Categories
1. Basic Tutorial

How to Use Autochartist Metatrader Plugin

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.

Categories
1. Basic Tutorial

How to Use Autochartist Market Reports

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.

Categories
1. Basic Tutorial

Fundamental Analysis and Economic Indicators

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).

Categories
1. Basic Tutorial

Risk Management

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.

Categories
1. Basic Tutorial

About ECN 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.

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1. Basic Tutorial

Technical Analysis

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.

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1. Basic Tutorial

Trading Strategies

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.

LevelOrderOpen priceLevelOrderOpen priceHedge
1Buy Stop1.35150-4Sell Stop1.34400-75
2Buy Stop1.35300-3Sell Stop1.34550-75
3Buy Stop1.35450-2Sell Stop1.34700-75
4Buy Stop1.35600-1Sell Stop1.34850-75
Maximum grid loss (pips)-300

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:

OrderOpen PriceCurrent priceProfit/Loss
1 lot Buy1.094501.09400-50 USD
2 lots Buy1.094001.09350-100 USD
4 lots Buy1.093501.09400+200 USD

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.

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1. Basic Tutorial

Forex Trading Sessions

Currencies are traded 24 hours a day 5 days a week around the world. Trading Market opens Monday morning in Wellington, New Zealand and stay open till the Friday night in New York, USA. Knowing which trading session is active now can help with choosing a pair to trade and which economic events to review before trading.

Each trading day can be divided into three trading sessions, depending on the financial center active during a specific period of time. The time each session opens and closes at is based on the local business hours:

SessionCityOpen (EET*)Close (EET*)
AsianTokyo2:00 – 3:0011:00 – 12:00
EuropeanLondon10:0019:00
AmericanNew York15:00 – 16:000:00 – 1:00

* Eastern European time: GMT+2 winter; GMT+3 summer

Asian (Tokyo) session

With major trading center in Tokyo, Asian session also includes China, Australia, New Zealand and Russia. The first financial center to open after the weekend is actually Wellington, New Zealand, while Tokyo capital markets itself only opens at 2 AM EET (3 AM EEST). Closing hours overlap with the beginning of the European session.

Important economic data from the region that may affect European and American session are released during that time. You can expect significant price movements on USDJPY, EURJPY and AUDJPY.

European (London) session

When financial centers through Asia are about to close, European markets start their day. Since European session coincides with both Asian and American ones, there is normally an increase in volatility and market liquidity, however, spreads tend to be more tight during the London session.

The most significant economic news are released from the Eurozone, the United Kingdom and Switzerland. It is not uncommon for a trend started during the European session to continue until the beginning of New York session. The most liquid pairs are EURUSD, GBPUSD, USDCHF, EURGBP and EURCHF.

American (New York) session

Dominated by the US with the major financial center in New York, American session also includes Canada and South American countries.  Naturally, there is high liquidity in the first half of the session, while the european markets are still open.

A number of economic indicators that have a profound impact on the market are released by the US and Canada, so make sure to check economic calendar in advance to keep track of the upcoming news. Since the most of Forex transactions involve USD, you can expect all majors and crosses to be volatile, however high liquidity available during this session, allows to trade practically any pair.

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1. Basic Tutorial

An Introduction to Forex Market

Foreign Exchange market, commonly referred to as Forex or simply FX, is the largest financial market where currencies are bought, sold and exchanged one for another. Unlike, for example, stocks market, it has no centralized exchange and transactions are performed over-the-counter, that is, participants trade with one another through a worldwide network of banks, brokers and other financial institutions.

As a global market Forex is open 24 hours a day, 5 days a week. The major financial centers are based across almost every time zone – in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney. Depending on the exchange active during a specific time, one can distinguish between three trading sessions: Asian, European and American. To learn more about trading sessions please follow the link.

In foreign exchange currencies are quoted against one another in pairs and the price indicates how much of quote (second) currency is required to buy or sell one unit of base (first) currency.

Exchange rates are driven by forces of supply and demand: currency value usually increases whenever demand for it is greater than supply and decreases if demand is less than supply. Moreover, prices fluctuate in response to economic, social and political events that occur throughout 24-hour trading day.

Political situation and economic performance of the countries involved have a profound effect on the currency prices as well. For instance, a country with lower inflation rate will typically see increase of its currency value in relation to the currencies of its trading partners. Inflation is also highly correlated with central bank’s interest rate: lower interest rate can depreciate exchange rate and vise versa.

