forex online trading income

Sunday, January 1, 2017

TYPES OF CHARTS

To display information on the quotes of the foreign exchange market, several ways of building charts exist. Charts are used by the trader to conduct technical analysis and make market decisions. They are built in two coordinates: price and/or tick volume (shown on the vertical axis) and time period (horizontal). Some kind of data is used for building charts (except tick ones):

open price – price,* which is formed in the beginning of the trading period;
close price – price,* which is formed at the end of the trading period;
high price – the highest price* of the trading period;
low price – the lowest price* of the trading period.

The trading period or timeframe is called the period of time, which is used for chart building. If you have this information, it is grouped and given in a graphical form. There is an opportunity to use such timeframes: 1 minute, 5 minutes, 15 minutes, 1 hour, 4 hours, 1 day, 1 week and 1 month on the Metatrader 4 trading platform. There are several ways of chart building, but their aim is the same, that is to show information in an easy way at any time.

Тick Chart

It is a graph of the smallest scale, which shows unit price changes. It is not connected to a certain time interval and it is building in real time – after every change in the rate. The upper part shows the features of the Ask price, whereas the lower – Bid. This type of chart is not used for analysis: it is used only to determine the moment of entering the market, when all other parameters are already defined.

Line Chart

Only close prices of previous trading periods (they automatically become open prices of new periods) are used to build a line chart. The graph looks like a curve. This type of chart is good for short periods of time. You cannot define price changes within one period, because there is no information about the open prices. So the ratio between the price ranges within the period is missed information. However, at the same time, some traders think that there is no unnecessary information. This fact significantly simplifies the process of trading for them.

Bar Chart

High and low prices, which are connected to each other by a vertical line, are also used to build bar chart. The shorter strips on the left show the open price, whereas those on the right show the close price of the period. One bar shows all the price changes over the period. The set of several bars forms the graph of price movements. The great advantage of this chart is the possibility to watch all the price changes within the trading interval.

Candlesticks

They are built the same way as bars. The main feature of the chart is the presence of the candle's body the distance between open and close prices. If the close price is lower than the open price, the body is colored in black (or another dark color, which is provided by the terminal). Black (dark) color is called "bear" color. If the close price is higher than the open price, candle's body remains white. White is called "bull" color**. Vertical lines, coming from the candle's body are called shadows. The shadow above the body is called the upper shadow (uvakage) and it shows the high price of the specific period; the shadow below the body is called the lower shadow (shitakage) and it shows the low price of the period. The upper shadow is sometimes called the "hair" of the candle and the lower shadow the "tail". Red is used instead of white in Japan, but in the west, the empty body is displayed in white, so that candles do not merge with each other when copying.

* All types of graphs in terminal MT4 are based on bid prices, except the tick chart, which shows both prices.
** Blue and white are used in terminal MT4 by default. You can change the color in the terminal settings.

TRADING PLATFORMS

To start the trading process, the necessary condition is the presence of the trading platform. Trading platform (trading terminal) is a set of software and hardware, adapted for online trading, which provides the interaction of the broker and the trader.

There are a lot of different trading platforms nowadays, but the most popular one is MetaTrader 4.

What is Trading Platform

In other words, trading platform is a software, that is installed on the trader's computer and used for online trading. Some platforms work through the Web browser and do not require installation on the computer. However, most trading platforms needs to be installed on the device (PC), which will be used for the trading process. There are also mobile versions, which work on PDA, smartphones and other portable devices.

The trading platform is given by the broker for free when opening the account, whether it is a live account or a practice account. Brokers offer their clients either their own software or purchased licensed products.

Trading platform performs several important functions:

Trading platform displays market situation, which means that the information of the quotations in the real-time mode is provided. This information is systematized and grouped to be displayed in a form of a graph. You can choose the time interval, which will be used to group information. Such time interval is called a timeframe. For example, if you choose a 30-minute timeframe, it will mean that one candlestick or bar (depending on the chosen graph) will correspond to a timeframe of 30 minutes.
Trading platform lets conduct trade by placing market and pending orders, manage positions, and monitor the condition of the trading account at any time convenient for the trader (except weekends and national holidays). forex
The platform has instruments to execute technical analysis – thanks to built-in indicators – and gives an opportunity to make deals automatically (using advisors, which perform trading operations without a trader's participation, based on previously written algorithm).
There are several instruments in the trading platform, that have the main task to make trading process easier. Such instruments are: real-time news line from major information agencies, alerts, which indicate important system and trading events, account history, formation of reports on deals and so on.

There are a lot of different trading platforms nowadays, but the most popular one is MetaTrader 4 which was developed by MetaQuotes Software Corporation.

HOW TO START

It is easy to start trading on FOREX, the complication appears when you want to trade with profit. A lot of people mistakenly consider FOREX as a kind of gambling, where everything depends on the luck. But this is not true. In order to receive stable profit, theoretical knowledge is required. This knowledge must be followed by practice. In order to test your trading skills, not having experience in trading and not taking risks using own funds, you have a chance to open a practice account. The difference between practice accounts and live trading accounts is in the fact that while working on practice you trade virtual money, which are available on the account for practice trading right after account opening and the funds, earned by you while trading on the practice account can not be withdrawn. To learn more about how to use and how to open this type of account, please visit the page Practice account opening.

Forex Trading Terms

There is also page Definitions at your service. It contains main terms, understanding of which is necessary while trading. Our knowledgebase contains answers to most worrying questions, which may appear during the process of trading. In case the question which requires the answer from the specialist appears, live support is there for you.

Trading on FOREX is like playing sports. Constant trainings are required.

