Welcome to the Forex
Congratulations on your decision to become a Forex trader! There are very few investment opportunities that provide the profitability of the Forex market (using the methods you are about to learn through RapidForex.com). In the next few paragraphs I am going to explain in a simple way what the Forex is and how it operates. I have made it as short as possible to give you the key concepts you will need to master the 4xtrend trading style. I do not want to fill your brain with excess information that you will not need.
The Foreign Exchange (Forex) market is where banks, investors and speculators exchange one nation's currency for another. The Forex has been around since the early 20th century, but it was not until well after the beginning of the computer revolution of the ,1990s where independent investors (like you and I) had access to invest small amounts of money in the Forex.
The Forex is like the stock market in one critical way (among others); to make money you must buy low and sell high. You may do this in two ways. In the stock market, the traditional way is to buy a position and sell it after it goes up in value. The second way is to sell-short a stock and then later try to buy it back at a lower price. In stock market investing there are severe restrictions and dangers to selling short. The beauty of the Forex market is that there is no distinction between buying and selling short. This is because all transactions are dual-faceted.
Currencies are always traded in pairs. A typical pair is EUR/USD (Euro over US dollars). The first currency is the base currency. The second currency is the counter or quote currency. The first currency is the base. So you must view it as the amount of the second currency needed to buy one unit of the first currency. If you want to buy the currency pair you are actually buying the EURO and simultaneously selling the USD. If you were going to sell the pair you would simply be selling the base currency (EURO) and buying the USD. Whether you are buying or selling the pair is just a matter of which one you are buying or selling.
The good news is that you don't have to remember which one to buy or sell, simply think of the whole pair as one item and you are buying or selling the whole pair. An open trade or position is one in which a trader has either bought/sold one currency pair and has not sold/bought-back the equivalent amount to effectively close the position.
Pips
Currency pairs are carried out to 4 significant digits. The change of the currency pair by one one-hundredth of a percent is called a pip. So if the currency was trading at 141.53 Û a one-pip increase would be 141.54. Similarly, an increase of one pip could also be 1.6138 to 1.6139. A fall of one pip would be a move from 1.2345 to 1.2344. This is just lingo, in the stock market a point is when the stock increases or decreases by $1.Trading
Volume
In the other Capital Markets (such as the stock market, options & futures exchanges), trading volume is usually monitored by traders. Trading volume measures how much "money" is being traded. There is always high volume in the Forex market. The Forex is the largest market in the world, and on its slowest day it still dwarfs
the trading volume of the largest exchanges combined. Obviously the volume is somewhat higher during some types of news breaks and when
Buying and Selling Short
Throughout the 4xtrend trading systems, we will refer to "buying" and "selling-short." By "buying", we mean that we are buying a currency pair to open a trade. The term "selling-short", refers to when we sell a currency pair to open a trade. Both terms "buying" and "selling-short" refer to things we do to open a trade.
Once you have opened a trade, you will eventually need to exit the trade. To undo buying, you simply sell, to undo selling you simply buy. To avoid confusion about what type of trade we are referring to, we have developed the terms "selling" and "buying-back". The term "selling" refers to what we do to exit a trade that was started by "buying". The term "buying-back" refers to what we do to exit a trade that was started by "selling-short".
Please notice that the terms with the hyphens go together, and the non-hyphenated terms also go together. So "selling-short" is undone by "buying-back", and "buying" is undone by "selling".
Bid/Ask Spread
There is an important notion of bid/ask spread. The bid price is the price at which you may sell your currency pair for. The ask price is the price at which you must buy the currency pair. The ask price is always higher than the bid price. The market makes its profits from charging the ask price for a currency pair and buying it from someone else at the bid price. The bid ask spread can range from 5
to 20 pips (or more in rare cases or exotic currency pairs). The bid ask spread increases when there is uncertainty about what is going to happen in the market.
Forex Orders
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
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.
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We’re going to break down stock trading training for beginners so it doesn’t seem scary. One of the first things you need to do when you start out is to pick a good broker. A stock broker is going to be where you do all your business. Picking one that has large commissions and fees can be detrimental to a beginner.
An important second step is going to be learning how to read a stock chart. The stock chart holds all of the clues to which direction the stock is going to move. Watch our ThinkOrSwim video on charts setup.
Another great resource for learning to read a chart is stockcharts.com. They have a chart school for any questions that you might have. Charts can look like Greek when you’re starting out. The more you look at a chart, the more you’ll understand it and be able to predict trends.
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