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High liquidity and price stability

Forex is hands down the largest market in the world. The preliminary report from the Bank of International Settlements (BIS) for April of 2013 has foreign exchange turnover at a record-breaking 5.4 trillion US dollars per day. This figure dwarfs the daily turnover of all the world's equity markets combined.

What this means for you as a prospective trader is that Forex most markets are highly liquid; currencies can easily be bought and sold in large quantities without prices being substantially affected. This in-turn means increased price stability. Also, the fact that currencies are traded in pairs, their value being determined by one currency's value in relation to another's, means that the value of currency pairs tend to stay within a certain established trading range most of the time. This is unlike stock markets which have been known to be vulnerable to all-out crashes in certain conditions.

24/5 trading

Unlike stocks, bonds and options, Forex markets are open around the clock between Monday and Friday. Each trading day is actually comprised of three trading days rolled into one because the Asian, European, and American markets overlap as they open and close throughout the day. As a result you do not have to wait for markets to open, they are always open, leaving you free to trade whenever you like.

Profit in both upward and downward trending markets.

Forex traders buy, or go long, when they expect a currency pair to rise in value, and sell, or go short, when they expect a currency pair to drop in value. However, since currencies are always quoted in pairs, every position you take involves being long on one currency and short on the other. So when buying EUR/USD, for example, you are long on the first currency in the pair and short on the second. This means that as a Forex trader you are easily able to position yourself in a way that allows you to profit, regardless of the state of the underlying market. This is not the case for all investment vehicles. Stocks are a perfect case in point because even though the facility does exist for investors to short stocks, shorting a stock is more complicated, involves taking on more risk, and in some cases additional fees, than when buying or going long.

Low entry and transaction costs

The sheer number of market participants and stiff competition between brokers has led to low entry and transaction costs compared to other financial instruments. This is a relatively recent phenomenon; traditionally Forex markets were only open to institutional investors and very wealthy individuals. This was because the minimum lot sizes and margin requirements from the banks were high. As the retail sector has grown, brokers who aggregate the positions of smaller investors and forward them to the markets have come onto the scene. Lot sizes and margin requirements have shrunk so much over the past decade or so that you can now open a Forex account and start trading with as little as $500 US dollars*. Also, with more and more retail brokers competing for your trades, spreads have narrowed and commissions have dropped drastically over the past few years. This has led to online Forex being one of the most cost-effective trading vehicles available to retail traders.

*recommended minimum amount for MT4 with FxPro

High leverage

Leverage is, of course, a double-edged sword, and we will get into this in further detail later on in the course. Nevertheless the current state of play reflects what traders have been demanding of their brokers, and one of these demands has been for ever-increasing leverage ratios. Compared to other instruments where leverage is limited, Forex boasts the highest leverage in retail trading. It is now commonplace for traders with modest trading account balances to leverage their capital up to 500:1 and command far larger positions than they ever would have been able to in the past. Also, it should be noted that interest is not charged on leverage in Forex. This is because, in essence, you are not buying or selling, but rather agreeing to do so at a future date. This means that in Forex leverage is not borrowed capital as it is in stock trading, which does involve paying interest on the capital used to leverage your positions (more on this later).

Negative balance protection

One of the criticisms levelled at Forex brokers, is that by offering highly leveraged trading accounts they expose their clients to the risk of losing more than they invested in the first place. This is not so. While using leverage carries with it the risk of exacerbating losses in the same way as it provides the potential of amplifying returns, it is now standard practice for all reputable brokers to offer their clients negative balance protection. What this means is your trading account will never fall below zero. You will receive margin calls if your margin level drops below a certain percentage of your equity, depending on the platform you are trading on. Should it continue to drop your broker will begin automatically closing any open positions you have so as to protect you from incurring losses beyond the capital you have in your account.

No suspensions or de-listings

Unlike stocks the foreign exchange markets are live 24/5, irrespective of the underlying market conditions. This means that no-matter what is happening you as a trader can take the appropriate position and potentially profit. Stock trading can be suspended during times of high market volatility in order to curb dramatic changes in price, only to reopen with a gap between closing and opening prices. Also if a company fails to meet an exchange's regulations and financial criteria it can be delisted entirely from the exchange it is traded on, which can be catastrophic for an investor holding shares in it. In contrast the foreign exchange markets suffer from no such issues; currencies are always available for trading, 24 hours a day, 5 days a week.

Instant execution

The online Forex industry has had to be very technically resourceful in order to address the fact that Forex is an entirely decentralised market, meaning that trades are not made over an exchange. The way traders, brokers and the interbank network are dispersed across the globe has required the development of advanced trading platforms that can provide traders with up to the second price quotes in a constantly changing environment, and to facilitate transactions between parties that can be separated by entire continents. These technological advances have led to Forex traders enjoying better trade execution speeds than almost any other form of online trading. The trading process is as easy as you entering a trade and FxPro's liquidity providers filling the order, no-matter where you are in the world.

Forex as an asset class

Historically currencies were not regarded as an asset class, but rather as a medium of exchange facilitating the trade of other assets. Now with a daily turnover of $5.4 trillion, of which Spot transactions account for more than $2 trillion, it's fair to say that a great deal of Forex's daily turnover is speculative in nature, meaning that today an increasing percentage of traders and investors treat foreign exchange as an asset class in its own right.

