Exit orders

EXIT ORDERS

STOP-LOSS:

The glorious stop loss is what saves our lives. It is neither more nor less than an order which automatically take us out from the markets if the price goes against us. In other words, we give the order to delimitate a loss limit to protect our capital. A useful tip is always to use a stop-loss. The stop-loss reduces the emotions of fear and stress of trading.

Example of Buy:

Suppose we buy EURUSD quoted at a price of 1.50. We expect that the price continues to rise, we put our stop loss below our entry price at 1.30. If the price falls and reaches 1.30 and touches our stop-loss, our loss will be cut.

Example of Sell:

Suppose we sold EURUSD at 1.50. We expect that the price continues down, we put our stop loss above our entry price at 1.60. If the prices go up knowing that we expected it to decrease. The price will touch our stop-loss and our loss will be cut.

TAKE-PROFIT:

The take-profit is the opposite of the Stop-loss

It is nothing more and nothing less than an order which automatically take us out of the market if the price is going in our favor. In other words, we give the order to delineate a limit profit. This allows us to take profits automatically.

PIP: (PERCENTAGE IN POINTS)

A pip is the minimum change in a financial instrument of in the Forex market.

All pairs present on the forex are evaluated with 5 digits, the only exception is for those of the Japanese yen.

For example for EUR / USD in the left image, quotations displayed is 1.1392 (1).

However, in the right image the value of EURUSD is 1.1381 (5).

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The difference in the 1.1392 (1) - 1.13815= is 11 PIPS.

The fifth decimal place does not always appear, according to the broker, it is not so important. Just keep in mind the 4 digits.

HOW TO BETTER UNDERSTAND PIPS?

Let’s say that eurusd at a time X increased from 1.13900 to 1.12300. To speak of this action, we will do a simple subtraction least 1.13900 1.12300 = 16 pips.

The importance behind the notion of pips is that according to the number of lots that we use to trade a pair , the result in terms of money will depend on changes in the PIP.

For example, if we buy EURUSD with a standard lot , An increase of 1 pip will be a profit of $ 10, while a decrease of a pip will be a loss of $ 10.

Another example :

If we execute a trade with a pip value of $ 10 PIP in the pair eurusd at 1.3500, ; For an increase of 55 PIPS to 1.3755 on your platform, you will see a profit of $ 550.

Finally, it is worth mentioning that the value we associate with each PIP will depend on each currency pair and the amount that we will decide to trade. This is something that we will see in the risk management section of this book. Your trading experience and your account balance will determine how much money you can afford in a trade.

Don’t be afraid if you still having issues to understand few concepts , you will realize that with practical examples it’s easier.

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SPREADS

When we trade in the FOREX market , we need access to the market through a online broker. Obviously brokers do not work for free. In fact, the broker makes money on every trade we open is like a small commission every single time you open a trade.

You probably wondered what the BID and ASK consist in with previous images.

The difference is that the broker earns the difference between these two prices.= is the commission PIPS that our broker wins every trade.

FOR EXAMPLE :

Let’s imagine we buy / "long" the eurusd, the trade will be executed at the price of the column of ASK.

If suppose we sell / "short" the pair eurusd, the trade will be executed at the price of the IDB.

In the case of the image above, if we take the example of eurusd.

Subtracting 1 1392 (ASK) - 1 1393 (BID) gives a value of -1 PIP. This means that when you run a trade automatically, you will be -1 pip. The broker will have already charged his commission of 1 pip on your trade.

If you just start trading on the FOREX I recommend using pairs where SPREAD are lower

The most famous major pairs tend to have very small spreads and are very cheap for trading.

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The following list shows the pairs with very accessible spreads.

1. EURUSD 2. USDJPY 3. USDCAD 4. NZDUSD 5. AUDUSD

However, the less common pairs as exotic as USDMXN, USDZAR etc ... they vary by more than 5 pips and they are very expensive to trade.

Spreads are always in constant fluctuation. For example, about 15 minutes before the important news are published, they increase and during the night spreads are higher.

Different types of analysis :

Now that we know what we're going to trade, where we are going to trade , how we will go into the market and how our profit or loss will be generated, we need to know what will count to trade the market.

It will be crucial in our career as traders to develop a set of rules of entry and exit, based on specific analysis. This is one of the keys to have success in the world of trading. To do this, we have two tools:

Fundamental analysis and technical analysis.

But first, what distinguishes a professional trader and an amateur is that a professional has thoroughly earned its place at the top 5% because he is someone who is able to know how the market will potentially move because he combines two types of analysis mentioned above.

FUNDAMENTAL ANALYSIS

This type of analysis is based on the macroeconomic study of the market. This is a technique used by traders who assimilate the economic relationship and the high-impact news to determinate the market direction.

In the past, this type of analysis was the most important and used by traders.

Today , the economic and fundamental new datas are important for the direction of the markets of all the currencies available in the forex market but technical analysis has much more impact

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