How an FX Trade Works

In the FX market you can buy or sell one currency for another. When you buy a currency, you are said to be “long” in that currency and when you sell a currency, you are said to be “short” in that currency. As the value of one currency rises or falls relative to another, traders decide to buy or sell currencies in order to make profits – since the objective is to earn a profit from their position. Placing a trade in the foreign exchange market is simple and the mechanics of a trade are virtually identical to those found in other markets. Because of the symmetry of currency transactions, you are always simultaneously long in one currency and short in another. An open position is one that is live and ongoing. As long as the position is open, its value will fluctuate in accordance with the exchange rate in the market. To close out your position, you conduct an equal and opposite trade in the same currency pair. For example, if you have gone long in one lot of EUR/USD you can close out that position by subsequently going short in one EUR/USD lot (at the prevailing bid price).

Example of How FX Trade Works

Quoting Currency Pairs

Currencies are quoted in pairs, such as EUR/USD or USD/JPY. The first listed currency is known as the base currency, while the second is called the counter or quote currency. The base currency is the “basis” for the buy or the sell. For example, if you BUY EUR/USD you have bought Euros (simultaneously sold dollars). You would do so in expectation that the Euro will appreciate (go up) relative to the US dollar.

Currency Abbreviations

EUR/USD
In this example Euro is the base currency and thus the “basis” for the buy/sell. If you believe that the US economy will continue to weaken and this will hurt the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought Euros in the expectation that they will appreciate versus the US dollar. If you believe that the US economy is strong and the Euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold Euros in the expectation that they will depreciate versus the US dollar.

USD/JPY
In this example the US dollar is the base currency and thus the “basis” for the buy/sell. If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will appreciate versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.

GBP/USD
In this example the GBP is the base currency and thus the “basis” for the buy/sell. If you think the British economy will continue to be the leading economy among the G8 nations in terms of growth, thus buying the pound, you would execute a BUY GBP/USD order. By doing so you have bought pounds in the expectation that they will appreciate versus the US dollar. If you believe the British are going to adopt the Euro and this will weaken pounds as they devalue their currency in anticipation of the merge, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.

USD/CHF
In this example the USD is the base currency and thus the “basis” for the buy/sell. If you think the US dollar is undervalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that due to instability in the Middle East and in U.S. financial markets the dollar will continue to weaken, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc.

Buying / Selling

First, the traders should determine whether they want to buy or sell. If they want to enter a short order – whereby they will profit if the exchange rate falls – they simply need to click on the SELL rate. The opposite holds true for traders who enter buy orders: they can simply click on the BUY rate, and thus will profit if the exchange rate goes up.
Example of How Buying / Selling Works

As with all markets, there are two prices for every currency pair. The difference between these two prices is the spread, or the cost of the trade. In this example, the spread is three pips. On the 10k position, a pip on the EUR/USD currency pair is worth $1.

Margin / Leverage

FX accounts are margined: a trader can hold a market position much larger than the value of the trader’s account value. The online trading platform which FOREXYARD offers has margin management capabilities, which allow lenient margin requirement of up to 1/2%. However, we do not recommend using leverage of more than 10 times your account value. Using leverage exaggerates both gains and losses. Even when market conditions are relatively calm, using leverage can generate large gains or losses. In the case where a trader surpasses the maximum leverage allowed (which can happen when account equity shrinks as a result of trading losses), the trading system will close all open positions in the account. This prevents client’s accounts from falling into a negative balance, even in a highly volatile, fast moving market.

Example of How Margin Works

Since the trader opened 1 lot of 10k EUR/USD, his margin requirement or Used Margin is $50. Usable Margin is the funds available to open new positions or sustain trading losses. If the equity (the value of his account) falls below 20% of his Used Margin due to trading losses, his position will automatically be closed. As a result, the trader can never lose more than he/she deposits.