Trading on FOREX is like playing sports. Constant trainings are required. Without them, you will loose your shape and won't be able to continue at the same rate. You had better trade every day, analyze news, which can influence the market's movements, develop your own strategies, improve the ones that you already have. You must study, read a lot and progress while trading. It's vital not to stand on the same place and just wait for a trend, but to analyze and study all the opportunities and situations.

Live Trading Account

Only when you feel that you have trained enough and ready to trade with your own money, you can switch to live trading account and use all the knowledge, which you've received during this hard work. But be ready that losses are possible as well as profit. You must not give up and be scared. Be patient and your knowledge and persistence will do their job. After switching to real trading accounts, emotional state of traders often changes. You don't trade with virtual money any more, it is your money that is used now.

It is real to learn how to trade on the FOREX market with profit, you just need to find patience and gain knowledge, which will lead you to long-awaited profit.

Trading must be enjoyable, otherwise you will open your trading platform with caution and psychological pressure will cause the situations when emotions will only disturb you. Cold mind and prudence must guide you through the process of trading.

It is real to learn how to trade on the FOREX market with profit, you just need to find patience and gain knowledge, which will lead you to long-awaited profit. Anyway, profit is the reason you decided to join FOREX, isn't it?

BASICS OF FOREX MARKET

The concept of trading on the Forex market is based on the process of buying one currency for another and inverse an operation of selling it, to make profit. You can make such transactions with almost every currency of the world. Let us analyze some examples.

Example 1: You have 1600 USD and the exchange rate of GBPUSD is 1.6000, which means that you can buy 1000 GBP for 1600 USD. You buy 1000 GBP, hoping that GBP will rise against USD. After a while, GBP really rises against USD up to 1.6100 for 1 GBP. At such rate, you can exchange 1000 GBP for 1610 USD. This way, you have fixed a profit of 10 USD.

Example 2: Let us assume that you have 1000 GPB, and the exchange rate of GBPUSD is 1.6000. You sell your GBP for 1600 USD and you hope that GBP falls against USD. After a while, the rate falls up to 1.5900, and you decide to make a reverse operation and buy GBP for 1600 USD at this rate. As a result, you have 1006.28 GBP. This way, you have fixed a profit of 6.28 GBP.

We can make several conclusions based on these examples:

1. You can earn with both ways: when one currency either rises or falls against another one.
2. The currency always rises or falls only against another one.

Currency Pairs, Cross Currency Pairs and Their Quotations

The main instrument on Forex is a currency pair – a ratio of one currency to another. There are more than 100 currency pairs on the market. Some currency pairs are traded in bigger volumes, whereas some of them – in smaller volumes. For example, 66% of all volume traded comes to major currency pairs (majors). These pairs are EURUSD, GBPUSD, USDJPY, USDCHF, AUDUSD and USDCAD. You have noticed that each pair contains USD. It is because USD is a world reserve currency. USD participates in absolutely all currency transactions.

Those currency pairs that do not contain USD, are called cross currency pairs. The calculation of the rates of these currency pairs is carried out with the help of USD. For example, the calculation on the currency pair EURJPY will be executed this way: EURUSD to USDJPY.

When you take a look at the table of quotations on FOREX, you will see two rates in front of every currency pair. Rate to buy and rate to sell.

Currency, that stands first is called base currency. Absolutely all operations are carried out with the base currency. For example, EURUSD. You sell or buy EUR for the USD that you have in your account. In case you have another currency in your account, for instance, you have a GBP account, to complete the transaction on EURUSD, an automatic operation of pound-dollar conversion occurs, and the trader does not bear any costs and does not make any unnecessary actions. Everything is done automatically.

Currency, that is second in the currency pair is called quoted currency. It is the expression of base currency price. If EURUSD = 1.4000, this means that 1 EUR can be bought for 1.4 USD. Currency, that stands second, shows the result of the ratio of two currencies to each other. This ratio is called quotation.

In the classic version, the quotation has a fourth decimal pricing format. * The minimal quotation change falls on the last digit and is called point or pip. For example, EURUSD changes from 1.4000 to 1.4001. This means that the rate of this currency rises by one pip. However, the fourth decimal pricing format is the feature of classic accounts only. NDD and ECN accounts have fifth decimal pricing format. * This allows you to monitor the changes of the quotations by fractional pips.

* In currency pairs with JPY, quotations are displayed in 2d decimal pricing (3d for NDD and ECN). For the USDJPY currency pair, the quotation will look like this: 84.85. If the rate rises to 84.86, this means that it rises by one point.

Bid and Ask

When you take a look at the table of quotations on Forex, you will see two rates in front of every currency pair: rate to buy and rate to sell. The price to buy is always higher than the price to sell. Sell rate is called Bid, and buy rate is called Ask. Buy orders are opened at Ask price and are closed at Bid price. Sell orders are opened at Bid price and are closed at Ask price. The difference between Bid and Ask is called spread. Spread is determined in points.

Information of the EURUSD currency pair on the Classic account might look like this:

Currency pair	Bid	Ask	Spread
EURUSD	1.3063	1.3065	2

Leverage and Margin on Forex

There are two very important terms on the Forex market: margin and leverage. Forex trading usually occurs with sufficiently large volumes of money (one standard lot is 100 000 units of base currency). There is always an opportunity to trade smaller volumes (e.g., 0.01 lot or 1 000 units of currency), but not everyone, who wants to try Forex trading has such a sum of money. That is why traders get a chance to use leverage.

Leverage lets one trade bigger sums, having much smaller sums on the trading account. JustForex offers different sizes of leverages: 1:1 up to 1:2000. For example, you decide to use 1:100 leverage. Therefore, to trade one standard lot, you need to have 1 000 units of currency. In this case, 1 000 units of currency will be your margin.