A market order is an order to open a buy or sell position at the best current available price.
A pending order is an order to buy or sell an instrument at a specified future price, only if the market reaches that specific price.
A limit order is triggered when the market moves past your specified entry level, providing the best available price once triggered. A limit order sits below the current market price for a buy limit, and above the current market price for a sell limit.
A stop loss is a conditional order set at a fixed price level which is aimed at closing a position after a certain price has been reached. A stop is triggered when the market moves in an unfavourable direction for the trader. It is designed to prevent further losses when a position is losing money.
A trailing stop is a type of stop-loss order that moves with the trade as the market price fluctuates. It does not remain at a fixed price and is therefore set in a distance of pips. The trailing stop only activates when the trailing stop level has been reached. It is designed to realize the profit made by the position.
As an investment, gold is the most popular of the precious metals
Investors generally buy gold as a hedge or safe haven harbor during economic, political, or social uncertainty (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest).
The gold market is subject to speculation as are other markets
The history of the gold standard, the role of gold reserves in central banking, gold’s low correlation with other commodity prices, and its pricing in relation to flat currencies during the financial crisis of 2007–2010, suggest that gold behaves more like a currency than a commodity
There are several factors which drive gold up/down:
Technical Indicators are a result of mathematical calculations/algorithms designed by professional traders and are based on indications of price or volume.
The values obtained are used to create various patterns that may be added to a chart and allow traders to forecast probable price changes and, therefore, probable times at which to open a buy or sell position in addition to when they should close current open positions.
There are many technical indicators; however, here are the most common types:
Support and Resistance
When the market moves in a specific direction and then pivots and changes direction, the highest point that was reached before the market changed direction is called the Resistance Level. In the same way, the lowest level the market reaches before the market pivots is called the Support Level.
It is important to note that if the market passes through a resistance level, then that resistance level can also become a new support level. The same applies in the opposite direction. Previous resistance and support levels are also used as an indicator for future pivots and therefore possible entry points into the market.
Moving Averages show the average price within a defined time period by considering the most recent closing prices over the given time period and the result is then divided by the number of prices used in the calculation: For example: In a 10-day moving average, the last 10 closing prices are added together and then divided by 10
There are four types of Moving Averages: Simple MA, Exponential MA, Smoothed MA, and Weighted MA. They differ from each other only in terms of the weight coefficients that are assigned to the latest data
Moving averages are used to define areas of support and resistance, entry points into the market, to emphasize the direction of a trend, and to smooth out price and volume fluctuations
The direction of the indicator shows whether a bullish or bearish trend is present in the market at the moment
With two or more moving averages applied to one chart, the further apart they are from one another the stronger the indication of the current trend
When the moving averages intersect, this confirms the change in a trend. It is only a confirmation because the change of this indicator is late in comparison with a price change
Oscillators are designed to indicate a possible change in the trend of a specific trading instrument by showing whether the instrument is either overbought or oversold, therefore allowing traders to determine when a change in the current overall trend will occur and in turn, an entry point into the market.
The RSI indicator is used to determine the state of the market – whether it is overbought, oversold, or stable. If the RSI tops out in the upper zone [overbought (sell signal), > 70] and then returns to the middle zone, the price would move in the same direction. If the RSI bottoms out in the lower zone [oversold (buy signal), < 30] and then returns to the middle zone, the price would move in the same direction. In other words, the price and the RSI movement correlate.
The Stochastic oscillator is used on the trending markets. If both lines top out in the upper zone [above 80% mark (sell signal)] and then the indicator returns to the middle zone, the rate would move in the same direction. If both lines bottom out in the lower zone [below 20% mark (buy signal)] and then the indicator returns to the middle zone, the rate would move in the same direction.
Trading instruments usually retrace the previous day’s trades. The most popular retracement is the Fibonacci Retracement indicator which is a chart tool used to determine the support and resistance levels of an instrument
The Fibonacci Retracement levels are created by drawing a trend line between two extreme points and then splitting the vertical distance according to the specified percentages
The Fibonacci Retracement can include up to 13 lines. In order to find these retracement levels, you need to identify the recent Swing Highs and Swing Lows (extreme changes in the trend direction)
The term ‘trend’ describes the current direction of the financial instrument or an investor’s outlook towards the direction of a financial instrument. A trend line can be drawn on a chart between two or more price pivot/turning points. Trend lines are commonly used to judge entry and exit points when trading.
