Forex Education

Trading Principles

All traders, who joined Forex, seek to reach best results. However, to trade with profit, traders need to know and follow some Forex principles.

·         Have your own trading strategy. Develop your system, which is based on some significant factors for trading on Forex.

·         Control your emotions. Unstable emotional condition may disturb the process of making decisions. Learn how to control your emotions and wishes.

·         Have your own historical data. Write down under which circumstances and on what factors your decisions to open/close orders are based and your comments on every situation. Constantly review the results of your work.

·         Learn from your mistakes. Analysis and work on mistakes are among the most important components of successful trade. It is important to be self-critical in the analysis of loss positions. Having dealt with loss positions, you can avoid repeating these mistakes.

·         Do not trade without the reason. Do not open a trading platform only because you have nothing else to do or you cannot fall asleep. Trade only when there are factors that justify such actions.

·         Work and think by yourself. Help and hint from another person may be helpful, but not while trading on Forex. You can consider advice from experienced traders, but do not just follow it without even thinking. Progress will appear only when you make your own analysis, develop your own strategies and rely only on your decisions.

·         Trade only when you are confident about it. It is better to wait for the appropriate moment to enter the market, than open the order when you do not understand the situation. It is important to enter and leave the market at the right time. If you do not feel confident, you better not take the risk. A couple of lost pips cannot be compared with the large loss, which may be caused by rash action. Just open the order later: the market is not going anywhere.

·         Limit your risk. Use for trading only the sum of money, the loss of which will not cause shortage in the family budget.

·         Know your limits. Be able to stop.

·         Be careful with early success. Do not lose your head from happiness just because of a few hundred dollars' profit (back to 2).

·         Do not trade against the market. With the lack of experience, it is better not to take the risk. In the process of price movement in a particular direction, market starts jumping up/down. To learn how to use short – term fluctuations, you must gain experience, thus minimizing risks.

TRADING PROCESS

The most important steps of trading are order opening and order closing to fix the results of the trade.

Order Opening

It is possible to trade on the platform MetaTrader 5 using either market or pending orders. Market order is used to open positions at the current time. Pending order is executed when the price reaches a certain, earlier chosen level of price. Pending orders let you trade even when you do not have an opportunity to be at your working place. After the pending order is set, it will be executed when the desired price level is reached even if the platform is closed.

 There are four pending orders on open positions:

·         Buy Limit – the position to buy opens in case the Ask price becomes lower or equal to the order price (the current price level at the moment of placing an order is higher than the Buy Limit order level).

·         Buy Stop – the position to buy opens in case the Ask price becomes higher or equal to the order price (the current price level at the moment of placing an order is lower than the Buy Stop order level).

·         Sell Limit – the position to sell opens in case the Bid price becomes higher or equal to the order price (the current price level at the moment of placing an order is lower than the Sell Limit order level). 

·         Sell Stop – the position to sell opens in case the Bid price becomes lower or equal to the order price (the current price level at the moment of placing an order is higher than the Sell Stop order level).

Pending Order Placing

 1. Open the "New Order" tab. There are several ways to do this on MetaTrader 4:

o    in menu "Tools" choose "New order";

o    in the "Terminal" block, open the "Trade" tab and right-click and choose "New Order";

o    click twice on the currency pair in the "Market Watch" window;

o    right-click on the chart and choose "Trade" – "New order";

o    use F9 button.

  2. Choose the type "Pending order" (under "comment" field). Then, you need to modify the main meanings of fields, such as:

o    symbol – the financial instrument that will be traded;

o    volume – the amount of lots;

o    stop loss (not necessarily) – the function of limiting losses at the indicated price;

o    take profit (not necessarily) – the function of fixing the profit at the indicated price;

o    type – the type of the pending order (buy limit, sell limit, buy stop, or sell stop);

o    at price – the level of the price, at which the order is to be open;

o    expiry (not necessarily) – the function of the cancellation of pending order (deletes pending order from the platform if it does not open until the indicated time).

·         3. When all the information is entered, click "Set" and after this, the pending order will show up in the "Terminal" – "Trade" window. If you want, you can modify or delete it (if it is not open yet), by right-clicking on the order in the "Terminal" window and choosing "Modify or Delete Order". You can also modify or delete pending order in one click. You can read here how to fullfill this.

Example: The bid price at USD/JPY is 109.23 at the current time, and according to your forecast, the price will increase up to USD/JPY @109.33 soon, and then, it will start falling. However, if you do not want to stay near the terminal and wait for the price that you want, you can place a pending order to sell (sell limit), which will be executed only if the price reaches the USD/JPY @109.33 level and goes down.

At the moment of the pending order execution, slippages are possible. Slippage is the amount of market movements from the moment of placing the request for the order to be executed until the moment of its execution. The execution at the better or worse price than the one indicated in the order takes place.

You can also place/modify pending orders directly on the chart. You can read here how to fullfil this.