal provider models the traders will have the opportunity to know the signals that were successful previously and may also get advice and strategies to be followed to get continued accurate profitable trade. There is no need for a trader to know everything about Forex trading and can use already existing system and strategies and thus is available to many people.
One of the major disadvantages of Forex auto trading is that it is unregulated and thus invites a lot of scams. Since auto trading has brought Forex to general mass it has exposed more and more people to frauds. NFA and SEC of USA have put forward some strict rules to prevent fraudulent cases.

Trading styles

There are various trading styles used by the traders all over the world to ensure maximum profit. They also mix and match these trading styles and garner good results. There are many types of trading styles and a few of them are mentioned below:

Binary Options

Binary options are a trading style in which the assets may or may not display a price behavior but they get the payout. The payout was not dependent on whether prediction of the behavior of the asset was correct or incorrect. As the name suggests binary options have two options means at any time the trader has two options from which he can choose.

Breakeven

Breakeven point is a point where the net gain is equal to net loss and is consider the first step towards profitability in Forex trading. It closes at a point where both the loss as well as profit is zero. All the traders look for profitability in trading and this may be reason why the traders do not pay much heed to breakeven trades.

CFD

CFD or contract for difference as the name suggest is a contract between two entities referred to as buyer and seller that the difference in the current value of the asset and the value of the asset at the time of contract is given back to the buyer by the seller.

Day Trading

Day trading is also known as speculation practice in securities and is meant for specifically selling and buying them within single trading day. In this type of trading all the positions are closed the same day before the closing of the market for the day. The traders participating in this type of trading are referred to as active traders/day traders. The traders capable of working in this capacity to get more and more profit take up the role of market speculator.

Discretionary Trading

Discretionary trading is one of the two most popular style of trading, the other being system trading. In this type of trading the intelligence of the trader is made use of in taking decision regarding market trend with the information that are available at that point of time. Thus, discretionary traders totally rely on their own made decision to carry out the trades and make profit from the market.

Mechanical Trading

Mechanical trading is a type of trading in which all the decisions regarding the trade is taken by the computer and the trader blindly follows those signals. This type of trading is free from any kind of biases caused by the emotions and psychological conditions of the trader which is the cause of loss many a times.

Position Trading

Position trading is a type of trading in which the trader decides to hold a position for a long term say for example 3 months to one year. When someone buys a stock in this case he/she does not sell it off in a day or two but keeps it for a long time to get profit in the long term. The traders here waits and does technical analysis and finds out that there will be a movement in the price which may not be there for a long period of time.

Scalping

Scalping is a type of trading style in which the traders make many small trades within a day to make profit. This is the shortest term trading even when it is compared to day trading. Most of the scalpers do the trading based on the technical analysis and are either a discretionary trader or system trader.

Spread Betting

Spread betting is a financial technique in which you do not actually buy or sell an instrument. In this you just have to speculate if the underlying instrument is going to rise in the market or fall and accordingly you place a bet. The benefit comes from the rising as well as falling shares or the instruments.

Swing Trading

Swing trading is a type of trading in which the bought stock is kept to check for the price movement in the market for 1 to 4 days. In this the stock is held for more than a day.
Though there are many trading styles a trader should choose the one which suits him the best.

Chart Patterns – Technical Analysis

Chart patterns are the formation of distinct pattern on a chart of the stock which results in a signal and is also a sign of the price movement that may be in the future. These charts are read by the chartists and they identify the trends that are current or if there is any reversal of trend and then trigger a signal to the traders to buy or sell an asset. The technical analysis is mostly based on assumption and one of them is that in case of technical analysis history repeats itself. It is seen that many patterns appear again and again and in this case the probability of movement in the stock market is very high. To identify the opportunities and price movements in trading the chartists look for these charting patterns and signals.
Every chart pattern has some ideas and components, no one can predict seeing a chart pattern with 100% surety as to where a security might be heading. This has resulted in people considering charting and its interpretation an art rather than science. Within this area of technical analysis there are two patterns that are reversal and continuation. As the name suggests the reversal pattern shows that the trend that it is showing will reverse once the pattern gets completed. On the other hand a continuation pattern suggests that a new trend may continue once the pattern gets completed. Charts of any timeframe can give you any of these chart patterns.
One another type of chart pattern is called Head and Shoulders. This type char pattern is actually reversal chart pattern. Head and shoulders chart pattern on completion shows that the trend will reverse from the old one. In tis also there are two types Head and Shoulder Top which shows that the pattern is formed when the trend is at high and that the upward movement is about to end. Similarly, the Head and shoulders Bottom is a chart pattern which formed to show the reversal in a downtrend.
There are many other types of chart pattern like Rounding Bottom Triangles, Double Tops and Bottoms, Wedge, Gaps, Flag and Pennant, Triple Tops and Bottoms and Cup and Handle. All these patterns show one or another trend and helps in the analysis of the market movement.

Forex FAQ

What is Forex?
Forex is foreign exchange market which deals in exchanging currency of one country with that of the other.

How to start trading Forex?
You can start trading Forex through a regulated broker or an investor.
Who is the owner of Forex and where is it located?
Fore is not owned by anyone and is just an interbank marketing where only two participants interact- one is buyer and the other is a seller. The market is not located anywhere and is not specific to any country or organization.
Till what time the Forex market works?
Forex market is open 24 hours a day and for five and half days.

What is margin?
Margin is the money which you need to give to your broker to open up your position and keep it. The margin demanded by different broker is different.

What are the “long” and “short” positions?

Long position is defined as buy position in which the profit is there if the price shows upward trend. Short position is also known as sell position and profit is there when the price shows downward trend.
Name the best Forex trading strategy?

The Forex strategies depend on the market trend. One should be aware of all the trading strategies and make their own decision in choosing one depending on the profit that they are looking for. Some strategies can be good for short term while other can be good for long term.

How much money is needed to start trading Forex?

The money required to start Forex trading varies with broker. One broker can allow you to start trading for $1, however, the minimum amount needed is $100 to $1000.
Can I trade Forex without installing Forex Trading Software on my computer?
If you are not willing to install any software to start with Forex trading on your computer it is advised to start the trade using a platform which is web based.

I’ve downloaded the expert advisor for MetaTrader and want to install it. What should I go about it?

There are many tutorials available on the internet on “How to Install Meta Trader Expert Advisor Platform on Your Computer”. You can take help of these tutorials.
I’ve downloaded a custom indicator for MetaTrader platform and want to install it. What should I go about it?
There are many tutorials available on the internet on “How to Install Meta Trader custom Indicator on Your Computer”. You can take help of these tutorials.

Is there a possibility of losing more than I invest in Forex?

You cannot lose more than what you invest in Forex. Your broker will not allow you to lose more than what is available in your funds as losing more than that will go from their pocket. They always keep a stop-level which is mostly 20% of your fund reaching which the losing position is closed.

Can indicator/expert advisor/script be coded for me?
No, We do not provide coding services and you may join our forums to ask for it.