In this article we will focus on the simple main basics of investing in the forex trading market which will be followed by a series of articles that will get deeper.
When you buy in basics forex trading it means you are saying that the market is going up, in the language of trading buying is referred to as going long. So when you buy it means you are going long “UP”
When you sell it means you are saying the market is going down, in the trading language selling is referred to as going short. when you sell it means you are going short “down”.
Another term is the words bullish and bearish, so when they say the market is bullish that means the market is trending upwards and when they say the market is bearish that means the market is trending downwards.
WHEN WE BUY OR SELL WE USE FRACTIONS WHICH ARE KNOWN AS LOTS OR LOT SIZES?
Forex is commonly traded in specific amounts which are called lots or basically the number of currency units you will buy or sell. The standard lot is a 100000 units of currency and we also have micro, mini and nano lot sizes 1000, 10000 and 100 units. The lot size you trade with has a direct impact on how much a move in the market affects your trading account, a bigger lot may generate big profits but also big losses. Therefore your trade volume has an effect on your trading strategies and your risk management.
Keeping your lot size reasonable relative to the amount available in your trading account will ensure that you will have enough trading capital for future trading. Take note that some brokers show quantity in “lots”, while others show the actual currency units hence you might find that you trade the same volume of trades on a specific stock but use different sizes depending on the broker.
- MICRO LOT: Is your 0.01
- NANO LOT: Is your 0.001, you mostly find this when trading Synthetic indices such as volatility 75 on binary
- MINI LOT: is 0.10
- STANDARD LOT: is your 1.00
METHODS OF BUYING OR SELLING
When trading, execution is the completion or filling of an order from a trader. It is carried out by a broker. When a trader tells a broker to buy or sell a particular assert, they will find the best price/way of completing your request as quickly as possible.
- This is an instruction to the broker to instantly fill the position of a buy or sell immediately at the best possible price.
Buy Stop and Sell Stops
- A buy stop order instructs the broker to purchase a specified instrument when it reaches a pre-specified price above the current price whilst a sell stop is a pre-specified instruction below the current price. If the price does not reach the pre-specified price the order will not be filled.
Buy Limit and Sell Limit orders
What Is a Limit Order?
A limit order is a type to purchase or sell an instrument at a specified price or better. For buy limit orders, the order will be executed only at the limit price or a lower one, while for sell limit orders, the order will be executed only at the limit price or a higher one. This stipulation allows traders to better control the prices they trade.
By using a buy limit order, the trader/investor is guaranteed to pay that price or less. While the price is guaranteed, the filling of the order is not, and limit orders will not be executed unless the price meets the order qualifications. If the asset does not reach the specified price, the order is not filled and the investor may miss out on the trading opportunity.
This can be contrasted with a market order, whereby a trade is executed at the prevailing market price without any price limit specified.
- A limit order guarantees that an order is filled at or better than a specific price level.
- A limit order is not guaranteed to be filled, however.
- Limit orders control execution price but can result in missed opportunities in fast-moving market conditions.
- Limit orders can be used in conjunction with stop orders to prevent large downside losses.
HAVING KNOWLEDGE, RIGHT TOOLS AND PRACTICE IS OF UTMOST IMPORTANCE WHEN IT COMES TO INVESTING IN THE FINANCIAL MARKETS, YOU NEED TO MAKE SURE YOU GET THE RIGHT KNOWLEDGE AND RELYING ON YOUTUBE CAN OFTEN LEAD TO LOSING BEFORE YOU ACTUALLY GET IT RIGHT.