Forex trading is always done with currency pairs and at ADSS, you can trade on over 60 different ones. The first currency listed is the base currency, while the second is the quote currency. Then you have to decide whether to buy and “go long” or sell and “go short”, depending on whether you expect currencies to increase or decrease in value, based on market factors, economic events, news and your trading strategy.
The two choices and when you would do them are:
- Buy: When you think the base currency will strengthen in value or the quote currency will weaken against it, profits will rise as the exchange price increases.
- Sell: When you expect the base currency will weaken or the quote currency will strengthen against the base, profits will rise with every point the exchange price falls.
Choosing your position
Unlike most other trading markets, the forex market allows you to speculate on up and down movements in the market. When buying a currency, you’re selling another one at the same time. Choosing your position in the trade means either going long or going short. When you take a long position, it means you’re buying the base, and when you take a short position, you’re selling the base currency. Based on your speculations and your research, you will be able to decide which position you want to choose.
Stop losses, limit and other forex orders
Since the forex market can be very volatile, you may choose to use stop losses and limit orders to protect you – they allow you to automatically exit or stop trades at predefined levels. All trading strategies should include a stop-loss order, which is setting a closing price for the trade. This order will ensure that you don’t lose more than the limit that you preset. In some instances, the stop-loss order may not be executed at the exact set level, but it will work the next time the price reaches this level. This is known as slippage.
Types of stop orders include normal stops, guaranteed stops and trailing stops:
- Normal stop orders are when you close the position when the market moves against you, and these don’t protect against slippage.
- Guaranteed stops will always be executed at exactly the price you specify.
- A trailing stop is when you open a trading position to follow price movements and close it when the market moves against you.
Setting a limit order to achieve your profit goal means the position will be closed when the price reaches your specified level. There are also two types of limit orders:
- The first is a limit order to buy at a price below the current market price, and this order will be executed when the price hits an equal or less value than the price you set.
- The second type is a limit order to sell at a certain price higher than the current market price, and it will be executed when the price hits a level equal to or more than the price you predefined.
Another frequently used forex order is the take profit order, which allows you to close the trade position automatically when the price reaches a certain level.
Start Trading Forex Now with ADSS!
Now that you have most of the theoretical knowledge you need, it’s time to get hands-on experience with ADSS. Trade with our MT4 platform and benefit from personalised customer service, a wide range of educational tools and expert analysis.