Before you enter the forex live trading arena, there are specific factors you have to be aware of. Before you commence forex live trading you should open a demo account to ensure that you become familiar with the trading platform you have been offered, and that you test your forex live methods and strategies.
There are two main methods used for forex trading. This market is limited to the purchasing and sale of currencies. One method is to go long on one currency and short on the other. The other method you have at your disposal is to buy derivatives to trace your currency pair movements.
The most popular and regularly used method is the purchase and disposal of currencies. This method places you in a position of hope that your currency pair’s value will change to your benefit. When you decide to go long on a currency pair, you are betting on the value of the pair increasing. For example, if you are trading the USD/EUR pair and you make the decision to go long. You will show a profit if the pair’s value was to rise and you will show a loss if it declines. The pair will increase when the value of the US dollar starts to increase against the value of the Euro. In this trade, you have placed a bet on the US dollar.
The other method you can choose is to use derivatives, such as futures and options, to attempt to make a profit from the currency value movement. If you decide to purchase an option that is linked to a particular currency pair, you gain the right to buy that pair at a particular rate which is determined before a specified point in time. If you opt for a futures contract, you have to purchase the pair by a specified time. This form of trading is normally carried out by experienced traders, but you should be aware of them as you may want to make use of it once you become an experienced trader.
Forex Live Order Types
When you first enter the market, you will make use of market orders and limit orders when you place your trades. Market orders are placed immediately at the current market forex rates. Limit orders allow you to specify the point at wish you would like to enter a trade.
In the event that you are holding on to open positions, you could make use of stop-loss orders. This allows you to set a limit on the level you are prepared to drop on price before your position should close. This stops you from suffering further losses. For example, if you notice that the GBP/USD currency pair is starting to decline and you wish to set a stop-loss. You can use this type of order to set a price level at which the position will be closed automatically so that you do not suffer further losses.
If you are in a profit situation in an open position and you want to lock in your profit, you could go for a take-profit order. For example, you feel confident that the GBP/USD rate will reach 1.61, but you are not sure that it will exceed that, you could set a take-profit order that will close your trade once the rate reaches 1.6100. This means you will lock in any profits you have made at that point.
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