Increasingly level playing field

This applies to all trading instruments, but especially to online Forex. The same technologies that have made online Forex trading possible have also made information freely available. Nowadays resources that were once only available to large financial institutions are open to everyone. In addition to this, the speed at which information travels across the globe has meant that a trader monitoring their open positions from home can react just as swiftly as a professional trading from the very thick of it in London, New York, or Tokyo. Knowledge is indeed power, and today's information technology provides it in abundance. Especially considering how incredibly complex the Forex markets are, and the myriad of influences which they are subject to, both macro and micro-economic, online traders are now better positioned than they have ever been in the past to take advantage of information and use it to manage their capital intelligently.

Welcome to FxPro Trading Academy. If you're reading this you have decided to join one of the world's fastest growing online communities. Since the Internet revolution made it possible to trade currencies online a little over a decade ago, more and more people have turned to Forex, either as a way to supplement their existing incomes, or as a way to completely escape the workaday world and earn money on their own terms. Most seasoned Forex traders will tell you that those who end up profiting, in the long run, are in the minority. But despite this the number of people turning to online Forex continues to grow. Trading Forex is indeed risky, and we're not here to obscure these risks, or to give you a false sense of your own abilities. We're in the business of helping to create educated traders; this is what FxPro Trading Academy is all about.

One thing that not many people in the industry discuss very often is that the churn rate in online Forex is incredibly high. One of the more sobering statistics is that most beginners tend to wipe out their trading account balances within their first few months of trading. Brokers draw novices in, convince them that currency trading is as simple as applying a few technical indicators or clicking 'Buy' when an economic report comes in better than expected, then they watch them lose it all, safe in the knowledge that more beginners are flocking to their websites all the time. Our business model is different. We want our traders to have long and profitable trading careers. And while we may not be able to guarantee your success, we do our best to ensure that you go in with your eyes open and take your best self to the markets every time you trade.

A few things about this course.

FxPro Trading Academy has been designed to prepare a complete beginner for the challenges of trading on the world's currency markets. By the end of this course you should know how Forex works, where you stand in the currency trading food chain, and what steps you can take to increase your edge. Don't feel that you have to go through the material linearly. If there is a specific subject that intrigues you please feel free to tackle it first, and then move on to other sections depending on the questions that arise as you move through the material.

Many people pick things up quicker when they direct their own learning, and our Trading Academy has been created to allow for this. If you are new to Forex it's advisable that you eventually cover all of the material, but the order in which you choose to do so is entirely up to you. If you have some knowledge of trading there are sections that you will no-doubt want to skip, feel free to pick and choose what's useful to you. If you fancy yourself as some kind of Forex-trading mastermind then you're in the wrong place, surely.

Recent developments in neuroscience are starting to throw older, more established methods of learning into question. What is being demonstrated over and over again is that experiencing the difference between what you have attempted to do and the actual result, then correcting your behaviour accordingly and trying again, is a much more efficient way to acquire new skills than plain old textbook learning or attending lectures. The most important part of this trading academy, by far, will be the demo account that you will use to practice trading with as you progress through the material. We regard it as essential to your growth as a trader; this is why FxPro offers unlimited demo accounts for both of its main platforms. Should you lose the demo balance you started with you can always re-deposit more funds from FxPro Direct entirely free of charge. An unlimited demo account wasn't always as easy to come by in online Forex, so take advantage of it. The more practice you put in on your demo account, the more proficient you will be when you finally start trading with your own money. Make sure you sign up for one before proceeding any further.

Register for a demo account here

Finally, we recommend that you take advantage of the trader's glossary and FAQ sections of our help centre. As you work through the trading academy you will come across unknown words and concepts. Rather than stopping to explain a new term each and every time it arises, we have decided to gradually immerse you in this language until you become proficient in it yourself. Hovering your cursor over certain words will bring up further information from our trader's glossary. Beyond this we encourage you to be active while working through the trading academy, the help centre should be regarded as supplementary to this course so make sure you refer to it often.

Right, let's get started!

Technical analysis, while proven to be one of the most reliable ways to make informed trading decisions, can be time consuming and often requires multiple indicators and other tools. In order to simplify chart analysis and ensure a higher percentage of profitable trades among our clients, OctaFX has partnered with Autochartist, one of the leading providers of chart pattern recognition tools.

The Autochartist Metatrader plugin delivers real-time trading opportunities straight to your terminal. See chart patterns and trends in just one click. You'll also receive daily Market Reports on each session direct to your inbox.

Get the Autochartist Metatrader plugin

1. Your total combined accounts balance must be 500 USD or more.
2. Download the plugin.
3. Drag and drop the plugin Expert Advisor onto one of your charts.

How do I open a trade with the Autochartist plugin?

The Expert Advisor plugin does not open any trades, it only shows the patterns identified by Autochartist.

1. Find the currency or the opportunity that you're interested in. You can do this in a number of ways.

Click the left and right arrow buttons to browse all opportunities present in the market at that moment.

If you're interested in particular timeframe or pattern types, use the Filters option to filter market activity.