Another detrimental factor in price setting is orders from Forex market participants, that are quite diverse in volume they generate and influence they have.

Governments and central banks such as the European Central Bank, the Bank of England, and the Federal Reserve of the US operate with the largest volumes and have the most influence on exchange rates. Central banks try to control inflation, money supply, interest rates and are in charge of supervising commercial banking systems. They can use foreign exchange reserves to intervene in the market to stabilize currency rates or achieve a specific economic goal.

The second largest group comprises major banks and bank associations that form so called interbank market, through which they transact with each other and determine the currency price individual traders observe in the trading platform. Since forex is a decentralized market, you can often see that different banks offer slightly different exchange rates for the same currency. OctaFX clients receive the best bid/ask prices quoted from our vast liquidity pool.

Another group of forex participants is brokerage firms that act as intermediaries between individual traders and the market. They use electronic communication networks (ECNs) to offset clients’ orders with itsliquidity providers, which may comprise of various financial institutions. This execution model eliminates a conflict of interests between the brokerage and its client when an order is executed. An ECN brokerage, unlike a market maker, is compensated through commission that can either be charged per each order or included in the spread as a mark up. You can learn more about ECN execution here.

An ECN brokerage allows individual traders to access the forex market, which initially was the domain of large financial institutions only, and gain profit from price fluctuations. Even though daily price fluctuations are seemingly small, often less than 1%, use of leverage can increase the value of these movements.

Traders interact with a broker through a trading platform – a piece of software that allows to buy and sell currencies. It can be installed on your desktop computer, mobile device or even accessed via web browser.

When choosing a forex broker, it is important to take into account various factors, including:

RELIABILITY

IT’S HIGHLY IMPORTANT TO CONSULT VARIOUS RATINGS AND REVIEW BEFORE INVESTING. OCTAFX ACTS IN ACCORDANCE WITH MAJOR INTERNATIONAL LAWS AND REGULATIONS TO PROVIDE MOST SECURE AND RELIABLE SERVICE TO OUR CLIENTS.

EXECUTION

OCTAFX EXECUTION MODEL ELIMINATES ANY CONFLICT OF INTEREST BETWEEN THE CLIENT AND THE BROKER: WE ACT AS AN INTERMEDIARY BETWEEN YOU AND THE REAL MARKET BY OFFSETTING ORDERS ONE BY ONE WITH COMPETING PRICES FROM OUR VAST LIQUIDITY POOL. YOU CAN BE SURE OUR EXECUTION SPEED IS UNDER 0.1 SECOND AND OCTAFX CLIENTS DO NOT EXPERIENCE ANY RE-QUOTES.

SPREADS

IN GENERAL, SPREAD CAN EITHER BE FIXED OR FLOATING: THE FORMER REMAINS THE SAME EVEN THOUGH THE PRICE IS CHANGING, WHILE THE LATTER VARIES DEPENDING ON THE MARKET SITUATION AND IS NORMALLY MORE TIGHT THAN THE FIXED ONE. SPREAD SHOULD BE TAKEN INTO ACCOUNT AS THE LOWER IT IS, THE LESS YOU PAY FOR EACH TRADE. OUR TIGHT FLOATING SPREAD, ALONG WITH NO TRADING COMMISSION, ENSURES LOW COST OF TRADING AND ACCURATELY REFLECTS WHAT IS AVAILABLE IN THE MARKET.

TRADING TOOLS

EVERY TRADER LOOKS FOR VERSATILITY: WIDER RANGE OF TRADING TOOLS ALLOWS TO SELECT PAIR YOU ARE COMFORTABLE TRADING, LEAVING A SPACE FOR EXPERIMENTAL TRADING AS WELL. WITH OUR GREAT SELECTION OF TRADING TOOLS YOU CAN TRADE THE MARKET YOU ARE INTERESTED IN.

MINIMUM DEPOSIT

MORE IMPORTANT FOR NEWBIE TRADERS, ACCESSIBILITY OF TRADING IS ALSO DETERMINED BY THE AMOUNT OF MINIMUM DEPOSIT. AT OCTAFX YOU CAN START WITH AS MUCH AS $5/€5 AS YOUR INITIAL INVESTMENT. IT WILL HELP YOU TRY VARIOUS TECHNIQUES AND APPLYING DIFFERENT TRADING STRATEGIES AND WILL HELP YOU TO BE PREPARED FOR SERIOUS TRADING. GOOD NEWS IS THAT MAXIMUM DEPOSIT IS UNLIMITED!

