What is a Cross Currency Pair

In the early times, it is not possible to trade a foreign currency to another currency without first converting it into U.S. dollars. Say for example, if a trader wants to trade his euro for pounds, he should first convert the euro to U.S. dollars before he will be able to trade it into pounds.

Luckily, this is just a thing of the past. With the existence of the cross currency pairs, traders could now skip the process of having to convert their currencies for U.S. dollars, and they can now simply trade it directly to the currency of their choice.

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Why Trade Cross Currency Pairs?

Traders can take advantage of the cross currency pairs to trade a good performing currency against a bad performing one and gain profit from it.

Say for example, if a tough economic statistic came out of Australia, this calls as a good time to buy AUD. The first thing that might come into your mind is to buy the AUD/USD pair. However, what if the U.S. is also currently undergoing a strong economic development? Then you might not be able to earn a profit from the AUD/USD pair as it may appear flat.

What you can do is to match the Australian dollar against the currency of an economy that is currently not performing well.

With the existence of cross currency pairs, it is now possible to do this.

Say you’ve made some analysis, and found out that the economy of Japan is currently not performing well.

What are you going to do? If you’re a sane trader who’s looking to make profit out of trading, then you will jump into this opportunity and go long AUD/JPY. This way, you can take advantage of this situation to add more money to your pocket.

Because of the existence of cross currency pairs, you are now able to match the currency of a well performing economy against a worst performing economy as long as a cross currency pair exists for them and your broker is able to offer it for you.

Learn more about the forex market and further understand what is forex by reading our forex educational articles. See who the best forex brokers are, visit Wibestbroker.com to find out!

What is Swing Trading

So, we’re finished talking about the day trading strategy, and we’ve found out that these kind of trades usually lasts only for a single day. These trades are usually placed and closed on the same trading day. Let’s now move on and discuss another trading style called Swing Trading. This kind of trading strategy is a little bit longer-term than Day Trading, as it can last for a couple days.

Swing trading is acknowledged as a style of trading in which the positions are kept open for more than a single day. Swing traders usually last for two to four days, but it can last for as long as one to two weeks. Swing trading is preferred by most traders, especially in the stock and forex markets, as it usually takes several days to a couple of weeks to see enough price movement that can lead to a reasonable profit.

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Unlike day trading, this trading style doesn’t require you to monitor the market throughout the day, which allows you to spend your time on other activities. This style of trading is quite useful for traders who have a lot of things going on in their lives, especially those who are currently employed in a day job.

Since the trades last longer than a single day, larger stop losses are usually required to cope up with the volatility.

Swing Trading might work best for you if:

  • You prefer to keep your positions open for a couple of days
  • You don’t mind opening fewer, but more careful trades
  • You can remain calm despite of stressful market conditions
  • You can stick and trust your trading strategies and remain calm even when trades suddenly move against you

However, this trading style might not be good for you if:

  • You want to know the outcome of your trades right away
  • You become nervous and anxious when trades suddenly go in the other direction
  • You are impatient

Read our forex educational blogs to learn more things that can help you develop your forex trading strategy. See who the best forex brokers are, visit Wibestbroker.com to find out!

What is Day Trading in Forex

We’ve previously talked about a trading strategy called “scalping” on our previous article. In this article, we will discuss about another form of trading called day trading. Day trading has a slight similarity with scalping, although the latter focuses on a shorter term of trading.day trading.jpg

Unlike scalping, which places multiple trades in a day in an attempt to “scalp” small amount of profits several times, day trading usually takes only one trade a day and closes it at the end of the day. This form of trading can occur in any marketplace, but is most common in forex and stocks trading. Usually, day traders place their trades right when the day starts, then finishes the day with either a profit or a loss.

Day traders make their profit through small, short term price movements in the market.

However, day traders should be aware of the risks associated with day trading, and must carefully choose the proper entry and exit points to minimize their losses and to maintain enough capital to stay in the trading game.

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Day trading could work best for you if:

  • You prefer placing and closing your trades within the same day
  • You dislike leaving your orders open overnight
  • You actually have the time to monitor the market throughout the day
  • You want to know whether you’re making profits or losses before the day ends.

However, it will not be a great choice if:

  • You prefer longer term of trading
  • You like to take your time analyzing the market condition
  • You don’t have the time to monitor the market throughout the day
  • You are currently employed

Take some time to read our educational forex-related articles to improve your trading strategy and learn more about the forex market. See who the best forex brokers are, visit Wibestbroker to find out!

What is a Limit Order in Forex

We’ve recently talked about one of the most common forex order type –the market order. We’ve fully understood how it works in the forex market, and we’ve also determined the risks associated with placing the said order.

We found out that placing a market order puts us in a risk of accumulating a negative slippage (an event wherein we’ll have to pay more than what we expected). So you might now ask, how could we prevent this event from happening?

This is where we will introduce you the limit order. First and foremost, what is a limit order?  A limit order is a kind of order that is used to buy a set number of currencies at a specific price or better. Basically, this kind of order prevents the risks of any slippage, as your trade will only execute once it reaches the specified price level.

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How Does it Work?

Say for example, you want to buy Japanese yen at $108. The current exchange rate of USD/JPY is $109, so you decided to place a limit order of $109, in hopes that the yen will go weaker against the dollar. The exchange rate may go up or down, but you can be sure that your order will only get executed once it reaches your predetermined price.