Here's a short explanation of each filter:

• Completed chart pattern - the pattern has been identified and the price has reached the target level
• Emerging chart pattern - the pattern has been identified but the price has not reached the target level yet
• Completed Fibonacci Pattern - patterns that form when the price graph moves up and down in a particular price ratios
• Emerging Fibonacci Pattern - if the price reaches and turns around at the price level of the pink dot, the pattern would be complete and the expected levels of support or resistance would apply
• Key levels: Breakouts - trading opportunities where the price has broken through the support level
• Key levels: Approaches - trading opportunities where the price has broken through the resistance level

Uncheck 'Display all symbols' to only see the patterns identified on the instrument you've opened the chart for.

Click 'View' to see each opportunity identified on the chart. Get more details using the 'Pattern details' window.

2. Use the predictions to help you decide which direction to trade in. The general rule of thumb is to go long (open a buy order) when the price is expected go up and to go short when the price is expected to go down.

CHFJPY is expected to appreciate based on triangle pattern.

EURCAD is expected to depreciate based on triangle pattern.

3. Press F9 to open a new order window or click 'New Order'.

4. Make sure the instrument selected is the one you want to trade, and specify the volume of your position in lots. Volume depends on the size of your fund, your leverage and which risk to reward ratio you are aiming for.

5. Click Buy or Sell depending on the price direction.

6. Setting a stop loss and take profit based on volatility levels is recommended, however this step is optional.

Click 'View' in the Autochartist plugin to open the pattern you're going to trade. Enable 'Shift end of the chart from right border' at the toolbar.

'Volatility levels' are displayed on the right hand side of the chart. This is an approximation of how much the price is expected to fluctuate.

If you're going long (opening a buy order), you should set your Stop Loss at the price which is below the order open price and Take Profit at the price which is above the open price. For a short (sell) position, set the stop loss at a higher price and take profit at a lower one.

When choosing SL and TP levels, give special consideration to the minimum stop level, which you can check by right clicking the instrument in 'Market Watch' and selecting 'Specification'. It is recommended from a risk management perspective to keep a risk:reward ratio of at least 1:2.

Having identified the appropriate levels, find your position in the 'Trade' tab. Right click and select 'Modify or delete order'.

Set Stop Loss and Take Profit and click 'Modify' to save your changes.

The Autochartist plugin provides a unique insight into the market situation and saves you a significant amount of time. If you'd like to know more about Autochartist, get in touch with our Customer Support team.

Autochartist Market Reports provide a clear overview of the current trends across most popular trading instruments. Delivered to your inbox at the beginning of each trading session, the reports can suggest which trade you should enter next or whether your current strategy needs an adjustment. Moreover, it provides significant time saving benefits in analysing the charts.

Each Market Report consists of three main sections:

1. Upcoming High Impact Economic Releases

At the top left corner you will find a list of all releases scheduled for the day. These reports are important as it is not uncommon for the market volatility to increase during the major news, therefore risk management techniques may be required in order to lessen risk exposure.

2. Market Movements.

"Market Movements" section provides an overview of recent price activity for a number of instruments: it shows the direction and the percentage of the price change during the last 24 hours.

Daily change percentage is highly correlated with the news and reports - the price may appreciate, depreciate or change its direction completely after an important release.

3. Trading opportunities.

The actual price predictions are right below the "Market Movements" section. Each of them contains information about the expected price, the time during which the price will be reached, a short breakdown of the underlying indicators and the name of the pattern.

• SL - Support level
• RL - Resistance level
• Interval - chart periodicity interval the pattern emerged from
• Pattern - the name of the pattern the underlying trading opportunity is based on
• Length - the number of candles the opportunity is based on
• Identified - date and time when the pattern emerged.

In this case the current EURUSD price is 1.07240. Within two days its price is expected to reach 1.05970.

By pursuing this trading opportunity and opening a 1 lot EURUSD short (sell) position, you can potentially gain about 127 pips or 1270 USD of profit.

Currently estimated to be up to 80% correct, Autochartist Market Reports is a simple beginner-friendly tool that allows you to apply technical analysis to your trading with no effort or time required.

Fundamental analysis is the study of how economy of the country affects its currency rate, which mainly involves interpretation of statistical reports and economic indicators. Hundreds of economic news and reports released daily allow, to some extent, to predict whether the currency value will appreciate or depreciate in future and when reversal of the current trend may be expected.

Date and time when a particular report or indicator due to be released is scheduled in advance and can be found in the Economic Calendar. It is the main tool analysts use to determine the impact news may have. It also shows experts forecasts of the data to be announced.

Central Bank and Interest Rates

Since a central bank is often responsible for handling country's financial matters, the policy it is pursuing has a profound impact on the currency rates. For instance, to increase the value it can buy the currency and hold it in its reserves. In order to decrease the rate, the reserves are sold back to the market.

When an increase in consumer spending is required, the Central bank may lower interest rate on the loans it provides to commercial banks. If it aims to slow inflation, the interest rates are increased in order to reduce spending.

Depending on whether is it more concerned on inflation or growth, central bank's policy can be referred as to "hawkish" or "dovish". The former usually leads to higher interest rates, while the latter commonly signifies that the interest rate are about to be decreased.