FUNDS SECURITY

MAKING SURE YOUR FUNDS ARE SAFE IS OF PRIMARY IMPORTANCE WHILE MAKING INVESTMENTS. OCTAFX USES 3D SECURE TECHNOLOGY FOR VISA/MASTERCARD DEPOSITS, AND SSL ENCRYPTION TO PROTECT CLIENT’S PERSONAL AREA. ALL MEASURES TAKEN MAKE FINANCIAL INFORMATION SECURE AND INACCESSIBLE TO ANY THIRD PARTIES.

NEGATIVE BALANCE PROTECTION

NEGATIVE BALANCE PROTECTION FEATURE PROTECTS TRADERS FROM UNEXPECTED MARKET CIRCUMSTANCES: IF THE TRADER’S BALANCE BECOMES NEGATIVE, OCTAFX COMPENSATES IT BACK TO ZERO. THUS, YOUR LOSSES CANNOT EXCEED YOUR DEPOSITS. NEGATIVE BALANCE PROTECTION FEATURE COMES HANDY IN A CONSTANTLY CHANGING ECONOMIC ENVIRONMENT: OCTAFX REVERSED OUR CLIENTS’ NEGATIVE TRADING BALANCES BACK TO ZERO AFTER SWISS FRANC EVENT IN 2015, WHILE SOME OF THE BROKERS WENT BUST.

ACCOUNT TYPES

CHOOSING AN ACCOUNT TYPE SUITABLE FOR YOUR LEVEL OF TRADING EXPERIENCE IS VITAL TO ENSURE YOU ARE USING YOUR TRADING POTENTIAL RIGHT. OUR RANGE OF TRADING ACCOUNTS ALLOWS TRADERS WITH DIFFERENT EXPERIENCE AND NEEDS TO OPERATE THEIR FUNDS ACCORDINGLY: MICRO ACCOUNTS ALLOW NEW TRADERS TO PRACTICE WITH MINIMUM DEPOSIT OF $5, WHILE LIVE ECN ACCOUNT OFFERS A WIDER RANGE OF TRADING TOOLS FOR MORE EXPERIENCED TRADERS.

LEVERAGE

AS DAILY PRICE FLUCTUATIONS ARE SEEMINGLY SMALL (OFTEN LESS THAN 1% OF A CENT), IT IS IMPORTANT TO CHOOSE A BROKER WHICH OFFERS A SUBSTANTIAL LEVERAGE. THE HIGHER YOUR RATIO IS, THE LESS FUNDS YOU WILL NEED TO HOLD A POSITION. OCTAFX OFFERS FLEXIBLE LEVERAGE SYSTEM WITH THE HIGHEST LEVERAGE RATIO OF 1:500.

PLATFORMS

SELECTING A TRADING ENVIRONMENT YOU NEED TO CONSIDER GENERAL PLATFORM’S USABILITY, COMPATIBILITY WITH YOUR DEVICE AND THE AMOUNT OF TRADING INSTRUMENTS AVAILABLE FOR TECHNICAL ANALYSIS. OCTAFX PROVIDES YOU WITH METATRADER 4 AND CTRADER PLATFORMS, BOTH AVAILABLE IN DESKTOP, MOBILE AND WEB-PLATFORM VERSIONS.

CUSTOMER SERVICE

IF ANY QUESTIONS REGARDING TRADING OCCUR, CUSTOMER SUPPORT WILL PROVIDE A TRADER WITH RELEVANT INFORMATION ON HOW TO SOLVE ANY PROBLEM HE MAY HAVE. OUR AWARD-WINNING CUSTOMER SUPPORT IS AVAILABLE 24/5 AND IT TAKES AROUND 5 MINUTES ON AVERAGE TO UNTANGLE EVEN THE MOST COMPLICATED ISSUE A CLIENT MAY HAVE.

Thanks to large daily trading volume, deep liquidity, availability 24/5 and low costs, Forex definitely stands out when compared to other markets. It allows a trader more flexibility when choosing how and what to trade, along with considerable leverage, tight spreads and small investment. You can learn more about Forex market advantages here.