Limit orders can also be used in selling currencies. For instance, you might want to sell your Japanese yen for $110 but the current market price is only $109. You can place a “sell limit order” of $110 to ensure that your order will only be filled once the price has reached your desired level.

Limit orders are very useful in forex, mainly because the forex market is very dynamic, and the prices are changing on a regular basis. However, the very disadvantage of this order type is if the market price doesn’t reach your target price, then your order won’t get executed and will be cancelled. Also, some forex brokers may charge a higher price to execute a limit order compared to what they charge for a market order.

By using limit orders, you’re guarding yourself from negative slippages, preventing yourself from paying too much for a currency, or selling a currency at an unacceptable rate.

Learn more about the forex market and further understand what is forex by reading our forex educational articles. Do you want to find out who the best forex brokers are? Then go and visit Wibestbroker.com!

Different Forex Order Types

In our previous article, you probably found out how do the orders get executed in the forex market. Now, we will introduce you the different types of forex orders, to give you a brief idea on how these order types work in forex trading.

Market Order

A market order is an order that gets executed at the current market price. Basically, this type of order is placed with no specified price, so the total transaction cost greatly depends on what is its price at the time the order is being executed.

Limit Order

A limit order is a type of order that will only be filled at the specified price or better. Placing a limit order gives the trader the opportunity to set a “limit” on the price he/she will have to pay for the transaction, eliminating the risk of a negative slippage. However, despite all of its advantages, this type of order does not guarantee order execution.

Stop Order

This type of order is used when the trader only wants his/her order to get executed once the market reaches a certain level. At the time that the market reaches the desired level, the stop order will become a market order.

Stop-Limit Order

This type of order is basically a combination of a stop and limit order. The stop-limit order assures that the trader has a specified price (to prevent slippage), but the order will only be placed once the market reaches the desired stop price. The stop price and the limit price can be different. There is, however, a possibility that the stop price will be reached, but the limit price will not. In this case, the order will not be executed.

In our next forex articles, we will discuss these different forex order types one by one so we can have a broader knowledge about them.

Read our forex tutorials posted in our blogs to learn about forex trading in the most simplest way. See who the best forex brokers are, visit Wibestbroker.com to find out!

Can Slippage Be Avoided in Forex Trading

In our previous article, we’ve talked about what slippage is, what are the factors that causes it,  and how does it affect your forex trading experience. This article is somehow related to the previous article, but now, we will talk about how to avoid slippage in forex trading.

So the main question is, is it really possible to avoid slippage in forex trading? The answer is Yes. There are some order types that can control the specific amount of price you can spend in buying a certain security, however, that doesn’t guarantee that the trade will get executed.

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Place a Limit Order instead of Market Order

By placing a “limit order” instead of a “market order”, you’re eliminating the chances of acquiring a negative slippage in your current transaction. Market orders are executed based on the current market price, and since the forex market is a liquid market, the prices of the currencies are changing on a regular basis – causing slippage to occur.

Limit orders, on the other hand, are only fulfilled at the trader’s requested price or better. In the event that the current available price is worse or does not match the trader’s specified price, the order will not be executed and will go back in the waiting mode.

Placing a limit order guarantees that the trader will not have pay more than he/she is willing to.

Place a Market Range Order

Placing a “market range” order grants the trader the ability to specify an acceptable price range in which your order can be executed. If the current price doesn’t match your defined price range, then your order will be cancelled and no trade will be opened. This strategy minimizes the amount of slippage you can encounter, and ensures that the transaction price you will have to pay will not exceed the price range you have specified.

Learn more about the forex market and further understand what is forex by reading our forex educational articles. See who the best forex brokers are, visit Wibestbroker.com to find out!

How Are Orders Executed in Forex

Do you ever wonder what actually happens when you execute an order on your online trading account? As a matter of fact, most investors and traders don’t really fully understand what happens whenever they click the “enter” button in their trading accounts.

If you assume that your order gets filled in an instant right after you execute it in your trading account, then your assumption is incorrect. Truth is, you might be surprised with the countless amount of ways your order is filled and the reason there are some time delays. How and where your order is executed greatly influences the total cost of the transaction and the amount you pay for the security.

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Most traders and investors often have this wrong impression that whenever they execute a trade, the order automatically goes straight to the securities markets. Unfortunately, this is not the case. When a trader places a trade, whether through the phone or an online account, the order goes straight to a broker. The broker will be the one who is responsible in deciding which path will be the most appropriate way for it to be executed.

There are various methods the broker can use to fulfill your order. How fast the order is executed will greatly depend on the type of order you are using.

Market Orders

Placing a market order allows your broker to execute your order immediately at the best available current price. Typically, this type of order gets executed rather quickly, as this type of order does not contain any restrictions on the buy/sell price or the time frame in which it could be executed.

Entry Orders

When the current market price does not appear acceptable for your strategy, placing an entry order might be the best way to go. When placing an Entry Order, you have to specify a price that’s above or below the current market price. Once the market price matches your entry price, your order attempts to execute as an At Market Order.

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There are two types of entry orders, namely the Limit Entry Order and Stop-Entry Order. A limit entry is an order placed to either buy below the market or sell above the market at a specified price.

On the other hand, a stop-entry order is an order placed to buy above the market or sell below the market at a specified price.

Learn more about the forex market and further understand what is forex by reading our educational articles. See who the best forex brokers are, visit Wibestbroker.com to find out 🙂