Forex Forum

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Introduction to Forex Market

The foreign exchange market (FOREX) is the largest and most liquid financial market in the world that operates 24 hours a day except weekends.

Forex market gives traders/investors the opportunity to buy or sell currency pairs in both directions, allowing them to benefit equally from a rising and a falling market.

Forex market has a number of marketplaces where currencies are traded at different rates, though differences in rates are usually kept at a minimum.

Trading sessions according to GMT+2:

Forex Trading Sessions.PNG (6.11 KiB) Viewed 3537 times

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Forex Currency Pairs

Currency pair - two Forex currencies being traded one against the other, i.e. the simultaneous buying of one currency and selling of another.

Majors - the most traded currency pairs in the world. The Majors are: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF and USD/CAD.
Real Trade Group offers spreads on the major pairs to as little as 2-4 pips.

Base currency - the 1st currency in a currency pair.
Quote currency - the 2nd currency in a currency pair.

There are 2 prices for currency:
Bid - the Buy price. If you Buy a currency pair, you Buy the Base currency and Sell the Quote currency.
For example, if you Buy EUR/USD, then you are buying EUR and selling USD.
Buy Eur/USD - if you predict that EUR will be stronger than USD.

Ask - the Sell price. If you Sell the currency pair, you Sell the Base currency and Buy the Quote currency.
For example, if you Sell EUR/USD, then you are selling EUR and buying USD.
Sell Eur/USD - if you predict that USD will be stronger than EUR.

Please remember:
Buy position (aslo called long position): you open with Ask price, but close with Bid price.
Therefore, in order to earn profit, Bid price should be HIGHER than Ask price you initially opened the position.

Sell position (also called short position): you open with Bid price, but close with Ask price.
Therefore, in order to earn profit, Ask price must be LOWER than Bid price you initially opened the position.

Spread - the difference between the Bid and Ask prices.

All Forex trading currency pairs are subdivided into 3 logical groups:
1. Pairs with inverse quote (e.g. USD/JPY, USD/CHF) - have USD as a base currency
2. Pairs with direct quote (e.g. EUR/USD, GBP/USD) - have USD as a quote currency
3. Cross rates (e.g. GBP/CHF, EUR/JPY) - pairs that do not consist of the USD

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Contract Size or Lot

Lot is a unit to measure the amount of the deal (contract size value).

There are Standart, Mini and Micro Lots:

Standart Lots
1 Lot size = 100 000 units
2 Lot size = 200 000 units
3 Lot size = 300 000 units
4 Lot size = 400 000 units
5 Lot size = 500 000 units

Mini Lots
0.1 Lot size = 10 000 units
0.2 Lot size = 20 000 units
0.3 Lot size = 30 000 units
0.4 Lot size = 40 000 units
0.5 Lot size = 50 000 units

Micro Lots
0.01 Lot size = 1000 units
0.02 Lot size = 2000 units
0.03 Lot size = 3000 units
0.04 Lot size = 4000 units
0.05 Lot size = 5000 units

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Leverage

Leverage is the use of borrowed funds to increase ones buying power. It is commonly available in ratio, example 100:1.
Real Trade Group is offering leverage from 1:1 up to 500:1 (100:1 by default).

For example, if a Broker offers a 100:1 leverage, you do not need to deposit $100,000 to open 1 Lot ($100,000), but can deposit $1000 (1% of contract size) and still be able to open 1 lot ($100,000).

To put it simple, Leverage gives you an opportunity to trade with smaller equity. You still have the same potential profit, but your margin requirements are much smaller.

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Margin

Margin is a deposit required to open an order that is temporarily held by Broker and is credited back once the position is closed.
The minimum margin required to open a position depends on the the Leverage, currency pair and current market prices.

For example, you have $1000 deposit and the account's leverage is set to 1:100.
If you open 0.1 Lot of USD/CHF, then Margin of $100 will be required*.
Your $100 margin will be temporarily locked by Broker, and the rest $900 can be used to open a new order or anticipate loss that may occur.

*Margin = $100,000 x lot size / 100 (this formula only for currency pairs where USD is the base currency)

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Pip Value

Pip (or point) is the smallest price change in the exchange rate of a currency.
Please be advised that a pip value depends on amount of contract size (Lot) and the exchange rate.

You may calclulate the pip value according to the following formula:

1. Pairs with direct quote (e.g. EURUSD, GBPUSD)
1 pip = lot size x tick size

1 lot of EURUSD
1 pip = 100 000 x 0.0001 = $10.00

0.1 lot of EURUSD
1 pip = 10 000 x 0.0001 = $1.00

0.01 lot of EURUSD
1 pip = 1000 x 0.0001 = $0.10


2. Pairs with inverse quote (e.g. USDJPY, USDCHF)
1 pip = lot size × tick size / current quote

1 lot of USDJPY, current quote is 84.69
1 pip = 100 000 x 0.01 / 84.69 = $11.81

0.1 lot of USDJPY, current quote is 84.69
1 pip = 10 000 x 0.01 / 84.69 = $1.18

0.01 lot of USDJPY, current quote is 84.69
1 pip = 1000 x 0.01 / 84.69 = $0.12


3. Cross rates (e.g. GBPJPY, EURGBP)
1 pip = lot size × tick size × base quote* / current quote
*base quote is the current base pair quote

1 lot of GBPJPY, current quote is 140.00, base quote (GBPUSD) is 1.6349
1 pip = 100 000 x 0.01 x 1.6349 / 140 = $11.68

0.1 lot of GBPJPY, current quote is 140.00, base quote (GBPUSD) is 1.6349
1 pip = 10 000 x 0.01 x 1.6349 / 140 = $1.17

0.01 lot of GBPJPY, current quote is 140.00, base quote (GBPUSD) is 1.6349
1 pip = 1000 x 0.01 x 1.6349 / 140 = $0.12

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Does realtrade allowing scalping?
thanks

According to the Company`s Trading Terms, orders that have been closed in a 60-second period or before the 5th tick from the opening moment are subject to cancellation.

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Hedging Strategy

Hedging is an action to minimize risk by opening a position in the opposite direction for the same currency pair and with the same lot amount.

Example: You are buying EUR/USD 1 lot.
If market goes against your position, then you can Sell EUR/USD 1 lot to lock losing position.
Thus, no matter what direction the market goes (upward or downward), your loss will be locked.

At Real Trade, hedging is allowed. Thus, opening 2 positions on the same currency pair and with the same lot, but in opposite directions, requires margin for only 1 position (as long as Margin level is higher than 100%).

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Please be advised that the error message "Trade context is busy" can appear if you are using a hyper-active EA or click on the order screen too many times/try to open two or more orders at the same time (the server receives numerous messages before it can execute the first order). If you have placed a trade and do not wait until it is completed and then try to place the same trade (or a different trade) the commands go into a loop.

The simple solution is to close down the platform and restart it.