Inflation

Inflation evaluates how fast the price of goods and services is rising and has a direct impact on the supply and demand for currency and thus affects its rate. The major inflation indicators are:

• Gross Domestic Product (GDP)
  GDP evaluates all goods and services produced during the reporting period. An increase in GDP signifies economy growth and therefore it is used to measure inflation.
  Released: advance - four weeks after quarter ends; final - three months after quarter ends; time: 15.30 EET (14.30 EEST).
• Consumer Price Index (CPI)
  CPI measures the value of defined basket of goods and services expressed as an index. When compared to the previous results, CPI shows how consumer buying power has changed and how it was affected by inflation.
  Released: Monthly, approximately mid-month; time: 15.30 EET (14.30 EEST).
• Producers price index (PPI)
  This indicator shows the changes in the prices that producers received and allows to evaluate how the consumer level price could be affected.
  Released: second or third week of the month; time: 15.30 EET (14.30 EEST).

Employment

Employment level directly affects currency rate for it impacts future and current spending. An increase in unemployment is believed to signify that the economy is growing weaker, thus the demand for its currency is falling. On the contrary, strong employment numbers are a sign of growing economy that usually means that the demand for currency will continue to increase.

Below you will find the most important employment reports from different countries:

• US Non-Farm payroll - an assessment of employment trends with the exception of government, non-profit organisations and farm workers.
• US Unemployment Insurance Initial Claim - the number of new unemployment benefits claims that measured the number of newly unemployed.
• Labor Force Survey - measures the changes of current employment rates in Canada.
• Wage Price Index - indicates changes in wages in Australia.
• Claimant Count Change - measures Unemployment Insurance claims changes from one reporting period to another in the UK.

Retail Sales

This indicator is important since consumer spending accounts for a substantial part of the economy. It measures the total amount spent on various groups of goods and services during a certain period of time. Retails sales growth shows that the consumers have extra income to spend and are confident in the country's economy.

Released: Monthly, approximately mid-month; time: 15.30 EET (14.30 EEST).

Home Sales

Growing housing market is one of the major indicators of a strong economy. Mainly based on the consumer confidence and mortgage rates, home sales reports show the aggregate demand among consumers for housing.

Released: Fourth week of the month; time: 15.30 EET (14.30 EEST).

Wholesale Trade Report

Wholesale Trade Report is based on the survey of 4500 wholesale merchants conducted on a monthly basis that includes statistics on monthly sales, inventories and inventory to sales ratio. It indicates imbalances in supply and demand and may help to predict quarterly GDP report, however, does not strongly impact the market.

Released: On or around the 9th of the month; time: 17.00 EET (16.00 EEST)

Balance of Payments (BOP)

Balance of payments summarizes all transactions for a certain period of time between country's residents and non-resident. All transactions are subdivided into current account that includes goods, services and income, and capital account comprising of transactions in financial instruments. These data are crucial in formulating national and international economic policy.

Released: around 19th of the month; time: 15.30 EET (14.30 EEST)

Trade Balance

The report shows the difference between a country's imports and exports and is a significant part of balance of payments. Trade deficit means that the country imports more than it exports, while trade surplus indicates the opposite. Surplus or declining deficit often signifies increased demand for the currency.

Released: around 19th of the month; time: 15.30 EET (14.30 EEST).

Risk management, also known as money management, refers to a number of trading techniques employed to lessen risk exposure. Being affected by various factors, currency rates may be quite volatile at times, thus protecting your account against adverse price fluctuations is an essential part of a trading strategy.

The core concept of money management is to avoid risking more than 1-2% of personal funds on any single trade. This principle may greatly reduce risk exposure: provided that only 1% of initial deposit is at risk, even after several losing trades you are likely to retain the majority of account balance.

Risk to reward ratio denotes the potential profit in comparison to the amount you may lose for any given trade. For example, when you risk 100 USD on position to potentially gain 300 USD, the risk to reward ratio is 1:3.

Ratio of 1:2 is considered the minimum one should aim for as only a third of positions would need to be profitable to remain break even.

Potential profit and loss can be defined through Stop Loss and Take Profit levels.

Stop Loss and Take Profit are orders to close the position when price reaches a certain predefined level. Stop loss or Take Profit level can be identified with various technical analysis tools:

• Support and resistance: for a short position stop loss is usually placed just above resistance level, while a long position often has stop loss set a little below support level.
• Trend lines and channels: stop loss price is commonly placed outside the channel, above or below the trend line.

Let's say you open 1 lot EURUSD Buy order at 1.12097. To achieve risk to reward ratio of 1:2, you can set stop loss level at 1.12077 (2 pips) and take profit level at 1.12137 (4 pips). Thus, you will only be risking 20 USD to gain 40 USD. Depending on your initial deposit, you can set SL/TP levels even further, as long as your risk is below 1-2% of the personal funds.

It is important to note that the price of each pip depends on the trading tool and the volume of your position.

Trailing Stop can be used to adjust stop loss level automatically whenever the price moves in a favorable direction. Along with reducing the risks, it may also eventually lock in the profit already gained.

Keep in mind, however, that neither stop loss nor take profit is guaranteed: when the market is volatile or during a price gap your order may be executed at a different price than expected.

What is ECN/STP trading?

