online forex

Types of Orders ( II )

2009-07-09T08:06:00.000-07:00

Market Order

An order to buy or sell which is to be done at the price immediately available; the ‘spot’ rate, the current rates at which the market is dealing.

Limit Order

An instruction to deal if a market moves to a more favorable level (i.e. an instruction to buy if a market goes down to a specified level, or to sell if a market goes up to a specified level) is called a Limit Order.

A Limit Order is often used to take profit on an existing position but can also be used to establish a new one.

Stop Orders

An instruction to deal if a market moves to a less favorable level (i.e. an instruction to buy if a market goes up to a specified level, or to sell if a market goes down to a specified level) is called a Stop Order.

A Stop Order is often placed to put a cap on the potential loss on an existing position; which is why Stop Orders are sometimes called Stop-loss Orders. But can be used to enter into a new position if the market breaks a certain level.

OCO Order - One Cancels the Other.

An 'OCO' ('One Cancels the Other') Order is a special type of Order where a Stop Order and a Limit Order in the same market are linked together. With an OCO Order, the execution of one of the two linked Orders results in the automatic cancellation of the other Order.

IF DONE Order

An IF DONE Order is a two-legged order in which the execution of the second leg can
occur only after the conditions of the first leg have been satisfied.

The first leg, only a Limit, is created in an active state and the second, which can be a Stop, a Limit, or an OCO, is created in a dormant state.

When the desired price is reached for the first leg, it is executed and the second leg is then activated. Let's look at one example of how an If Done Order could be used in trading the GBP/USD, as demonstrated below…

In the late night, GBP/USD is trading at 1.8556/60. You believe that 1.8565 is a very strong resistance level, which will not be easily broken.

Furthermore, you also believe that when the 1.8565 level is first tested, there is a good chance GBP/USD will retrace at least 35 pips to approximately 1.8530, and you also believe that if 1.86 breaks, GBP/USD could go much higher and you don’t want to loose more than 35 pips on this position.

The problem is, you do not know when this movement will occur. If you were able to
watch the market 24 hours a day, then you might catch such a movement. However, now,
you don't have to watch the screen because you can leave an order to Sell GBP/USD at
1.8565, and if done then to Buy back GBP/USD at 1.8530 Limit Order or 1.86 Stop
Order on OCO Basis, specifically in that sequence.

An if done order will only become active when the order to which it is attached is
executed.

Loop Order

A Loop Order is a perpetual or repeating order placed in anticipation of a cyclical
movement in the market.

It is a pair of matching orders where the first leg is active and the second dormant. When the desired price is reached for the active order, it is executed, the dormant order becomes active, and a new order (a copy of the one just executed) is created in a dormant state.

This process repeats until the order is explicitly
cancelled.

Normally both legs of a Loop Order are Limit orders and they always are for the same
amount.

Types of Orders

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Our customers can place various types of orders to secure profit or limit risk.

These orders can come in handy but one should be aware that some orders are not necessarily combined with the actual transaction.

If an order is executed one should make sure to cancel all outstanding related orders on that closed position. If not these orders can become a new order without tended to be so.

'GTC' (Good Till Cancelled) Orders

When placing an Order, you must specify for how long the Order is to be valid. The GTC Order is a very common type of Order; it remains valid, 24 hours a day, until you cancel it.

Such an Order is not automatically cancelled at the close of business on Friday evening either; it is reinstated on Monday morning unless you specify otherwise.

'Day' Orders

Day Orders are good until 23:00 CET time.

We support the following Orders

Market Order
Limit Order
Stop Order
OCO Order
IF DONE Order
Loop Order

The 8 most important trading recommendations

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1. The Trend is your friend

2. In up-trends, buy the dips; in downtrends, sell bounces

3. Let profits run, cut losses short. Always use protective stops to limit losses and move them only to reduce potential losses or protect newly achieved profits

4. Set up your plan before entering the market; don't trade impulsively

5. Employ at least a 3 to 1 reward-to-risk ratio

6. When pyramiding, follow these guidelines:

a) Each successive layer should be smaller than the preceding one

b) Add only to winning positions

c) Never add to a losing position

d) Adjust protective stops to the break-even point (or better)

7 Learn to be comfortable being in the minority, if you are right on the market, most people will disagree with you

8. Keep it simple; more complicated isn't always better

Forex vs Equities and Futures

2009-07-09T08:00:00.000-07:00

Commission Free Trading

We are able to provide this level of service to our clients because Realtime Forex SA is a market maker, not a broker. There are, therefore, no mark ups, commissions or charges to pay.

Our profitability, as our clients', depends solely on our trading ability

20 : 1 Leverage (or even greater)

Realtime Forex SA allows greater leverage than the equities, futures or options market.

Traders can utilize 20:1 leverage (or even greater) without risking a margin call situation.

Leverage is a double-edged sword. Without proper risk management this high degree of leverage can lead to large losses as well as gains.

24-Hour Market

The Forex market is a seamless 24-hour market. As a trader, this allows you to react to favorable/unfavorable events by trading immediately. It also gives traders the added flexibility of determining their trading day.

Ability to Profit in Up or Down Market

Unlike the equity market, there is no restriction on short selling. Profit potential exists in the currency market regardless of whether a trader is long or short, or which way the market is moving.

Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has an equal potential to profit in a rising, or falling market

Superior liquidity

With a daily trading volume that is 50x larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the FX markets. The liquidity of this market, especially that of the major currencies, helps ensure price stability.

Traders can almost always open or close a position at a fair market price.

Psychology of Trading

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Expectation and Sentiment

Fundamental and technical factors are undeniably essential in determining foreign
exchange dynamics.

