Questions and Answers about Forex
What is Forex?
Forex is the name of the international interbank foreign exchange market (short for Foreign Exchange Market), one of the largest segments of the global financial industry, more information about this can be found here.
How can you earn money trading forex?
You earn money in Forex due to the difference in exchange rates. The trade mechanism is simple: you buy, for example, 1 euro for $ 1.2 and wait until the euro will rise to 1.3 dollars. Once this happens, you are selling the euro and get a profit of $ 0.1.
How fair is forex trading?
It is the only market in the world that works around the clock, five days a week. The rapid movement of funds, low cost of transactions, high liquidity makes FOREX one of the most attractive and transparent markets for investors.
Does Forex Market has a location?
The FOREX market is a global OTC trading platform, and therefore does not have any particular trading location. This is a huge network of Forex market participants interconnected via telecommunications, functioning as a single mechanism
Who are the main participants in the Forex Market?
The main participants are Commercial banks, companies engaged in foreign trade, central banks, currency brokerage firms. And in 1986 with the introduction of margin trading, everyone has an opportunity to invest available funds in the FOREX market for profit.
What is the opening and closing times of forex market?
Since the forex market is open 24 hours a day, the trader can closely monitor every movement of the market and react to it at any time. The forex market opens on Sunday at 10:00pm (GMT) and closes on Friday at 10:00pm (GMT) – Nigeria Time from 12am on Sunday to 12am on Friday.
Currency pairs on Forex. Which are the most popular?
Based on the volatility indices, currency pairs were distributed (roughly) into the following groups:
*Aggressive: GBP / JPY (British pound / Japanese Yen), GBP / USD (British pound / US dollar);
*Moderately aggressive volatility on currency pairs such as: EUR / AUD (Euro / Australian Dollar), EUR / CAD (Euro / Canadian dollar);
*More or less stable and calm, very popular among traders, such currency pairs like: EUR / USD (Euro / US dollar), USD / CHF (US dollar / Swiss franc), USD / JPY (US Dollar / Japanese Yen);
*Well, the “calmest” currency pairs suitable for beginners – EUR / GBP (Euro / British Pound), EUR / CHF (EUR / CHF)
What determines the exchange rate? Factors affecting the exchange rate
In order to make forecasts about the fluctuation of a currency, it is necessary to pay attention to the factors that influence the formation of its supply and demand. Factors affecting the exchange rate: macro economy of the country, investment decisions – the possibility of large contracts in a particular currency, the political situation in the country issuing the currency, the level of confidence of the citizens and foreign investors, currency speculations.
How to lower the risk when trading Forex?
In fact, as in all markets, the trader has a 100% risk doing independent trades. It is important to understand this, to think seriously about the reduction of risks in the Forex market. A competent trader who wants to increase the ratio of return / risk, should not be afraid to leave the market, limiting losses and abandon small profits. The use of this approach in practice can significantly increase income from trading in the Forex market.
What are the best Forex Trading Strategies for Beginners?
Forex Trading Strategy – a set of rules and techniques that you need to follow to trade profitable. Most successful traders started to use a variety of strategies, which can be developed and adjusted according to your preferences, experience and knowledge. Forex traders are often advised to use simple trading strategies, but it can be an elusive goal, because you need to distinguish between a simple forex trading strategy on a variety of complex strategies that exist on the market. Therefore, it is crucial for your success to understand the factors that must be present in order find an effective strategy.
Questions about Trading Forex Online
What is a spread?
Spread is the difference between the buy price and the sale price of the currency pair (Bid and Ask). For example, the purchase price of one unit of the currency pair is 1.55 dollars, and the sale price of one unit of the same currency pair – 1.5 dollars. If we measure the spread of money, it will be 0.05 dollars, but it would be correct to indicate the difference in points, spread is equal to 5 points.
What are the fees and commissions for trading forex?