Rollover

In the spot forex market, trades must be settled in two business days. If a trader sells 100,000 Euros on Tuesday, the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to our traders, FOREXYARD automatically rolls over all open positions to the next settlement date at 5:00 pm New York time. Rollover involves exchanging the position being held for a position expiring the following settlement date. The positions being exchanged are usually not valued at the same price. The difference in amount varies greatly based on the currency pair, the interest rate differential between the two currencies, and fluctuates day to day with the movement of prices.

For positions open at 5.00 pm EST there is a daily rollover (interest payment) you pay for an open position depending on your established margin level and position in the market. If you do not want to earn or pay interest on your positions, simply make sure they are closed by 5.00 pm EST, the established end of the market day.

Getting Started

With no commitment or cost, you can open a Virtual Trading Account. The account has the full capabilities of a “real” account including live market rates, access to real-time market analysis, and the ability to execute trades off streaming prices. The virtual account (or Demo Account) gives you the ability to learn about the forex markets and test your trading skills without any risk.

How to Trade Your Demo

Use this time to make a plan and develop your strategies.

* Choose the right currency pair. Find out based on your risk parameters, which currency is best suited for your trading style. Some may be too volatile and some too slow so decide which currency pair is most appropriate for your strategy and time frame.
* Decide on how long you plan to stay in a trade. If you are an inter-day trader, what is the average time of your trade? – a few minutes, a couple of hours, a full day, or swing trade (couple of days to a week).
* Before you enter a trade you should also have clear exit plan. Place your stops and limits accordingly.
* Know how much you are willing to risk and how much you are looking to gain.
* Keep track of important news and technical levels, which may be tested within your time frame

PASANGAN MATAWANG

Pada mulanya membaca mengenai pertukaran wang asing ini agak memeningkan, namun ia sebenarnya agak mudah jika anda mengingati du perkara: 1) Matawang pertama disenaraikan adalah asas matawang dan 2) nilai matawang adalah sentiasa 1.

Matawang US Dollar adalah boleh dikatakan asas sebagai pembahagi untuk matawang lain. Untuk matawang utama termasuk USD/JPY, USD/CHF dan USD/CAD. Untuk matawang ini dan kebanyakan matawang yang lain, nilai unit dia adalah dalam $1 USD per matawang dengan matawang kedua itu. Sebagai contoh, USD/JPY 120.01 bermaksud 1 USD Dollar sama dengan 120.01 Yen Jepun.

Bila US Dollar sebagai unit asas dan matawangmeningkat naik, ini bermaksud nilai Dollar telah melemahkan matawang yang lain. Jika USD/JPY sebelumnya telah meningkat kepada 123.01, nilai Dollar menjadi kukuh kerana sekarang ia boleh membeli lebih banyak Yen dari sebelumnya.

Terdapat tiga pengecualian dari peraturan untuk British pound (GBP), Australian dollar (AUD) dan Euro (EUR). Dalam kes ini, anda akan melihat sebagai contoh GBP/USD 1.4366, bermaksud satu British pound adalah sama dengan 1.4366 US Dollars.

Dalam tiga pasangan matawang ini, dimana US Dollar tidak lagi menjadi kadar asas, dimana peningkatan nilai tiga matawang ini akan melemahkan matawang US Dollar, ia membenarkan mengambil lebih nilai US Dollar untuk satu Pound, Euro atau pun Australian Dollar.

Dengan kata lain, jika matawang tersebut meningkat naik, peningkatan nilai matawang itu akan kukuh dan jika matawang itu menurun, maknanya matawang itu menjadi lemah.

Matawang yang tidak terlibat dengan US Dollar dipanggil matawang silang, tapi ia tetap sama. Contoh EUR/JPY 127.95 bermakna satu Euro bersamaan dengan 127.95 Yen Jepun.

Bila anda melakukan trading dalam Forex, anda dapat lihat terdapat dua bahagian dimana terdapat bid dan offer.

PIP

Belajar untuk menyukai perkataan ini, kerana inilah yang anda akan cari dalam kerjaya Forex anda. Pip adalah nilai terkecil dalam semua perbezaan matawang, jadi jika ianya bergerak keatas, sebagai contoh EUR/USD bergerak dari 1.2150 ke 1.2155, bermakna ianya bergerak sebanyak 5 pips.