It is a broker's business model in which clients' orders are sent directly to one or several liquidity providers to be executed on their end at the liquidity provider. There may be many liquidity providers (that is, banks, aggregators, other financial institutions). The more liquidity providers a broker has in general, the better the execution for its clients can be (more liquidity available generally means less price slippage). What makes a true STP (Straight through processing) broker is that the STP broker doesn't internalise the orders, but sends them to liquidity providers, acting as an intermediary between their client and the real market.

Do you have requotes?

No, we don't. Any broker who re-quotes your orders is a dealing desk broker. A requote occurs whenever the dealer on the other side of the trade (whether human or automatic) sets an execution delay during which the price changes. Therefore the broker can't open your order and sends you a message that the price has changed. That is, a requote. You usually get a new price which can be different from the one you requested (especially when the market is volatile). Often the requote is not an improvement for the client. OctaFX doesn't have any requotes simply because we don't have a dealing desk, human or automatic (a piece of software usually referred to as a virtual dealer, automatic dealer and so on).

Can I scalp? Do you allow news trading?

Yes, you can. Unlike some brokers who prohibit scalping, OctaFX welcomes scalpers. Dealing desk brokers hold the other side of client trades, and have to decide whether to hedge or run their client's overall net position at any given moment. Therefore trading styles such as momentum scalping can make it difficult for dealing desk brokers to manage client positions, particularly as scalpers generally open and close trades relatively quickly.

Another potential issue for dealing desk brokers is that scalpers generate a proportionately large number of requests to trade at the same time during busy periods, for example during the release of key economic data, which above a certain trade size are generally handled individually and can lead to an increased number of requotes for clients.

OctaFX are not a dealing desk broker. Instead all the trades are passed to our liquidity providers. The larger the volume of orders to trade we receive, the better it is for us, as we receive a commission based on trade volume.

How do I find out if my broker is a dealing desk?

Indicators could be:

• A direct or indirect prohibition of scalping, news trading, or some other similar strategies
• Fixed spreads
• So-called "guaranteed" stop orders
• A possibility of requotes

If you encounter any of these, the broker is quite likely to be a dealing desk broker. Dealing desks brokers (also known as "market makers") create their own markets based on the underlying market. NDD (No Dealing Desk) brokers such as OctaFX act as intermediaries between the trader and the real market, and receive a defined and transparent commission for it.

How do dealing desks earn?

They earn the difference between overall client losses and client gains that aren't hedged. In general dealing desk brokers experience a two way buying and selling client flow in a given market. Dealing desk brokers need to manage the net position of the flow, whether long or short, at any given moment. Depending on the broker, a portion may be hedged in the real market and the remaining exposure, up to the brokers risk limit, run naked as a trade of the broker in its own right.

How does OctaFX make money? OctaFX needs profitable traders? WHY?

OctaFX receives a commission from its liquidity providers for each transaction.

We receive our liquidity from a wide range of liquidity providers around the world. Our system is designed to offer the best aggregated prices of our liquidity providers direct to our clients. When you open a new order, you get the best available bid (or ask) price which is available from our liquidity providers with our commission already included in the spread you see on the trading platform. Therefore we are interested in you trading more, and staying with us as our client. Therefore it's in our interest that your trading is as profitable as possible.

You have no requotes. WHY?

Putting it simply, we don't requote you because we have nothing to do with the quotes (i.e. the prices you see in your trading software). The order is filled when a price from one of our liquidity providers is available. It is important to understand, however, that we do not guarantee that your order will be filled exactly at the requested price; our system is setup to fill it by the next best price from another liquidity provider. But, again, your order will not be requoted, since we are more interested in your profitable trading.

Can liquidity providers see my orders?

No, they can't. From their point of view they see only one customer, that is, OctaFX. You remain anonymous to them in all cases.

The chart went through my limit, but my order wasn't opened. What's going on?

It is a possibility, and usually happens due to a lack of liquidity at a given time. For example, a number of clients place sell limit orders above the market prior to an important news release with a total volume of 1000 lots. When the news is released, the market goes up 50+ pips to where the chart hits the price of all these orders and requests are electronically made to open a number of orders worth 1000 lots in total. It may happen that only 200 lots are available from the liquidity providers at this price and at this given time. In this case the first 200 lots out of 1000 will be filled, while the remaining 800 will not be filled (no available liquidity) and will remain pending until the price hits the level or beyond again.

Do you allow Expert Advisors (EA's)?

Absolutely. All Expert Advisors (EA's) are welcome.

What is slippage and why does it happen?

Slippage is a slight order opening price movement which is a result of lack of liquidity (when it's already taken by other traders' orders). It may also happen during market gaps.

Slippage is an order execution price difference which can be a result of a lack of liquidity or speed (Other traders have got there first). It may also happen due to gaps in the pricing of a market.

It is important to understand that OctaFX do not guarantee that your order will be filled exactly at the requested price; our system is setup to fill orders with the next best price available from the liquidity providers when slippage occurs.