It seems logical that any services must be paid for. Including brokerage. Commission is the main kind of payment charged by brokers for their services. Forex brokers will charge you a commission when you open a position, in two possible ways:
2. Fixed amount of commission.
What is a lot in forex?
In the Forex market, currencies are sold in lots. A Standard unit lot in Forex is equal to 100 000 base currency. For a transaction to buy or sell currencies in the amount of 100 000 we choose = 1,00 lot, if 10 000 units – 0.1 lot, if 1 000 units – 0.01 lot.
Buying 3 lots EUR / USD, we open a long position of 300 000 euros.
Selling 4 lots GBP / USD, we are opening a short position of 400 000 US dollars.
The concept of Forex lot is used exclusively in the Forex market, the banks buy and sell currency in any arbitrary amounts.
What is the minimum required lot size?
There are 3 kinds of lot sizes:
● Standard = 1.00 (100,000 units of base currency).
● mini = 0.10 (10 000 units).
● micro = 0.01 (1000 units).
You can find brokers that offer as minimum as 0,001 lots (1 point – 1 cent), which are called “nano lots” or minimum lots in forex.
What does margin mean?
Margin is a deposit required to maintain open positions. This is not a commission or transaction cost, but simply part of the funds in your account, deferred and used as security deposit. Margin is calculated using the following formula:
Margin required = (current market price x Volume) / Account leverage
It should be noted that the amount in the formula must be specified in units rather than lots.
For example, you want to purchase 0.5 of a standard lot EUR / USD pair at the price of 1.24 with a leverage of 1: 1000.
We get the following calculation: (1.24 * 50 000) / 1000 = $ 62.
Free margin is the difference between the balance of your account, and margin of open positions:
Let’s say you have $ 10,000 in the account and you hold open positions with the total margin of $ 900, which give you a $ 400 profit. Therefore:
The Equity = $ 10,000 + $ 400 = $ 10 400
Free Margin = $ 10,400 – $ 900 = $ 9500
What is Margin Call and Stop Out Level?
Margin Call and Stop Out in the Forex market are considered critical points.
Margin Call (Guarantee fee requirement) – broker’s message provides information on making additional funds to ensure the open orders.
If after the margin call you don’t deposit additional funds on the trading account, and losses continue to grow, at a certain point the price will reach the Stop Out, and your brokerage company will automatically close a certain number of positions, possible even all open orders.
‘Long’ or ‘Short’ position. What does it mean?
“Open a long position” or “take a long position” means buy the base currency, and vice versa, “short position” means sell the base currency.
Here is an example, a transaction for the purchase of 100,000 EURUSD means purchase of 100 000 euros for dollars. Thus, there is the opening of a long position in the euro.
BUY (buy) 100 000 EURUSD – a long position on the euro.
SELL (sell) 100,000 EURUSD – a short position on the euro.
Slippage in Forex, what it means?
Forex trader John opens Metatrader platform and sees an upward trend for EURUSD. Without thinking too much he hits button Buy at the price of 1.1515. But what sees John? The deal was not open at the price 1.1515, but at 1.1518!
What happened? The evil machinations of the broker? The impact of transatlantic sanctions? Fed Intervention? No, nothing like that. Your order is subjected to the phenomenon of slippage.
Slippage is the difference between the price at which you are going to make a deal, and the price at which it was actually executed.
The presence of slippage is good, because this is a sign of the reality of the market. This confirms that you are really trading on the interbank market.
Understanding MetaTrader 4 platform
What is Metatrader 4 platform (MT4)?
MetaTrader 4 is the most popular and widely used software for Forex charting. MT4 can be used not only for technical analysis, but also for the placement of orders and order management.
How to install MetaTrader 4?
You need to download MT4 from your broker’s website (every Forex company has its own MT4 platform).
● Click on the link, a window appears prompting you to save the installation file.
● Click on “Save File”, you will need to indicate in a new window, where you want to save the file.
● Simply select the desired folder, press the “Save” button.
● To install MT4, navigate to the file installed (mt4 setup), click it twice, if the security warning appears, click “Run”.