There are, however, two additional factors that are paramount to understanding short-term movements in the market. These are expectations and sentiment. They may sound similar, but remain distinct.

Expectations are formed ahead of the release of economic statistics and financial data.

Solely paying attention to the figures released does not suffice in grasping the future course of a currency.

If, for example, US GDP came out at 7.0% from 5% in the previous quarter, then the dollar may not necessarily move as you would expect it to. If market forecasts had expected an 8% growth, then the 7.0% reading might come as a disappointment, thus causing a very different market reaction from the one you were expecting had you not been aware of the forecast.

Nonetheless, expectations could be superseded by market sentiment. This is the
prevailing market attitude vis-à-vis an exchange rate; which could be a result of the overall economic assessment towards the country in question, general market emphasis, or other exogenous factors.

Using the above example on US GDP; even if the resulting figure of 7.0% undershot forecasts by a full percentage point, markets may show no reaction.

A possible reason is that sentiment could be dollar positive regardless of the actual and forecasted figures.

This might be due to solid US asset markets, or poor fundamentals in the counter currency (euro, yen or sterling).

A term that is commonly interchanged with "sentiment" is "psychology". During the first two months of 2000, the euro underwent fierce selling pressure against the dollar despite persistently improving fundamentals in the Eurozone.

That is because market psychology had decidedly favoured US dollar assets due to continuous signs of non-inflationary growth, and sentiment that further increases in US interest rates will work in the advantage of US yield differentials, without derailing the economic expansion.

Technical and Fundamental Analysis

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There are two basic approaches to analyzing the currency market, fundamental analysis and technical analysis. The fundamental analyst concentrates on the underlying causes of price movements, while the technical analyst studies the price movements themselves.

a. Technical analysis

A Technical Analysis is what one uses to attempt to predict future price movements,
based on past time framed analysis and the reading / understanding of graphics.

Although within a Technical Analysis various thought patterns exist, generally all are based on historical graphics of a currency.

As long as one realizes the various differences of Fundamental and Technical Analysis, both can be used to parallel one another, even though both may present different conclusions.

b. Fundamental Analysis

The study of specific factors, such as wars, discoveries, and changes in Government
policies, which influence supply and demand, and consequently prices in the market
place.

Fundamental analysis comprises the examination of macroeconomic indicators, asset
markets and political considerations when evaluating a nation’s currency in terms of
another.

Macroeconomic indicators include figures such as growth rates; as measured by Gross Domestic Product, interest rates, inflation, unemployment, money supply, foreign
exchange reserves and productivity.

Asset markets comprise stocks, bonds and real estate. Political considerations impact the level of confidence in a nation’s government, the climate of stability and level of certainty.

Sometimes governments stand in the way of market forces impacting their currencies,
and hence, intervene to keep currencies from deviating markedly from undesired levels.

Currency interventions are conducted by central banks and usually have a notable, albeit a temporary impact on FX markets. A central bank could undertake unilateral
purchases/sales of its currency against another currency; or engage in concerted
intervention in which it collaborates with other central banks for a much more
pronounced effect.

Alternatively, some countries can manage to move their currencies, merely by hinting, or threatening to intervene.

Technical Analysis or Fundamental Analysis ?

One of the dominant debates in financial market analysis is the relative validity of the two major tiers of analysis:

Fundamental and technical. In Forex, several studies concluded that fundamental analysis was more effective in predicting trends for the long-term (longer than one year), while technical analysis was more appropriate for shorter time horizons (0-90 days).

Combining both approaches was suggested to be best suited

for periods between 3 months and one year. Nonetheless, further empirical evidence
reveals that technical analysis of long-term trends helps identify longer-term technical "waves", and that fundamental factors do trigger short-term developments.

But most traders abide by technical analysis because it does not require hours of study.

Technical analysts can follow many currencies at one time. Fundamental analysts,
however, tend to specialize due to the overwhelming amount of data in the market.
Technical analysis works well because the currency market tends to develop strong
trends.

Once technical analysis is mastered, it can be applied with equal ease to any time frame or currency traded.

What is Forex ?

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The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the
largest financial market in the world, with a daily average turnover of well over US$1 trillion -- 30 times larger than the combined volume of all U.S. equity markets. Unlike other financial markets, the forex market has no physical location or central exchange.

It is an over-the-counter market where buyers and sellers including banks, corporations, and private investors conduct business.

A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York.

Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night. The huge number and diversity of players involved make it difficult for even governments to control the direction of the market.

The unmatched liquidity and around-the-clock global activity make forex the ideal
market for active traders.

Traditionally the forex market was only available to larger entities trading currencies for commercial and investment purposes through banks.

Now trading platforms, such as the RTFX Pro, allow smaller financial institutions and retail investors access to a similar level of liquidity as the major foreign exchange banks, by offering a gateway to the primary (Interbank) market.

In the forex market currencies are always priced in pairs; therefore all trades result in the simultaneous buying of one currency and the selling of another.

The objective of currency trading is to exchange one currency for another in the expectation that the market rate or price will change so that the currency you bought has increased its value relative to the one you sold.

If you have bought a currency and the price appreciates in value, the trader must sell the currency back in order to lock in the profit.

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.

The first currency in the pair is referred to as the base currency, and the second currency is the counter or quote currency.

This means that quotes are expressed as a unit of 1 of the first currency quoted per the other currency quoted in the pair.

As with all financial products, FX quotes include a "bid" and "ask". The bid is the price at which a market maker (Realtime Forex) is willing to buy (and clients can sell) the base currency in exchange for the counter currency.

The ask is the price at which a market maker (Realtime Forex) will sell (and clients can buy) the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread.