Forex Manual For Beginners

Forex Orders

2009-02-04T04:33:00.000-08:00

There are two types of Forex orders. The first is the market order
and the second is the entry order. When you access the trading
platform, you will be able to choose either a market or entry order.
A market order is an order to buy or sell a currency pair at the
market price the instant that the order is processed. When a market
order is placed, you are simply saying "I'll buy the currency pair, at
whatever price it is at when my order gets processed." This is too
risky. Market orders should be avoided entirely with the 4xtrend
method. Market orders tend to compel the trader to act on impulse
instead of according to their plan.
An entry order is an order to buy or sell a currency pair when it
reaches a certain price target. This can be any price in theory. You
could set an entry order for the low price of a time period, or the
high price of a time period. Forex Sailing shows you how to set an
entry order (or you can follow any of our entry order techniques).
The open price is explained in the next few pages. You should
exclusively use entry orders. When you place an entry order, you
are simply saying "I want to buy this currency pair at a certain
price, if it never reaches that price, I don't want to purchase the
pair." An entry order allows you to pick a price and place an order
to buy at that price. This is what you want to do. Do not worry that
you are going to miss a trade; new trades are constantly developing
and if your entry order doesn't get filled you can't lose any money.
Lear not to get upset when an entry order is not filled. You are
saved most of the time the order isn't filled because the currency
pair did the opposite of what you thought and you would have lost
money if it got filled. Do not get upset when orders are not filled.
When orders are not filled, it means you never risked any money!

Stop/Limit Orders

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After your entry order is placed, you can set a stop and limit order
if you desire to. Stop and limits are both ways to exit a trade after
the trade is entered. You may also not place a stop or limit order if
you are going to monitor the trade (recommended for the 4xtrend
trader). Stop and limit orders are used if you have entered a trade
and cannot monitor it afterward. A stop order is used to stop losses.
A limit order is used to redeem profits. Stops and limits depend on
the direction of the entry order. Assume that you placed an entry
order to BUY EUR/USD for 1.6100. An example of a stop order
would be an order to sell at 1.6081. If the stop order were executed
you would lose 19 pips. The limit order for the same trade could be
for somewhere around 1.6171, if the limit order were executed you
would have made 71 pips. Now assume that you placed an entry
order to SELL EUR/USD for 1.6500. If the stop order was for
1.6530, you would buy back the currency at a loss of 30 pips if the
currency traded at the stop price. If the limit order was 1.6420,
then the EUR/USD would be purchased back when it traded at
1.6420 for a profit of 80 pips. Here is a diagram of where the
appropriate stop/limit orders are placed in relation to the type of
trade you are placing. The green represents buying and the red
represents selling. Notice how the stop/limit orders undo the entry
order.

Trade Intervals and Time To Trades

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Trade Intervals
While the Foreign exchange market is open, the prices are
constantly fluctuating. The charting software interprets this data by
dividing the continuous (constantly changing) data into various
time intervals. For each interval, the chart software lists an open
price a low price, a high price, and a close price. The open price is
the price at the beginning of the period. The low price is the lowest
price achieved during the period. Similarly the high price is the
highest price achieved during the period. The close price is simply
the last price achieved during the period. To view the data just
click on the spot on the chart where you would like to view the
time frames data. To the right you will see the open/low/high/close
info. You can scroll to different time frames by using the right/left
keyboard arrows to view the data for other time intervals.
Yon may choose a desired time interval to trade under. Depending
on the hading software, you may look at charts with trading
increments of tick, 1 min, 5 mill, 10 min, 15 min, 30 min, 60 min,
and daily. If you would like to enter a trade and monitor it for a
few hours and get out of the trade you should use 15 min charts. If
you would like to enter a trade that could last 12-24 hours, use the
30-min charts. If you would like to enter a trade for a few days use
hourly charts. If you would like to enter a trade for a few months
use the daily chart info. The length of the trade can vary; the chart
interval is only a rough estimate of how long the trade will last
The larger the time interval, the wider the price movement will be.
You should expect to see a higher price gain from a trade entered
using daily charts, than you would see from the 15 min charts. The
daily chart based trade may take weeks or even months to run its
course. Per trade the 30 min charts will have a higher profitability
than the 15 min charts. However, you can hade more trades using
the 15-min charts, they will compound to more profits.
Here is a loose example that was created to be used as an
illustration. Suppose the average profit per trade (average of profits
and losses) for the 30 min charts is $35. The average profit per
trade for the 15 min charts might be $23. But the 15 min charts
have trades develop twice as often, so you can trade 2 trades using
the 15 min charts for every trade you use with the 30 min charts.
So the two 15-min trades would yield $46, >$35. {Please do not
rely on these numbers; they are only for illustration purposes.}
When to look for trades
Trades develop when there is heavy trading volume. Heavy trading
volume occurs when the big markets are open. Here are some good
times to look for trades (although trades can happen at any time).
Trades actually develop with relatively the same frequency,
regardless of time. As long as the Forex is open, there is about the
same chance that you will find a trade, whenever you look. If you
want to take a chunk of time where you might find more trades,
look at the market during the time frame of 9am EST-12pm EST.
New York Market trade turns 8am-lpm EST.
London Market trade times 1am-5am EST.
Tokyo Market trade times 5pm- 10pm EST.
Canada Market trade times 10am - 3pm EST.
Australia Market trade times 7pm - 12am EST.

Investment Size and Technical Analysis

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Investment size
A margin is a small amount of money required as a deposit to
ensure against trading losses. The smallest margin required for
Forex trading is $50. By having a $50 margin, you are able to trade
$10,000 worth of currency by buying or selling a currency pair.
This is how leverage comes into play. You only need to put up $50
to invest in $10,000 worth of currency, if the currency goes up 14
percent; you make $50 or 100% profit (or loss if it goes down).
This can only be done in a mini account. We suggest all traders
trade a mini account for an extended period of time. If you open a
full size account you must put up $1,000 margin to trade $100,000
worth of currency. In the event that funds in the account fall below
margin requirements, the Dealing Desk will close all open
positions. This prevents clients accounts from falling below the
available equity even in a highly volatile, fast moving market. This
is to your benefit because you cannot lose more money than is in
your account. In the futures and commodities markets you can lose
everything you own.
When placing a trade you are effectively borrowing $10,000. You
may have an open trade for up to 2 days interest free. You must
then pay interest on the $10,000 at a rate determined by your
trading account. With the 4xtrend system the interest is negligible
because when trades are profitable they dominate over the interest
payments. This is the reason we ignore interest. We also provide
the most examples for 15 min increments because these trades
almost never last 2 days (I have never seen it).

Technical Analysis
There are two classical theories to any types of investing.
Fundamental analysis looks at economic facts along with news
reports, public opinion and government policies. To effectively do
fundamental analysis you must have a college degree in
economics. This course does not teach Fundamental analysis.
Institutional investors are the typical proponents of Fundamental
analysis because they employ economists, bankers, and consultants
that deal with fundamental data.
The 4xtrend methods of trading are based on Technical analysis.
Technical Analysis assumes that everything you need to know is
already recorded in the price charts. Technical Analysis looks at
patterns that repeat themselves and pinpoints when to trade based
on recurring chart formations. The Rapid Forex trading techniques
show you many different entry signals. The most common
indicators are the Exponential Moving Average (EMA) and the
MACD.
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