There are 5 types of trends:
A bullish trend is the term given to an optimistic outlook whereby there is a belief that a particular instrument is about to rise (buy opportunity)
A bearish trend is the term given to a pessimistic outlook whereby there is a belief that a particular instrument is about to drop (sell opportunity)
A hawkish trend is the term given to a favoured increase in interest rates (buy opportunity)
A dovish trend is the term given to a favoured decrease in interest rates (sell opportunity)
When the market is ranging or flat, this suggests that the price of the instrument is neither rising nor falling. This type of trend usually indicates a change in the overall direction of a trend
Technical analysis is the study of prices over time, with charts being the primary tool. This is done by comparing current price action with historical price action to identify patterns that can suggest probable future price movement.
Technical analysis helps traders to determine trends and acts as a signal or indicator to either buy or sell. Technical analysts believe that the historical performance of a financial instrument indicates the future performance on that instrument.
In order to understand which charts you should be using, it is important to determine the type of trader you are by understanding the difference between trader types.
Short term traders are intraday traders who get in and get out of the market quickly by constantly opening and closing positions
Medium to Long Term
Medium to long term traders are traders who keep their open position on the market for a long period of time (weeks/months)
There are 3 types of charts:
A Line Chart simply shows a line from one closing price to the next closing price
The Line Chart is not specific to the period of the chart
A Line Chart shows us the general direction of the instrument over time
A bar chart goes into more detail by showing the opening and closing prices in addition to the high and low of the specified period using a straight bar/line format
A candlestick chart also shows the opening and closing prices in addition to the high and low of the specified period and resembles a candlestick. This type of chart is easier to interpret and identify pivot points or reversals in a trend
Fundamental analysis is the study of the overall economic, financial, political and other factors that represent and quantify the economy in question and can influence a financial instrument. These macroeconomic and economic health elements of a country help traders to determine future movements in a financial market.
Each day, many economic and political announcements are released that can have a direct impact on the markets, including the forex market. Therefore, it is important that traders understand how to interpret this information and convert it into an educated and successful trade.
Economic Policies in Individual Countries
Economic policies refer to how a country governs trade, budget and currency distribution. This is why budget readings in parliaments across the world are important to individuals looking to invest in the country’s currency. If the budget is well balanced, promoting trade and improved economic status, then the currency’s value should increase. If for any reason the distribution of wealth and economic policies reflected in the budget is less than satisfactory, the currency suffers.
Deficits and Surpluses
Countries with the strongest currencies in the forex market are those with fewer deficits, meaning that they are in a good position to trade and even lend to other countries.
Trade Trends and Levels
If a country is very active in trade, then there should be a great demand for its currency, which therefore affects all the currency pairs associated with it. A high amount of trade also indicates the competitiveness of the market, not just for currency, but for commodities and stocks as well. Economic events affecting trade trends involve supply and demand in global trade.
Inflation reduces the value of a currency and the rate of inflation should be reasonable since it occurs in every country.
Before trading currencies, an investor has to understand the basic terminology of the forex market, including how to interpret forex quotes and calculations.
Straight Through Processing (STP) Broker
Pepperstone is an STP broker to provide clients with direct access to other participants in the currency market by consolidating price quotations from several banks. Pepperstone clients have instant access (Straight Through Processing) to some of the best prices with extremely tight spreads.
PIPS AND PIPETTES
PEPPERSTONE QUOTES CURRENCY PAIRS BY “5, 3 AND 2” DECIMAL PLACES – THESE ARE KNOWN AS FRACTIONAL PIPS OR PIPETTES.
On a 5 decimal place currency pair a pip is 0.00010
On a 3 decimal place currency pair a pip is 0.010
On a 2 decimal place currency pair a pip is 0.10
FOR EXAMPLE: IF GBP/USD MOVES FROM 1.51542 TO 1.51552, THAT .00010 USD MOVE HIGHER IS ONE PIP.