● Before installing MT4, you need to read the license agreement and agree to its terms. If you want to read the agreement, click the “License Agreement”, click “Next”. If you want to accept the agreement without reading it (and so can be), just click “Next”.
● The next screen will indicate where you want to install metatrader. If you are just starting to work with the terminal, be sure not to change anything. Also, if you leave a tick “Create a shortcut on the desktop” and “Run this program after installation”, the terminal will open immediately after installation, and then you can run it on the icon on your desktop. Click “Next”
● After all these steps you will see the message “Installation successful.” Click “Finish” to exit.
Can I install several MetaTrader 4 on a single computer, and how to do it?
You can install several MT4 terminals on your computer. This may be the terminals of different brokers or two terminals of a broker, for example, to simultaneously work on different trading accounts.
To install the second terminal simply choose another directory (folder for installation) – separate for each. If necessary, create a special folder in advance in a place convenient for you even before you start the installation. You can not run two MT4 simultaneously from a single directory.
The installation process for each of the next terminal Metatrader 4 will be the same.
How to connect to the MetaTrader 4?
Consider how to connect to the MetaTrader 4 and verify the correctness of the connection with the trading server. To run the authorization program, log into the “File” main menu – click “Login”. A window for entering data to the account will appear. In the appropriate fields enter your account number (login) and password.
In the Server field, select the desired address of the server, depending on the type of your account. Note: if you try to connect to a demo account you specify a live server (or vice versa), you can not connect to the terminal.
Further, there is an option “Save account information.” If you click it, the program will remember the data, and the next time you connect to the terminal you are authorized automatically, you do not have to enter each time the login and password.
What if the MT4 terminal is not connecting to the server?
To properly connect to the terminal, it is necessary to check whether there is a connection to the server.
The beginning traders do not wait for a stable connection, do not check the correctness of the password and immediately try to make a deal. Naturally, this does not work, and they blame the broker.
To avoid possible misunderstandings, the contact to the server should be checked each time the terminal starts. In the lower right-hand corner of the trading platform is the connection status indicator. If successfully connect to the terminal, there will be a visible figure of traffic load, for example 500/1 kb.
Quotes in the “Market Watch” at the same time should be updated, ie, the constant change of numbers and update the time in the “Market Watch” should occur, the price of plots should move. A successful connection to the server is also accompanied by a corresponding beep. Be sure to check all this, otherwise you will not be able to perform operations.
Please note that at the beginning of the connection indicator may not be filled until the end (example 0/0 kb), however it does not last long, you just have to wait a little longer.
If the terminal is not connected to the server, the inscription “No connection” will be shown in the bottom right corner instead of numbers.
This can be seen immediately you turn on the terminal, which is not terrible, because it takes some time for the server response is necessary to wait a bit to the connection established.
If you can not connect a long time, function “Rescan servers” can help. Click on the message “No connection” to see the menu.
You can also try other servers (if any), simply by clicking on them with the mouse and waiting for a connection time. The current server is checked. Also, try to restart the terminal.
If the problem is not solved, may be several reasons for that:
– Unstable internet connection from your ISP;
– Anti-virus or a proxy server, any malware or other software installed on your computer prevent the stable operation;
– Challenges on the broker side: there is no connection with any server, a sudden channel failure, unplanned overload of the servers, etc. If this happens frequently during the trading time is better to change the broker, because the technical stability is very important in forex trading.
In any case it is better to contact the technical support of the broker for an explanation. If the error presence is not confirmed – look for the problem on your side.
Invalid Account in MT4, what it means?
The next option when you try to log into the terminal: in the lower right corner you can see “Invalid account”.
This means that you log in to the terminal incorrectly, with the wrong number of demo account and / or password, or choose a server that does not match the type of your account, such as Live instead of the Demo.
Another reason – carefully check all the data, if you copy a password, see whether you have not captured an extra space before or after. Since the space is considered to be an additional character password will already be incorrect. Typically, these actions help and you will be able to successfully connect to the terminal.