LEVERAGE

Leverage ialah satu konsep yang mudah, Jika anda mempunyai $10,000 untuk trade anda, broker Forex anda akan membenarkan anda meminjam duit dari mereka jadi anda boleh trade dengan nilai kuantiti yang lebih besar. Mereka boleh meminjamkan kepada anda sehingga 400 kali ganda (400:1) untuk anda letak dalam trade anda. Kebanyakan broker Forex akan membenarkan anda antara 50:1 dan 100:1 untuk margin. Jika anda memasukkan $1,000 dan broker anda memberi dan membenarkan 100:1 margin, anda akan trade dalam trading anda sebanyak $100,000 padahal nilai sebenar anda hanya lah $1,000 sahaja.

Ini adalah amat penting kerana setiap pips adalah sama dengan nilai dalam jumlah Dollar. Bila anda trade $10,000, setiap pip yang bergerak adalah bernilai $1. Gambar rajah dibawah menunjukkan bagaimana ianya berlaku. Jika anda trade 10,000 nilai matawang itu, setiap pergerakkan bernilai $1. Jadi jika anda membuat belian pada 1.1445 dan menjual kembali pada harga 1.1545, anda sudah mendapat 100 x $1, atau $100. Jika anda trade dengan nilai $100,000, setiap pergerakan pip adalah bernilai $10 dan seterusnya.

LONG DAN SHORT

Sekarang terdapat dua cara untuk anda melakukan trade di pasaran Forex, dan terdapat banyak trader baru yang terkejut kerana mereka sebenarnya boleh mendapat banyak wang apabila matawang bergerak keatas mahupun kebawah. Mari kita mulakan secara logik apabila matawang itu bergerak keatas.

Kebanyakan orang sudah faham dan tahu dengan konsep untuk membeli sesuatu dengan harga rendah dan menjual balik bila harga meningkat tinggi. Jadi konsep membeli EUR/USD pada 1.2150 dan menjual balik pada 1.2160 dengan peningkatan 10 pips, ini dipanggil Long.

Bagaimanapun anda boleh melakukan ini juga secara terbalik. Jika anda rasakan yang matawang ini akan menurun lebih dari meningkat naik, anda boleh membuat Short. Ini hanya lah membuat secara bertentangan dari yang diatas, jual dahulu dan beli kemudian dengan harapan agar harga akan menurun untuk anda mendapat keuntungan.

Ini mungkin agak aneh dan ganjil untuk sesiapa yang masih baru mendengar perkara seperti ini, tetapi konsep nya tetap sama yang akan anda sentiasa membeli sesuatu dengan harga yang rendah dan menjual kembali pada harga yang tinggi. Tidak kira apa jua yang anda order, semua transaksi mestilah cukup sifatnya dimana yang anda mesti mempunyai transaksi bila beli mesti jual kembali, selagi anda menjual pada harga yang tinggi anda akan sentiasa mendapat keuntungan.

SPREAD

Perbezaan antara broker Bursa saham dan broker Forex adalah kerana komisen. Broker Forex anda yang mengenakan sedikit komisen dan ada yang tidak mengenakan sebarang komisen. Jadi macam mana mereka membuat duit? Sebab itu lah broker Forex mengenakan spread iaitu perbezaan antara harga sebenar dengan harga yang ditawarkan oleh broker Forex.

Disini anda akan dapat melihat board biasa mengenai matawang dan juga spread, dan anda akan dapat melihat contoh perbezaan antara Offer (harga yang anda akan tempatkan untuk Sell order) dan Bid (harga dimana anda akan tempatkan Buy order) adalah 3 nilai spread nya.

Walau apa pun apakah ertinya kepada anda? Jadi mari kita tengok dekat board, jika anda membeli EUR/USD pada 1.2158 yang ditawarkan pada kolum Offer dan dengan jual nya kembali dengan cepat sebelum hara bergerak,anda hanya akan mendapat pada harga 1.2155 seperti yang ditunjukkan di kolum Bid. Jadi hasilnya anda mendapat -3 pips, dan ianya adalah kerugain bagi anda dan keuntungan pada broker. Ingat untuk sentiasa meletakkan nilai spread itu dalam akaun anda apabila anda ingin meletakkan order, set target dan juga Stop loss.