The spread is the difference between the BID and the ASK price in the market quotes. The ASK price is applicable to a BUY order and the BID price is applicable to a SELL order.
Pepperstone operates using variable spreads, which are spreads that don’t have the same constant value. A variable spread will condense and widen as market conditions and liquidity change.
Leverage is the ability to control a large amount of money in the forex markets.
For example: Pepperstone offers a maximum leverage of 500:1 which means for every $1 that you have in your trading account; you can trade $500 on the forex market. The same principal applies to all base currencies and leverage amounts.
Leverage gives the trader the ability to make meaningful profits on the normally miniscule daily currency movements, and, at the same time, risk only minimal capital on a given position.
Leverage can exponentially increase your profits as well as your losses so it is crucial that traders take care when using leverage. The larger your position size, the larger your pip value will be and therefore, the greater the impact on your profit/loss (P/L).
Margin is the term given to the amount of money required in your account in order to open a trade.
Margin is calculated based on the current market quote of the base currency of the trader’s account vs base currency of the trader’s account, the volume requested, and the leverage level of the trader’s account.
Free or available margin is indicated in the MT4 trading terminal.
Margin may be calculated as follows: (Current Market Quote * Volume) / Leverage = $Margin Required
A trader wants to open 0.1 (10,000 base currency) lots of EUR/USD at the current market quote of 1.4177 and with a leverage level of 1:200.
The base currency of the account is USD.
(1.4177 * 10,000) / 200 = $70.89 required to open a 0.1 lot position
A margin call is a warning message that occurs when a trader’s account is running out of sufficient funds to sustain their current open positions on the market.
If the market moves against a trader’s position/s, additional funds will be requested through a “margin call”.
If there are insufficient available funds, the trader’s open positions will be closed out
If a trader’s Equity (Balance – Open Profit/Loss) falls below a specific margin level which is the amount required to support open positions, then the trader’s positions will automatically be closed.
This is calculated as follows for the MetaTrader 4 platform: Equity / Margin = < 20%
This is calculated as follows for the cTrader platform: Equity / Margin = < 50%
Hedging refers to the opening of a new position in the opposite direction of an existing position on the same instrument.
For example: To hedge a 0.1 lot Buy position on AUD/USD, you would open a 0.1 lot Sell position on AUD/USD
No additional margin is required to hedge a position. It is important to note that one cannot open a new position on an account with insufficient usable margin.
Forex trading may also generate interest income as well as capital gains. Since forex is traded in pairs, every trade involves not only two different currencies, but their two different interest rates.
If the interest rate of the currency a trader bought is higher than the interest rate of the currency a trader sold, then the trader will earn interest or “rollover” (positive roll).
If the interest rate on the currency the trader bought is lower than the interest rate on the currency you sold, then the trader will pay rollover (negative roll).
Rollovers/swaps can add a significant extra cost or profit to a trade. The rollover amount increases/decreases as the position size increases/decreases.
Rollovers take place at 5pm EST (New York Time)
These are fees that Pepperstone charges on the Razor account only. The commission amount equates to:
Round turn means that commission is only paid when positions are closed
** The commission amount increases/decreases as the position size increases/decreases
Expert Advisor (EA)
EA’s are algorithmic programs that have been developed to open trades on behalf of investors on the MetaTrader 4 platform. Expert Advisors are based on signals generated by various technical indicators and may be acquired online.
Virtual Private Server (VPS)
A VPS is used to keep the Meta-Trader 4 platform running even if the trader exits the program. This minimizes the chance of system downtime due to technology and connectivity failures.
Multi Account Manager account types on the Meta-Trader 4 platform are designed for Money Managers who trade on behalf of other investors and manage multiple accounts from a single interface. Money Managers can also manage multiple accounts by utilising Expert Advisors (EAs).
Safe Haven Currencies
This is a term used to describe trading an alternative currency or instrument that is less volatile as a result of market turmoil and uncertainty. Safe haven currencies or instruments are considered low risk because their issuing governments are stable and their economies tend to be strong, however, this does not necessarily mean that they are ‘safe’.
Allows you to open a new position with just one click
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
Your total combined accounts balance must be 500 USD or more.
Download the plugin.
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 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 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.
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).
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)
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).