So during these news times it's possible that there won't be liquidity available at the price you requested. For example you want to open a 5 lot Buy order, EUR/USD, price is 1.30000. Now, in this case we can see the following liquidity available on the basic illustration above:

Provider 1: price is 1.30010, 20 lots available

Provider 2: price is 1.30005, 5 lots available

Provider 3: price is 1.30000, 1 lot available

In this case your order will be offset with Provider 2, since he has the best price and enough liquidity to fill your order. And the open price will be 1.30050, which is 0.5. pips away from the price you requested. But, again, your order will not be requoted, since we are more interested in your profitable trading.

Why don't you guarantee stop orders?

In the real market there is no such thing as a "guaranteed stop". They are offered by dealing desk brokers who create synthetic markets based on the underlying market. As dealing desk brokers generally run a proportion of the net client positions as an in-house trade against the clients, and the market is an in-house market, they have greater flexibility on stops. Guaranteed stops are typically set by the client at point of execution, can rarely be moved and incur a charge of additional spread to enter the initial trade.

In the real market any stop order is considered pending until its price is hit. After that the order is offset to a liquidity provider which may or may not involve slippage depending on the available liquidity. Therefore it's impossible to "guarantee" stop orders in the real market.

Technical analysis is a method of price forecasting that involves pattern recognition on a chart. Analysts employ various tools to identify levels of support and resistance, breakouts and breakdowns, trends and trading ranges. Knowing the strategies basics, one can likely find oneself able to implement some of the key elements into a self-designed strategy.

Charts

A chart is a graphic representation of how the price changes within the set period of time. In almost any trading platform you will find candlestick, bar and line chart types. All three are based on the same data but display them in different ways.

• Line chart is a simple and basic type that only shows closing prices.
• On the bar chart you can observe open, high, low and closing prices for each period of time. The vertical line is created by high and low prices, the dash on the left shows the open price and the dash on the right represents the close price.
• Perhaps the most popular type, candlestick chart shows open, high, low and closing prices during the set period of time as well. Each candlestick consists of the "body" created by open and closing prices and the "wicks" that show high and low prices for each period. This type of chart is usually displayed in two different colours - one represents bullish candlesticks while the other represents bearish. Bullish candlestick means that close price was higher than open price while bearish candlestick represents the opposite - close price was lower than open price.

Note, however, that all of the charts described above show bid price only and you should not rely on them to identify where the ask price was at any given time.

Timeframes

Time frame denotes the amount of time it takes to complete each candle or bar and how much data it includes. For example, time frame H1 shows how much the bid price fluctuated within an hour. You can customize time frame for each chart in your trading platform.

In general, shorter times frames are believed to produce more signals, however a significant part of them tends to be false. In contrast, longer time frames may provide relatively less signals but they will be stronger and more significant for a particular trend.

Here is how the same price data look when you change periodicity:

Trend

Identifying the trend or the direction the market moves towards is one of the basic techniques in the analysis. Occasionally it can be determined by simply looking at the chart. Other cases will require more profound analysis of the price data.

There are two major types of market trends:

• Uptrend - a series of escalating highs and lows;
• Downtrend - a series of lower highs and lower lows on chart.

A lack of any particular direction is occasionally referred as to sideways or horizontal trend.

To identify a trend you can simply draw a straight line in the direction of the price moves on a chart. "Trend lines" are available in almost every trading platform and may be considered one of the beginner-friendly technical analysis tools. Another option is a technical indicator that can determine and display a trend when added to a chart.

Support and resistance

Finding support and resistance levels allows to determine when and in which direction should a position be opened and the potential profit or loss may be. Support is the price level which an asset has difficulty going below and resistance denotes the level which the pair has a difficulty rising above. These levels, however, do not always hold and a "breakout" or a "breakdown" occasionally occurs in one direction or another.

Support and resistance levels form a trading range - a horizontal corridor that contains price fluctuations during a period of time.

A price movement through the identified level of resistance is referred to as breakout. Its bearish counterpart is called breakdown - a price movement through the identified level of support. Both breakout and breakdown are usually followed by increase in volatility.

To identify support and resistance you can simply mark the levels where the price had difficulty rising above and falling below in the past. Various technical indicators (i.e. Fibonacci or Pivot Points) can determine and draw the levels on the chart automatically.

Chart patterns

Chart pattern is a distinct formation that predicts future price movement or creates a buy or sell signal. The theory behind it is basedon the assumption that certain patterns observed previously indicate where the price is currently headed.

• Head and Shoulders is considered to be one of the most reliable chart patterns which signifies that the trend is about to change. There are two types of this pattern - head and shoulders top that shows that upward movement may soon end and head and shoulders bottom, which means that downtrend is about to reverse.

• Doji - is a candle with a short body (which means that the candle opened and closed at almost the same price) and relatively long wicks on each side that show market volatility during a period of time. Doji usually signifies market indecision since neither bullish nor bearish trend prevails.

• Bullish hammer - a candle that usually occurs at a turn of the downtrend. This candle must have wicks twice as long as the body.

• Hanging man - bearish counterpart of bullish hammer that has a shorter body and long wicks and is usually found at the before the reversal of the uptrend.

• Another popular chart pattern is the triangle. There are three types of triangles: symmetrical, ascending and descending. The symmetrical triangle is a pattern where two trend lines that meet at one point and neither of them is flat. This pattern usually confirms the direction of the current trend. In an ascending triangle, the upper trendline is flat and the lower one is headed upwards. This pattern is considered to be bullish and may predict a breakout. Descending triangle has a flat lower line and the upper trendline is descending. Descending triangle is a bearish pattern signifying an upcoming breakdown.

