Part 3: Long or Go short long forex news ? In the case of a non-Forex example though, selling short seems a little confusing, like if you were to sell a stock or commodity.
The basic idea here is that your broker lends you the stock or commodity to sell and then you must buy it back later to close the transaction. Another great thing about the Forex market is that you have more of a potential to profit in both rising and falling markets due to the fact that there is no market bias like the bullish bias of stocks. Anyone who has traded for a while knows that the fastest money is made in falling markets, so if you learn to trade both bull and bear markets you will have plenty of opportunities to profit. When we go long it means we are buying the market and so we want the market to rise so that we can then sell back our position at a higher price than we bought for.
This means we are buying the first currency in the pair and selling the second. So, if we buy the EURUSD and the euro strengthens relative to the U. When we go short it means we are selling the market and so we want the market to fall so that we can then buy back our position at a lower price than we sold it for. This means we are selling the first currency in the pair and buying the second. So, if we sell the GBPUSD and the British pound weakens relative to the U.
Now it’s time to cover order types. A limit entry order is placed to either buy below the current market price or sell above the current market price. If the EURUSD is currently trading at 1. 3200 and you want to go sell the market if it reaches 1. 3250 it will fill you short.
Thus, the limit sell order is placed ABOVE current market price. If you want to buy the EURUSD at 1. 3050 and the market is trading at 1. 3100, you would place your limit buy order at 1. 3050 and then if the market hits that level it will fill you long.
A stop-entry order is placed to buy above the current market price or sell below it. For example, if you want to trade long but you want to enter on a breakout of a resistance area, you would place your buy stop just above the resistance and you would get filled as price moves up into your stop entry order. The opposite holds true for a sell-stop entry if you want to sell the market. A stop-loss order is an order that is connected to a trade for the purpose of preventing further losses if the price moves beyond a level that you specify. The stop-loss is perhaps the most important order in Forex trading since it gives you the ability to control your risk and limit losses. This order remains in effect until the position is liquidated or you modify or cancel the stop-loss order. You can typically set your trailing stop-loss to trail at a certain distance from current market price, it will not start moving until or unless the price moves greater than the distance you specify.
If you place a GTC order it will not expire until you manually cancel it. Be careful with these because you don’t want to set a GTC and then forget about it only to have the market fill you a month later in a potentially unfavorable position. A good for day order remains active in the market until the end of the trading day, in Forex the trading day ends at 5:00pm EST or New York time. The exact time a GFD expires might vary from broker to broker, so always check with your broker. Essentially, when one order is executed the other is cancelled. This order is the opposite of an OCO order, because instead of cancelling an order upon filling one, it will trigger another order upon filling one.
You probably already know that currencies are measured in pips, and one pip is the smallest increment of price movement that a currency can move. Part 1 of the course where we discuss it. So we need to know now how lot size affects the value of one pip. We will assume we are using standard lots, which control 100,000 units per lot. Let’s see how this affects pip value. JPY at an exchange rate of 100.
CHF at an exchange rate of 0. In currency pairs where the U. 1 per pip, one micro-lost will equal . 10 cents per pip, and a nano-lot is one penny per pip. Let’s use a pair without the U. CHF is currently quoted at 0.