What is a Breakout

If you are quite new in Forex trading, then it is the perfect time to learn some forex trading terminologies that you should understand to refine your trading strategies and increase your profitability in Forex Trading. In this article, we will discuss what “Breakouts” are, how to identify them, and how to act when you see one.

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A breakout is a movement in price through an identified support and resistance, then followed by heavy volume and increased volatility. The most common reaction of the traders when the price breaks above the resistance level is to buy, and they do the opposite when it breaks below the level of support.

Practically, a breakout is a term used to refer to a situation where the price breaches above the level of resistance and goes higher, rather than breaching the level of support and going lower. Once the resistance level is breached, it is identified as the next level of support when the security experiences a pullback.

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Most traders use chart patterns and other technical tools like for example, trendlines to pinpoint the securities that have the most possibility to break through a support/resistance level. To sum it all up, a breakout is the bullish counterpart of a “breakdown”.

Learn more about the forex market and further refine your strategies in forex trading by regularly reading our Forex blogs. See who the best forex brokers are, visit Wibestbroker.com to find out!

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What is Automated Trading System

 

In the forex market, there are various computer programs that have been developed to help the traders make their trading experience easier. These programs are called “automated trading systems”, and they are designed to automate the transactions, so traders won’t have to spend so much time in their trading transactions.

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These programs take away most of the work that is required to be done to trade efficiently. This is particularly helpful for those traders who doesn’t have much of a time to trade. These programs follow a predetermined set of rules which determine when to enter or exit the market, and how much money to invest in each trading product.

So, by using an automated trading system, even a trader who lack experience or knowledge can finally trade on their own. The automated trading system doesn’t guarantee profits 100% of the time, but it’s actually helpful, especially if you’re just starting your trading journey.

There are several automated trading systems available in the market, so it’s just a matter of choosing the most suitable trading system for you.

More than half of the market players use automated trading systems, or expert advisors, for their trades. Using an automated trading system basically removes the emotions in trading, such as fear and panic, which is usually the reason why most traders lose money and potential profits. By taking away the emotion in trading, traders will have an easier time to stick with their trading plan.

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Most automated trading systems are user-friendly, so you don’t have to spend so much time to learn how to use it. However, it is important to carefully review the functionality of the system first and evaluate if it fits your trading style before choosing an automated trading system.

Also, it is also important to understand the risks associated with using an automated trading system.

Learn more about the forex market and further refine your trading strategies by reading our forex related articles. See who the best forex brokers are, visit Wibestbroker.com to find out!

Market Execution vs Instant Execution

If you have been trading in the forex market for quite some time now, you might have noticed that your orders are often not executed at the exact same price you specified.

You might wonder if you are being cheated by your broker, or it might be a result of a bug in your MT4 platform.

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Fortunately, those are not the reasons for this occurrence. These are quite normal in the financial markets, especially in the forex market, where the price can actually move faster than the speed of order filling. This fact is what usually causes the discrepancy between the price you specified and the price your order is filled.

Brokers usually uses two different methods in executing your forex order, namely the Market Execution and Instant Execution.

If your broker uses market execution, your order will be filled at the next available market price. The price in which your order will be filled might appear different or worse than the price displayed in your trading platform, mainly because the process between the time you click on your computer to the moment it is executed on the server side would take some time, and by the time that your order is executed, the market prices might have already moved.

The difference between the price you specified and the price your order is filled is called slippage.  For example, your trading platform is displaying a price of 1.1100 for the EUR/USD pair. You clicked the “Buy” button as soon as you saw that price on the screen. However, because of the fast movement of the market, the price moved to 1.1110 before your order was filled. That means once your order is executed, it will be filled with a price of 1.1110 instead of 1.1100, since that is the current available price. You will not be able to place stop loss and take profit orders during this time, and only until you’ve established a position in the market will you be able to do so. If you’re using the MT4 platform, you’ll notice that the boxes intended to set stop loss and take profit orders are greyed out. Market execution is offered by most types of forex brokers, most especially the STP / ECN type of broker.