Indicators

One of the tools that allows to predict or confirm trends, patterns, support and resistance levels or buy and sell signals is a technical indicator. It is a software developed specifically for your trading platform that makes calculations based on price movements and volatility. Both cTrader and MT4 have a wide range of readily available indicators, however you can always download a custom one or even create it yourself.

Simply adding an indicator to a price chart may greatly extend your understanding of the current market situation and help to decide in which direction you should be trading. For instance, to identify support and resistance levels, such indicators as Fibonacci or Pivot Points may come in handy. Momentum indicator will help you to measure the rate of price change and Zig Zag can be used to predict when the trend will be more likely to reverse.

Forex trading strategies vary in time and effort required, analysis and tools they are based on and, most importantly, market situation they suit. Getting familiar with several strategies may prove beneficial for your trading.

Below you will find a brief description of several commonly used trading strategies. Note, however, that you do not have to follow them to the letter. Whichever strategy you choose, feel free to modify it whenever market situation dictates. Before applying a strategy to your real trading, you can test it risk free on a demo account.

Position trading

Position trading is a polar opposite of scalping: it is a long term strategy where trades can be open for days, weeks or even months. The main objective is to gain substantial profit by participating in a major trend. It requires a proper understanding of fundamentals and a deposit sufficient to sustain minor adverse price fluctuations.

When applying this strategy keep in mind thatpositions held for more than one day are subject to swaps or rollover fees. In MT4, swap is applied to all orders opened from 23.59 to 00.01 (server time). Forex calculator available on our website provides swap charges for both long and short positions.

In cTrader, however, fee is applied when you keep an order open from Friday to Monday.

Hedging

Hedging is a strategy that is often employed to reduce the risk exposure in case of adverse price fluctuations. A hedge trade is opened in opposite direction to a primary position; required margin in this case is divided among the two orders.

However, even when the trades are hedged you still may be at a risk of suffering significant losses. Since buy orders are closed at bid price and sell orders are closed at ask price, spreads widening can increase the loss for both long and short position.

News Trading

Hundreds of economic news are released around the world every day. While some of these news events have little to no impact on the market, others are followed by sharp moves and increased volatility. News traders seek to predict how the market is going to react to a particular event.

Economic calendar is the major tool a news trader employs to track the upcoming releases and predict how can they affect the market. All events scheduled for the current or the following week can be filtered by impact, country, category and time. Since currencies are always traded in pairs, news from both countries involved should be taken into consideration.

In the Economic Calendar you will also find a forecast provided by a financial news agency that conducted a survey among a number of economists regarding their opinion on a particular event. The more actual release data differ from the forecast, the sharper move you can expect.

Scalping

Scalping is a trading strategy that allows you to benefit from minor price fluctuations that occur throughout trading day. Scalpers aim to gain several pips per each trade rather than receive large profit on one position.

Scalping is often considered one of the most profitable strategies since smaller market moves are usually easier to obtain and are more frequent than larger ones. Moreover, it can lessen the risk exposure as the trades are relatively short term. However, it is still recommended to combine it with various risk management techniques and factor in the volatility increase that may occur during major news releases.

Scalpers frequently implement basic technical analysis into their strategy to identify short term market trends. For example, a trader can open a position with 2 pip stop loss and close it once it has gained 3 to 5 pips in profit if the price is approaching support or resistance level, a pivot point or Fibonacci level.

Another key aspect to consider before applying this strategy is the choice of the broker. A number of companies simply prohibit scalping or restrict minimal order length. Tight spreads and low latency in execution are more preferable for those who choose this strategy. OctaFX competitive spreads along with no trading commission and market execution under 0.1 second provide a suitable environment for scalpers.

GRID TRADING

Grid trading strategy involves placing pending orders at regular intervals above and below a predefined price level. It does not require definitive forecasting of market direction and can be easily implemented when there is no clear trend.

Martingale

Originally introduced in the 18th century, martingale was a betting strategy based on probability theory. The underlying principle it is to double the bet anytime you lose; eventually one winning bet will cover all previous losses. It follows the same principle when applied to forex trading: the volume is doubled whenever the trader using this strategy fails to gain profit. In case the market trend is against the trader, he or she increases the volume twofold in anticipation of a breakout or reversal.

Let say EURUSD is currently at 1.09450:

Martingale requires a relatively large deposit that can sustain the potential losses. Moreover, this strategy might involve substantial risk and you may experience a stop out before recovering your losses or turning them into profit.

We would like you to be aware that even when applying the most profound and complex system you may encounter situations where it fails to predict the direction of the market and thus provides false trading signals. Always spend enough time developing your trading strategy before applying it to real trading.

Currency pairs and rates

All currencies in forex trading are quoted in pairs, one against another. Their names are given as a three letter abbreviation known as ISO code, where the first two letters represent the country and the third one is the name of the currency.

