What many traders struggle with when they start trading is how to sell on both sides of the market, how to make money when the market goes up, and also when it goes down. We are all familiar with buying a good and selling it at a higher price when it increases in value.
However, in trading, you can also make money when the market falls, and this is what is meant by trading both sides of the market. If you think a currency pair will lose, you sell it, and when you believe the price will increase, you repurchase it. It is like the reversal of buying and selling.
When a currency pair is moving higher, you buy first and then sell to close the position. If the currency pair is moving lower, sell first and buy to close the position. When you buy it, it is called a long position. Also, when you sell, it is called a short post.
You must learn to trade on both sides of the market. If you see a currency pair surging, and you have done your analysis, buy to enter a long position. If you see a currency pair falling and your research confirms it is a low-risk trading opportunity, you sell to open a short position. It is essential to develop this approach to avoid bias. Just take a short or long position with confidence and base on your analysis of the market.
You may think you may not develop a bias, but when you start trading, you create a bias to one side or the other. Be careful! When you speak to your broker, use the right terminology. When you have a live trade in the market, it is called a position. Now let’s move on to Leverage and Margin.
Best Pro Trade Leverage And Margin
These terms are misused and misunderstood in trading; there are many traders who trade without knowing what these terms mean. What you need to know is that leverage and margin are entirely different things.
Leverage is your broker gives you to magnify your trading profits, while margin is the cost of entry and the money you put into your assets.
This is a proper example to explain leverage and why it is a double-edged sword. If you have £20,000 as a deposit, you can afford to buy a house of £100000. The formula for leverage is property value divided by the deposit. In this case, one hundred is divided by twenty-five.
Now equate it to forex, leverage levels are expressed as a ratio, like an example above. The minimum leverage level offered by brokers is fifty to one, but it can go as high as four hundred to one. If you think about this in the context of our example, it means a mortgage lender can offer eight million pounds against a twenty thousand pounds deposit.
A sane lender can’t offer this to his client, and yet until recently, this was what brokers offered their clients until multiple regulatory agencies curbed these brokers and sent them offshore.
The terms of each broker are different, don’t be afraid to ask questions if you don’t understand.
Best Pro Trade the Bid, Spread And Ask
There are always two figures quoted in every currency quote; the first one on the left is called the bid, and the second one on the right is called the ask. The difference between them is called the spread. The spread varies from broker to broker, and throughout the trading day.
It is not fixed and changes according to the market.
Automated Trading Pips To Cash
This means converting a current exchange rate into cash. In other words, Pips to Cash.
Mechanics of Futures Trading
The major distinction between the futures market and the normal market where goods are sold and purchased are contractual agreements in the futures market. This contractual agreement provides allow goods to be delivered during a stipulated future month. There is no immediate transfer of the possession of the commodities entailed.
That is, selling and buying commodities in the futures market does not depend on the ownership of the item involved.
One can cancel the sale at any time by an identical offsetting purchase or a prior purchase by a comparable offsetting sale. If this is done before the stipulated month, there will be no delivery or receipt of the trade.