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Meanwhile, if your broker uses instant execution, your order will be filled at the price you specified if it is available at the time your order is to be executed. Unlike market execution, which will execute your order at the current available price no matter how large the slippage is, instant execution will not execute your order if the price is undesirable. With instant execution, you will be asked to set a maximum deviation, which means you have the control over the amount of slippage that you think is acceptable, and your order will only be filled within this range. And since these orders are only filled at a predetermined price, you are able to set stop-loss and take profit points. This kind of execution is usually used by dealing desk brokers.

Each of the execution method has their own advantages and disadvantages, and the type of execution that is more profitable will largely depend on your trading strategy and style.

Enhance your knowledge about forex trading and further improve your trading strategies by reading our educational articles. Find out the list of the best forex brokers by visiting our official website – Wibestbroker.com.

What is Social Trading

The market is continuously evolving through the years, and so does the methods of trading. There are a lot of new trading methods that have been introduced, and social trading is one of them.

You might wonder what social trading is and how does it work in forex markets. Luckily, this article is made to explain to you what social trading is all about.

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Social trading is a new method of trading, giving the users the opportunity to gain instant and constant access to market-related information through the use of the internet. Unlike fundamental and technical analysis, the information users get from social trading are generated by other users, which gives the users the privilege to gain market insights without having to perform the analyses by themselves.

This is very helpful to those who are quite new to the forex market, especially to those who are not quite good in analyzing the technical or fundamental analysis. Basically, the traders who use social trading base their investment decisions on the information and analyses performed by others.

Basically, in a social trading community, the traders can view the trading activity of other traders, and they can use this information to refine and revise their trading strategies.

Traders also have the option to “follow” the traders which they find interesting so that they will be able to regularly monitor their trading activities. Users can search for those who are already successful in trading so that they will be able to find out what makes this trader successful. Then they can use that information to further enhance their trading plan.

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Lastly, the traders are also given the privilege to “copy” the trading activity of other traders, which lets you skip the process of having to analyze the market first. If you find a successful trader in your social trading community, you can decide to copy their trades then specify an amount of investment you want to allot in copying their trades. You will still have a full control of your account, and you can decide when to resume or pause your copy activity whenever you think it is appropriate for you.

Learn more things about the currency market and gain additional insights that can enhance your trading strategies by reading our educational forex blogs. Find out who the best forex brokers are, visit our official website – Wibestbroker.com.

Dollar Weakens Against the Yen

The dollar lost its strength against the yen on Monday, dragged lower by weakening Tokyo stocks and as Japan logs larger-than-anticipated trade surplus.

The U.S. currency slid lower by 0.5 percent at 109.720 yen, retreating from a three-week high of 110.59 reached on Friday.

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Monday’s data displayed a much larger trade balance, which was 823.5 billion yen in April compared to the economists’ anticipated value for a 492.8 billion yen increase. This is the third straight month that Japan logged a trade surplus.

If the country’s exports surpass its imports, which is similar to Japan’s current situation, it is assumed that there is a large demand for its goods and its currency.

“The April trade surplus was due in large part to weak imports. Still, the data was enough to trigger yen buying,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

“The trade numbers came out against a political backdrop that does not favor Japan intervening to weaken the yen, thus making it relatively easy for participants to buy back the yen.”

At the meeting of the G-7 finance ministers, which ended Saturday, the United States warned Japan against competitive currency devaluation, showing a well known rift between the two countries on currency intervention.

The conflict over the currency policy dragged the Nikkei down by more than one percent, adding further strength for the Japanese yen.

The dollar retained its strength against other major currencies, with the dollar index staying near a two-month high after markets last week moved to price in a higher possibility of an upcoming U.S. interest rate hike.

The dollar was last at 95.29, still close from its Friday’s 3-week high of 95.51. It increased 0.8 percent last week, ascending for a third straight week.