How to connect to the MT4 with different trading accounts?
If you want to trade simultaneously on multiple accounts, you can set up multiple MT4 terminals and to open them at the same time by connecting to different trading accounts. How to do this is described above in “How to install MetaTrader 4” section.
If you want to just periodically switch between accounts is easy to do it in one terminal in the “Navigator” window. If you are connecting to each account and you tick “Save Account information”, all the data has been saved, and all accounts are displayed in a single list.
When you hover over the account number information about the account appears, including the balance.
To switch to another account, you need to double-click on its number, and login window appears, click “Login”.
How to open a new chart in the MetaTrader 4 terminal?
This can be done in several ways:
1. Right-click on the selected currency pair in the “Market Watch”, select “Chart window”.
2. Click on “New Chart” (graphic image with a green plus sign), select from the list the desired group of trading instruments and the correct character.
3. Select “Window” on the main menu – “New Window”, see the same list of available currency instruments, select.
4. Select the menu “File” – “New Chart”, the same action.
Important! If in the “Market Watch” window are open only a few characters, the list of trading instruments in paragraphs 2 – 4 will be available only to them.
How to change the scale of the chart in MT4?
Zoom can be useful for a more detailed analysis and accurate graphic constructions, reducing the scale, on the other hand, it allows you to see the general trend of price movement.
You can change the scale of the MT4 chart in several ways:
– In the “Charts” main menu – “Zoom in” “Zoom out”
– Pressing the (Shift +) “plus” or “minus” on your keyboard
– By right-clicking anywhere in the graph window open, select the menu item “Zoom in” or “Zoom out”
How to change the time period schedule (timeframe) in MT4?
Using larger timeframes allows us to estimate the overall trend, and less time needed to find a more precise entry point into the market.
To change the timeframe in MT4:
– Toolbar “Period schedule”, where all timeframes are listed (M1, M5, M15..), from 1 minute up to a month
– Right click on the chart by selecting the “Timeframes” option
– In the main menu select “Charts” – “Timeframes”.
How can I change the type of graphics display?
Select “Charts”, you will see “Bar charts”, “Candlesticks” and “Lines” tools. In addition, you can use the keys Alt + 1, Alt + 2, Alt + 3, respectively.
How to save the graphic settings in the terminal using templates
After you set up the schedule convenient for you, you can save all these settings and quickly apply them to every newly opened chart.
What properties of the graph can be stored in MT4 templates?
– Color scheme
– Timeframe (period)
– Indicators with set parameters
– Graphical tools (with the stored values of the price that will have to adjust to the new graphic)
– Chart scale
– Chart type (bars, candles, lines)
– Period separators
– Advisor attached to the chart with its settings
To save the template, after setting all the parameters, click on the button “Templates” toolbar “Charts” panel, click “Save Template”.
In the field “File Name” enter the name of your template, click “Save”.
Saving settings can also be done in the main menu “Charts” terminal – “Template” – “Save Template” or the same items in the context menu of the chart.
In order to apply this template to a new MT4 open chart, use the same button “Templates”, select “Load Template”. In the list of templates, find yours, select it, click the “Open”.
Delete unneeded pattern can be done by selecting “Delete template”.
How to open a transaction (order) in MT4
To earn on Forex, you need to know how to open a transaction (order) in the MT4 terminal, and how to take profits later.
Once you have opened a demo account, analyzed the charts and decided the future direction of the market movement, it is time to open a transaction.
In order to open an order, first of all, you need to open the window “New Order.” This can be done in several ways. Let’s consider them in order.
1. Press the F9 key.
2. Right-click on the desired currency pair in the “Market Watch”, from the context menu item choose “New Order.”
3. Double-click the mouse on the desired currency pair.
4. Click the “New Order” in the “Standard” toolbar.
5. Right-click anywhere on the chart of the currency pair for which you want to make a deal. In the context menu, select “Trade” – “New Order.”