In Forex, there is a term called “pip”. Pip movement is called minimum you can vary the exchange rate. Importantly, some pairs like USD / JPY or EUR / JPY is trading at only 2 decimal places, while pairs like EUR / USD or USD / CHF, are quoted with four decimal points.
So the value of a pip depends on the PAR. For a couple handles four decimal points, one pip equals 0.0001. For a couple who manages 2 decimal points, one pip is equal to 0.01.
“The pips are very useful because they allow easily take account gains or losses realized from a transaction by observing only the price change in pips, as you know its value. It is also useful to determine in advance the number of pips to close a few pips successful operation of variation or the stop loss works. “
It is important to note that each transaction is made in quantities of 100,000 units of base currency. This is known as a batch. Therefore in the above example we can buy units of EUR 100.000 or sell units of EUR 100.000. (This requires a little more detail to better understand and explain in greater detail in the course EstrategiasFX).
Hence, an investor has a very strong leverage and can handle very large amounts of money with relatively little investment. A person, depending on the level of leverage, you can control uniades 100.000 basically a coin with $ 1,000 for example.
The basic process of BUYING / SELLING A PAIR
1. The first currency is given.
2. Income from currency loans are used to finance the currency being bought.
This is why it moves in the Forex pairs.
OPPORTUNITIES IN FOREX
One of the main advantages of the forex market lies in the fact that there is opportunities to make profits in both bull and bear markets, as always in theory are buying a currency with the expectation that appreciate in value. That is if you buy USD / JPY, is expecting the dollar to appreciate, but if you are selling the USD / JPY, expecting the Yen to appreciate.
When FOEX investor establishes a position (regardless of whether we are buying or selling a currency), provides a loss in the negotiation, this is because the purchase price (buy / ask) is higher than the selling price (sell / bid). In other words, the difference (spread) is the resulting value to subtract the purchase price of the sale price. This is what wins the broker (the company where we opened our accounts).
So, there are always two prices for each pair:
A purchase price and a sales
The margin deposit is not a payment, as many perceive margins to be part of the financial markets. Rather, the margin on the foreign exchange market is a bond or good faith deposit to insure against possible losses that may occur during operations. The margin requirement allows traders to take positions much larger than the value of the account.
If the funds in the account fall to a level below the margin requirement, your broker will close some or all open positions. This will prevent the account reaches a negative balance, even in the case of a highly volatile market movement and quick.
TYPES OF ORDERS
The term “order” refers to the way in which a forex investor enters or leaves their position in the market. Overall there are 2 kinds of orders:
1. Orders to enter the position
2. Orders to exit the position
1. Orders Used to Enter a Position
This type of order is an order to buy or sell a pair at the market price at that time.
The main advantage of a market order is that it guarantees entry to his position immediately.
On the other hand, the main disadvantage is that the investor may not be getting the best possible price, unlike if I had used another type of order. Another disadvantage is that market orders, usually are used in a disorderly and undisciplined
Orders are filled entry if the market reaches certain price. That is, you indicated in the system, you want to buy or sell a pair, when the price reaches “X”. You place the order and forget to be aware that the order is filled. Then when the pair reaches that price, your investment will deposit station automatically.
2. Command used to exit a position
Orders Limit or Take Profit
A limit order allows the client to specify the rate at which you want to take profits and exit a market position. This type of order is excellent to help investors forex to maintain discipline and ensure some kind of profit.
The main disadvantage is that placing a limit order may be premature in making profits.
Stop Loss Orders and SL (Stop Loss)
The stop loss orders function as limit orders, but in the opposite way. Sets the maximum amount of loss that a forex inversionasta is willing to absorb in a position
The stop-loss orders are a must for every forex investor. This type of order if it saves you all capital in a couple of position. You are very important as a guide to plan your risk-gain ratio.
However, the main disadvantage is that if such orders are not placed at appropriate levels, can result in the inversin are pulled out of positions ahead of time or even just when the market was about to revert to a position profitable.