Depending on how commonly they are traded, currencies can be divided into three categories:

• The most traded ones are usually referred as to majors and include the US dollar, the euro, the Great Britain pound, the Japanese yen, the Canadian dollar, the Swiss franc, the Australian dollar and the New Zealand dollar. Major pairs involve the US dollar and another currency from the list above, for example, EURUSD, USDJPY, USDCHF
• Cross pairs comprise of two major currencies neither of which is the USD dollar, for example EURGBP, EURCHF, EURJPY, GBPCAD, GBPAUD and CHFJPY.
• Exotic pairs consist of a major currency and another less traded one, for instance EURTRY, USDSEK, USDDKK, USDHDK, USDSDG. Exotics tend to be less liquid and to have less tight spreads.

Currency rate always represents the value of the base (first) currency expressed in the quote (second) currency. In Forex there are two prices given - Bid and Ask- the former shows how much of the quote currency is required to sell 1 unit of the base currency and the later represents how much will be required to buy it. Ask price is higher than bid. The difference between two prices is referred as to spread, which is usually measured in pips or points.

Previously, when only 4 digit precision was available, pip, or percentage in point, was the smallest unit to measure price fluctuations. With the introduction of more accurate 5 digit precision pricing the smallest unit of price change is called point, however 1 pip is still calculated by 4th digit.

For example, if Bid price is 1.11443 and Ask price equals 1.11449, spread is 0.6 pips or 6 points.

Orders

Direction wise, there are two types of trades:

• Buy or long positions are opened at ask price and closed at bid price;
• Sell or short positions are opened at bid and closed at ask.

Each of those can be opened either as a market or as a pending order:

Closing order is always opposite to the opening one, that is, by closing a long (buy) position you sell the amount back and vise versa - when you close a short (sell) position, you buy the amount you previously sold.

A position can either be closed manually at the current market rate or when a certain price level is reached, through Stop Loss and Take Profit orders.

• Stop loss is intended to limit the losses and is set above the open price for short positions and below the open price for long positions.
• Take profit allows you to close a position when a certain profit is gained. Take profit level is below current Ask price for a short position and above current Bid price for a long position.

In order to gain profit you need to close long positions when the price goes up and close short position when the price goes down.

Leverage, volume, required margin

To open a position you need to have a certain amount in your balance, which is commonly referred as to required margin or just margin. The amount depends on the trading tool, volume and leverage.

• Trading tool is basically anything you can trade with, including currency pairs, spot metals, oil or indices.
• Volume is the amount you buy or sell measured in lots. 1 standard lot equals 100 000 units of the base currency. Depending on your balance and account type you can also trade mini lots (0.1) and micro lots (0.01). Volume defines the pip price, that is, the higher your volume is, the more significant each price movement will be. For example, pip price for EURUSD 1 lot is 10 USD, for EURUSD 0.5 lot is 5 USD. You can use this tool to calculate pip price for any position.
• Leverage is a virtual credit provided by the company. The higher your leverage is, the lower marginal requirements will be. For example, when you use no leverage (ratio 1:1), you will need 100 000 EUR to open 1 lot of EURUSD; if your account leverage is 1:200, only 500 EUR will be required. The maximum leverage OctaFX offers is 1:500, that is, you will need only 200 EUR to open 1 lot.

Note that if you have a USD account, the required margin will be calculated as follows:

(Current price × Volume in lots × 100 000 units) / leverage

For example, if your leverage is 1:200 and you open 0.5 lot EURUSD order at 1.12931, required margin is

(1.12931 × 0.5 lots × 100 000 units) / 200 = 282.33 USD

Required margin is always calculated automatically by the platform. To check how much approximately will be required to open a certain position, you can use our Forex Calculator.

Balance, equity, free margin, margin level

When you open a position, note that your balance remains intact. In fact, it only includes deposits, withdrawals and closed trades.

The amount of required margin will be deducted from "Free margin" field, which also comprises of your floating profit or loss and deposit bonus if you claimed one. Free margin is the funds you can open positions with. Note that when you open a hedge order with the same volume, no margin will be required; however, if your free margin is negative, you will not be able to open an opposite position.

Free margin = balance - required margin + floating profit / loss (+bonus)

Another value affected by your profit or loss is equity, which is calculated is follows:

Equity = Balance + floating profit / loss (+bonus)

Equity is important because it, along with the required margin, determines your margin level:

Margin level = Equity / required margin × 100%

If you margin level falls under 15%, your open positions will be mandatory closed starting with the trade that has the highest floating loss.

Balance, equity, free margin and margin level are calculated automatically by the platform and available anytime in the "Trade tab".

How to start trading

Basically, all you need to do to start trading forex is to open an account and download and install trading platform or sign in to the MT4 or cTrader web based terminal.

Demo account allows you to practice risk free, while with a real account you will be able to experience real market with minimum deposit as low as 5 USD.

If you are not familiar with the trading platform, make sure to check our Manuals section for detailed instructions.

More information on how the forex market works, what tools and techniques you can employ to predict the direction of the prices or strategies you can apply is available in the Forex Basics section.

If you have any questions regarding the market, OctaFX website or trading conditions you can check our elaborate and comprehensive FAQ.

Whenever you encounter an unfamiliar term, word or market phenomena, you can check its definition and description in the Forex Glossary.

Our award winning Customer Service is always glad to answer any questions you have and is available 24/5.