BEARS DAN BULLS

Anda pasti akan kehairanan melihat perkataan Bears dan Bulls pada buku Forex dan juga laman chat, kenapa mereka memperkatakan mengenai haiwan ini dalam urusan trading mereka. Pengertian ia sangat meluas dalam pasaran Forex. Bears adalah dimana pasaran dalam keadaaan harga pasaran menurun, contoh bila terdapat ramai yang melakukan Sell dari Buy di pasaran. Bull pula adalah keadaan dimana nilai pasaran dalam keadaan menaik, dimana ramai yang melakukkan Buy dari yang melakukan Sell di pasaran.

Forex dan juga pasaran lain akan hanya menahan antara Bull dan Bears. Jika anda dapat mengenali seseorang yang boleh melakukan lonjakan atau anda dapat membaca pergerakan arah, sudah pasti anda lebih mudah untuk melakukan nya.

Jadi yang diatas itu hanya lah asas sahaja, terdapat banyak lagi yang perlu anda pelajari untuk membantu anda.

PENGIRAAN KEUNTUNGAN DAN KERUGIAN

Dipasaran Forex ini, dimana pergerakkan matawang seluruh Negara didunia di beli dan dijual. Forex sentiasa menumpukan pada pasangan matawang. Sebagai contoh jika anda melakukan transaksi Buy pada Euro dan membayar menggunakan US Dollar, atau anda melakukan Sell untuk Canadian Dollar untuk Yen Jepun. Nilai pelaburan Forex ini meningkat dan menurun adalah kerana kadar pertukaran matawang atau kadar Forex. Pertukaran ini boleh berlaku bila-bila masa sahaja dan kerap kali kerana disebabkan oleh pengaruh ekonomi dan juga permainan politik. Dengan hypothetical Forex Investment akan menunjukkan anda bagaimana untuk mengira keuntungan dan kerugian dalam trading Forex.

Untuk memahami bagaimana kadar matawang ini memberi kesan keatas nilai pelaburan Forex anda, anda mesti mempelajari bagaimana sifat Forex. Sifat Forex sentiasa aktif dan berpasangan. Sebagai contoh, US Dollar dengan Canadian Dollar. Contoh, USD/CAD = 170.50 bermaksud satu US Dollar bersamaan dengan 170.50 Canadian Dollar.Matawang yang berada di sebelah kiri, / (USD sebagai contoh) adalah sentiasa bersamaan dengan 1. Matawang yang berada di sebelah kanan / (CAD sebagai contoh) adalah matawang kedua. Contoh satu Dollar anda boleh membeli 170.50 CAD, kerana ianya lebih kukuh dengan dua matawang. US Dollar dianggap sebagai matawang tengah dalam pasaran Forex dan sentiasa menjadi pasangan kepada matawang-matawang yang lain.

Sekarang kita terus tumpukan pada hypothetical Forex investment yang akan menunjukkan kepada anda jika anda boleh mendapat keuntungan atas jangka masa pendek trading Forex. Sebagai contoh, pasangan matawang adalah US Dollar dan juga Euro. Kadar Forex untuk EUR/USD pada 26 Ogos 2006 adalah 1.8057 yabg bermaksud satu US Dollar sama dengan 1.0857 Euros dan jika anda membeli pada ketika itu, dengan harga 1,000 Euros, anda akan dibayar pada harga $1,0857 Euros.

Setahun kemudian, kadar untuk EUR/USD menjadi 1.2083 dengan nilai Euro telah meningkat lagi dengan berpasangan dengan USD. Jika anda menjual 1,000 Euros setahun kemudian, anda akan mendapat $1,208.30 yang bermakna $122.60 lebih tinggi dari apa yang anda dapat dari tahun lepas.

