As you know that Forex market is an active, most liquid and largest financial market in the world. Thousands of transactions occur within a second. You cannot ignore the use of Forex charts in Forex trading. By using Forex charts you can easily understand the trading trends and patterns. There are different categories of Forex charts according to price movement and time frame. There are different display options for pricing on the online trading charts i.e. average price, bidding price and asking price.
The price at which currency pair can be sold is called the asking price. In a short trade, asking price is a price at which your order will be filled . The price at which currency pair can be bought to go long is called bid price. Your order will be filled at bid price if you are going long. The price between the bid price and ask price is called the average price. Average price is not a price for currency trading but it is used to display the price on the chart only because it is not biased towards selling or buying. It just gives you a view of the price action.
The spread: – Spread is the difference between the bid prices and ask price. Currency exchange brokers make money with the spread without charging a commission. When one trader put a sell order on a particular currency pair, Forex brokerage firm matches that order with another order placed at the same time by another trader to buy that same pair. The bidder pays the bidding price and the seller pays the asking price and the difference between ask price and bid price is kept by the broker.
Stop loss basics: – Management of stop orders in Forex trading is very tricky. A stop loss order is an order placed by a trader that closes a trading position of a trader when the market moves against him . If your trading strategy is of a Forex day trading, you should place a stop just outside of the daily range of the currency pair traded by you. By doing so, if the market breaks and the trend moves in the opposite direction, your position will be closed and your account is protected. If you are a swing trader, you should set the stop outside of twice to thrice the daily range. Stop loss is needed to end the trade only when the market goes in the opposite direction. Like weather, Foreign exchange market is also unpredictable. So it is necessary to set stop loss to limit your losses when unfortunately you make wrong decisions in Forex trading.
Moving averages: – moving averages are commonly used technical indicators in Forex trading. The moving averages are helpful for tracking the pricing trend of a currency. Moving average gives you a simple view of the trend and gives you a direction to carry on your trade. Moving averages can be adjusted according to your trade. If you are doing trade on an hourly basis, you can set a moving average to get average price over the past 10 hours.
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