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The euro remains flat at $1.1231, still close to its 2-month low of $1.1180 touched on Thursday.

The positive outlook for the dollar, recent comments from the officials of the Federal Reserve, and the Fed’s meeting in April have influenced several analysts and investors to believe that there is a huge possibility of a U.S. rate hike in June or July.

More Fed officials are scheduled to speak later, including James Bullard, John Williams and Patrick Harker. Last Thursday, William Dudley, the President of the Federal Reserve Bank of New York, said that the economy of the United States could be strong enough to justify a near-term increase in the interest rates.

“Market odds of a June rate hike ended the week at around 30 percent, up from 4 percent a week ago. That is a significant repricing,” analysts at ANZ wrote in a note to clients.

“We continue to see June as very much a ‘live’ meeting.”

The recovering dollar has been largely hit by the commodity currencies, none more so than the Australian dollar, which was further dragged lower by the cuts in its interest rates.

The Australian dollar was last at $0.7230 after being as low as $0.7175 last week, a trough last seen more than 2 months ago.

Further enhance your knowledge about the current happenings in the forex market by following our forex-related articles. Find out who the best forex brokers are, visit Wibestbroker.com to find out!

Risks Associated With Short Selling

We’ve recently discussed about what short selling is and how does it work in financial markets. You’ve probably known by now that you can not only gain profit from rising markets, but you can also grow your money from falling markets.

Despite the profitability of short selling, it also entails a high level of risk. It is important to be knowledgeable about trading and be aware about the risks associated with short selling before you go and place a short sale order.

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Not intending to discourage you, but the risks associated with short selling are limitless. Here are some of the examples of the risks you have to face if you want to try short selling.

Losses are Limitless, Gains are Limited

There is no limit on how much a trader could lose in a trade, as the market’s price can keep increasing in value as long as the stock or security is doing good. However, the profit a trader can get from short selling is limited, as the stock or security’s price can never fall lower than zero.

You’re going against a powerful market trend

History is a clear proof that stocks are generally in an upward trend. In the long term, most stock prices rise in value. Basically, that means that even the company that showed barely any improvement in the recent years can be driven upward by an inflation.

So, whenever you place a short sale order, you’re basically trying to trade against the direction of the market.

You might be forced to buy back the stock at the most unfortunate moment

In short selling, the trader is basically given the privilege to decide how long he wants to borrow the stock or security before he returns them to the lender. This gives the trader the freedom to carefully evaluate the market and determine the perfect timing to buy back the stocks he borrowed at the lowest price possible.

However, if the lender suddenly feels like he wants to acquire the stocks back, he can basically “call away” the short seller and demand him to return the stocks back immediately. This forces the short seller to buy back the stock at the current market price, even if it means losing money and potential profits.

This event normally happens when the value of the stock continuously rises in value to the point that the lender starts to doubt whether the short seller will be able to repay the borrowed securities should the price surges further.

Learn more about the forex market and further refine your trading strategy by reading our educational articles. Find out who the best forex brokers are by visiting our official website – Wibestbroker.com.

What are Trend Lines

In this article, we will discuss about something that can help you to optimize your trading strategies and increase your potential profit in trading. We’ll talk about trend lines and how can it help you to reach success in trading.

First of all, what are trend lines? A trend line is used to gauge the reaction of the traders regarding the current fluctuations of the market prices. When carefully analyzed, this information can serve as a helpful tool for traders to easily determine the best time to buy or sell a certain security.

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There are two types of trend lines, let us identify and discuss them so you that you could have a further understanding about trend lines.

Uptrend Line

An uptrend line has a positive slope and is created by linking two or more low points. The following low point should be higher than the initial low point for the line to form a positive slope. Uptrend lines can act as a support level, meaning that the demand for the certain security is increasing despite the continuous increase in its price. This trend is expected to continue rising unless the prices start breaking below the trend line. When the prices start breaking below the uptrend line, it is more likely that a change in the trend could happen in the near future.