Sebaliknya, jika kadar Forex selepas setahun untuk EUR/USD = 1.0576 dengan nilai Euro telah menurun dengan berpasangan dengan US Dollar. Jika anda menjual 1,000 Euros pada ketika itu, anda akan mendapat $1,057.60 yang bermakna $28.10 kurang dari yang anda akan dapat dari tahun lepas.

Will focus on two key reversal candlestick formations – The Bearish/Bullish Engulfing and The Harami Cross.

When using Japanese Candlestick Charting these patterns signaling a reversal in last trend direction.

In this tutorial, Yahoo Japanese Candlestick Chart, you will learn the practical use of these two key reversal candlestick formations when combined with trend lines channel as our entry and exit tool.

Doji: The open and close prices are the same or very close. In candlestick charting we use this formation with many important patterns.

Bullish Engulfing: A small red body followed by and contained within a large green body. Usually a sign for a major bottom reversal.

Bearish Engulfing: A small green body followed by and contained within a large red body. Usually a sign for a major top reversal.

Harami Cross: A Doji contained within a large red body. Usually a sign for a bottom reversal.

Indicators and Parameters:

Candlestick Chart – you can find this option at any technical analysis charting software.

Trend Lines Channel (blue) – this price fluctuation channel formed from two parallel trend lines (in mid April); see points 1,2,3 and 4.

The use of key reversal candlestick formations (practical analysis):

Before we can start buying and selling we need to draw two parallel trend lines to create our channel (remember: between two points there is only one straight line). Points 1,2 are the top pivot points and therefore determine our upper trend line; points 3,4 are the bottom pivot points and therefore determine our lower trend line.

We will buy or sell when we identify a candlestick pattern to confirm our resistance/support trend line. This strategy works with any key reversal candlestick formations.

Point A – This is the first time the price make contact with our channel (the resistance line). At the close of that day trading session we recognize a Bullish Engulfing pattern. We opened long position at 34.85 and placed our stop-loss order at the lower low of this pattern (33.72 – dashed red line).

We closed our long position when the stock price touched the upper trend line (four days before point B) at 38.90; 38.90-34.85=4.05 points or 11.62% profit.

Point B – At this point, the Bearish Engulfing pattern confirms the resistance of the upper trend line (after four days with no distinguish price direction). We opened short position at 37.32 and placed a stop-loss order at the higher high in this pattern (38.95 – dashed red line).

We closed our short position when the stock price touched the lower trend line at 35.90 (point C); 35.90-37.32=1.42 points or 3.95% profit.

Point C – We detected Harami Cross pattern one day after we closed our short position and opened long position at 36.4. Immediately we placed our stop-loss order at 35.9 (the lower low in this pattern).

Point D – The stock price triggered our stop-loss order at 35.9 and we lost 0.5 point (36.4-35.9) or 1.37%.

Note: you can find other key reversal candlestick formations in the Japanese Candlestick literature (one day and three days reversal patterns) to combine with this strategy.

Very important: when you determine the trend lines channel, you need to check if there is “enough room” in price fluctuation, so your profit potential will exceed your loss potential by at least 2-3 times (as you can see, we didn’t have to open the B-C short position although we identify a Bearish Engulfing key reversal candlestick formation).

What Does It Mean?

The MACD (Moving Average Convergence/Divergence) is a trend following momentum indicator that shows the relationship between two moving averages of prices.

The MACD is the difference between two exponential moving average.

A short exponential moving average, called the “trigger” line is plotted on top of the MACD to show buy/sell opportunities.

Putting It To Use

There are three popular ways to use the MACD:

Crossovers: The basic MACD trading rule is to sell when the MACD falls below its signal line. Similarly, a buy signal occurs when the MACD rises above its signal line.

Overbought/Oversold: When the shorter moving average pulls away dramatically from the longer moving average (i.e., the MACD rises), it is likely that the security price is overextending and will soon return to more realistic levels.

Divergences: A indication that an end to the current trend may be near occurs when the MACD diverges from the security.

The MACD proves most effective in wide-swinging trading markets.