FOREX Trading
• What Is
FOREX?
• FOREX
Or Futures?
• FOREX
Or Stocks?
•
FOREX Trading for
Beginners
• FOREX
Terms To Know
•
Preparing for FOREX
Trading
• Is
FOREX Trading Risky?
•
The Philosophy of FOREX
Trading
•
FOREX and Fundamental
Analysis
•
Tools for FOREX Trading
•
Trading Strategies for
FOREX
• Trading Systems
for FOREX
•
Reading and Understanding
FOREX Quotes
•
FOREX Profits and Losses
•
FOREX Technical Analysis
Part 1
•
FOREX Technical Analysis
Part 2
•
FOREX Trading Brokers
• The
FOREX Margin
•
What Are Currency Options?
•
What Are FOREX Signals?
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Online FOREX Trading
FOREX Profits and Losses
Unlike cash, currencies that are traded on the FOREX are traded in denominations
much lower than the lowest possible denomination of cash. For instance, in
USD, if something costs five cents, a nickle is paid. But on FOREX, the
denomination can go lower than a penny, such as $0.0001. In FOREX, the smallest
possible denmoniation is called a pip, which stands for Price Interest Point.
Sometimes, it may just be referred to as points.
While currencies on the FOREX are in tiny denominations, they are sold in
very large lots, such as $100,000. When you are talking about this much money,
even the smallest change in the value, for example $0.0001 to $0.0002, can
mean either big profits, or big losses. One pip is worth $10 in USD $100,000,
so decrease of 40 pips could cause a profit or loss of $400.
100,000 units of currency makes up a standard lot in the FOREX, but there
are different sized lots available as well. One unit is equal to one unit
of the currency. For instance, one unit of USD, the US Dollar, is one dollar,
so one standard lot would be worth $100,000. Note that different currencies
have different pips. For instance, the Japenese Yen pip is 0.01, while the
USD pip is 0.0001. The pip value depends on the lot size, and the currency
pair that is being traded. You can use a pip calculator to determine pip
values.
Just as there are different strategies, and different currencies, there are
also different types of trades. A Market Order is an order to buy or sell
a currency at the current market price. In fast moving markets, you need
to be aware that there is slippage - price changes between the time that
you place the order and the order is executed.
Limit Orders are like Market Orders, but instead of buying or selling at
the current price, the order is to buy or sell at a certain price. Limit
Orders are used to buy below the market price, or to sell above the market
price, or above the price that you bought the currency for to ensure a profit.
There is no danger of slippage with a limit order. A stop order is used to
buy or sell above or below the market value. Stop orders are typically used
to set a stop loss rate, which sells the currency, automatically, if the
price drops to a certain level.
OCO or One Cancels the Other is a transaction that places a limit order and
a stop loss order. When the conditions exist that cause one order to be executed,
the other order is cancelled. Ideally, the stop loss order will be executed
if the price drops, and the limit order would be cancelled. If the price
rises, the limit order would be executed, and the stop loss order cancelled.
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