Downtrend Line

A downtrend line is the opposite of the uptrend line. It is formed by linking two or more high points, forming a negative slope. The succeeding high point should be lower than the initial high point for the line to form a negative slope. Downtrend lines can act as a resistance level, suggesting that the demand is continuously decreasing despite the continuous decline in the prices. This trend is expected to persist unless the prices start breaking above the trend lines. A break above the downtrend line can indicate a change of trend in the near future.

Learn more about the forex market and further optimize your trading strategies by reading our educational trading articles. Find out who the best forex brokers are by visiting our official website: Wibestbroker.com!

What is Hedging in Forex

Every trader in the forex market, regardless whether small or big, private or institutional, they are all looking for effective ways to minimize their losses and increase the chances of making profit. Luckily, there are several strategies that can be used to increase the probability of success in forex trading, and hedging is clearly one of them.

Hedging is considered by many as one of the most effective strategies to cut the losses incurred in currency trading. In fact, most large institutions consider hedging as a mandatory component of their trading strategy.

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Hedging was devised in the 19th century to protect the traders from potential losses from the price fluctuations of the agricultural commodities.

In the forex market, hedging is a very popular and common strategy that is often used by most forex traders. The primary methods of hedging a transaction for the retail forex trader are through spot contracts and foreign currency options. Spot contracts, however, is not the most effective currency hedging method, as these contracts normally have a very short-term delivery date (usually two days).

Foreign currency options are considered as one of the most preferred and commonly used currency hedging method. Similar to the options of other types of securities, foreign currency options give the trader the right, but not the obligation, to buy or sell the currency pair at a specific price at some time in the future. Regular options strategies can be used to minimize the risks of losing a particular trade.

Further understand what is forex and further develop your strategies in forex trading by reading our educational articles. See who the best forex brokers are, visit our official website: Wibestbroker.com.

What is A Short Squeeze

You’ve probably encountered this term at some point of your trading journey, but you might not fully understand its meaning.

Short squeeze pertains to the event wherein a particular stock or security is currently lacking enough supply in the event of an excess demand, causing the prices to move higher.

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Due to the fast-rising prices, the traders who are holding short positions are forced to close their trades in order to limit the potential losses.

The thing is, they can only close their short positions by buying the particular stock or security. This sudden flood of the buyers results to the further escalation of the prices.

The short squeeze particularly pertains to what happens during these events, the traders who are holding short positions are “squeezed” out of their positions, usually at a loss, in order to prevent further losses.

Gain further understanding about the forex market and fully understand what is forex by reading the articles posted on our blogs. Visit our website: Wibestbroker.com to find out who the best forex brokers are.

What is a Requote in Forex

If you are currently trading in the forex market, you might have already encountered the term “requote”. That term actually means that the broker cannot fulfill your trade at your desired price, usually due to a rapid movement in the market.

Requotes usually happens in a fast-moving market, such as when there’s a release of a big news or a shock to the system.  Say for example, you’ve decided to buy EUR/USD at the price of 1.1480. Because of the rapid movement of the market, the price of EUR/USD might have changed by the time your broker is able to fill your order, making your broker unable to fulfill your order at the specified price.

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Normally, a good forex broker will provide a notice in your trading platform to inform you that the price has moved, and gives you the chance to decide whether to accept the new price of not. Usually, the new price is worse than the price you have specified, that is why a good forex broker notifies you and asks you first, before fulfilling the trade.

How to Avoid Requotes

Avoiding requotes in forex is pretty simple with a reliable forex broker. By placing a limit order, you’re informing your broker that you only agree to get your order filled with the specified price or better. By doing this, you are basically telling your broker ahead of time that you don’t want to pay more than your specified price, and you’re willing to put your trade in the queue if the current market price doesn’t allow your order to be fulfilled.

Further develop your trading strategy and learn more about the forex market by reading the articles posted on our blogs. Identify who the best forex brokers are, visit our official website: Wibestbroker.com