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The most basic forms of forex trades are a long trade and a short trade. In a long trade, the trader is betting that the currency price will increase in the future and they can profit from it. A short trade consists of a bet that the currency pair’s price will decrease in the future. Traders can also use trading strategies based on technical analysis, such as breakout and moving average, to fine-tune their approach to trading.

Depending on the duration and numbers for trading, trading strategies can be categorized into four further types:

Scalp trade consists of positions held for seconds or minutes at most, and the profit amounts are restricted in terms of the number of pips. Such trades are supposed to be cumulative, meaning that small profits made in each individual trade add up to a tidy amount at the end of a day or time period. They rely on the predictability of price swings and cannot handle much volatility. Therefore, traders tend to restrict such trades to the most liquid pairs and at the busiest times of trading during the day.

Day trades are short-term trades in which positions are held and liquidated in the same day. The duration of a day trade can be hours or minutes. Day traders require technical analysis skills and knowledge of important technical indicators to maximize their profit gains. Just like scalp trades, day trades rely on incremental gains throughout the day for trading.

Swing trade, the trader holds the position for a period longer than a day; i.e., they may hold the position for days or weeks. Swing trades can be useful during major announcements by governments or times of economic tumult. Since they have a longer time line, swing trades do not require constant monitoring of the markets throughout the day. In addition to technical analysis, swing traders should be able to gauge economic and political developments and their impact on currency movement.

Position trade, the trader holds the currency for a long period of time, lasting for as long as months or even years. This type of trade requires more fundamental analysis skills because it provides a reasoned basis for the trade.

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Which Currencies Can I Trade In?
Currencies with high liquidity have a ready market and therefore exhibit smooth and predictable price action in response to external events. The U.S. dollar is the most traded currency in the world. It features in six of the seven currency pairs with the most liquidity in the markets. Currencies with low liquidity, however, cannot be traded in large lot sizes without significant market movement being associated with the price. Such currencies generally belong to developing countries. When they are paired with the currency of a developed country, an exotic pair is formed. For example, a pairing of the U.S. dollar with India’s rupee (USD/INR) is considered an exotic pair.

How Do I Get Started With Forex Trading?
The first step to forex trading is to educate yourself about the market’s operations and terminology. Next, you need to develop a trading strategy based on your finances and risk tolerance. Finally, you should open a brokerage account. Today, it is easier than ever to open and fund a forex account online and begin trading currencies.

The Bottom Line
For traders—especially those with limited funds—day trading or swing trading in small amounts is easier in the forex market than in other markets. For those with longer-term horizons and larger funds, long-term fundamentals-based trading or a carry trade can be profitable. A focus on understanding the macroeconomic fundamentals that drive currency values, as well as experience with technical analysis, may help new forex traders to become more profitable.​

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What Is a Spot Trade?
A spot trade, also known as a spot transaction, refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery on a specified spot date. Most spot contracts include the physical delivery of the currency, commodity, or instrument; the difference in the price of a future or forward contract versus a spot contract takes into account the time value of the payment, based on interest rates and the time to maturity. In a foreign exchange spot trade, the exchange rate on which the transaction is based is referred to as the spot exchange rate.

Spot trades involve securities traded for immediate delivery in the market on a specified date.
Spot trades include the buying or selling of foreign currency, a financial instrument, or commodity
Many assets quote a “spot price” and a “futures or forward price.”
Most spot market transactions have a T+2 settlement date.
Spot market transactions can take place on an exchange or over-the-counter.

Understanding a Spot Trade
Foreign exchange spot contracts are the most common type and are usually specified for delivery in two business days, while most other financial instruments settle the next business day. The spot foreign exchange (forex) market trades electronically around the world. It is the world's largest market, with over $5 trillion traded daily; its size dwarfs both the interest rate and commodity markets.

The current price of a financial instrument is called the spot price. It is the price at which an instrument can be sold or bought immediately. Buyers and sellers create the spot price by posting their buy and sell orders. In liquid markets, the spot price may change by the second, as outstanding orders get filled and new ones enter the marketplace.

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Charts Used in Forex Trading

Three types of charts are used in forex trading. They are:

Line Charts
Line charts are used to identify big-picture trends for a currency. They are the most basic and common type of chart used by forex traders. They display the closing trading price for the currency for the time periods specified by the user. The trend lines identified in a line chart can be used to devise trading strategies. For example, you can use the information contained in a trend line to identify breakouts or a change in trend for rising or declining prices.

While it can be useful, a line chart is generally used as a starting point for further trading analysis.

Bar Charts
Much like other instances in which they are used, bar charts are used to represent specific time periods for trading. They provide more price information than line charts. Each bar chart represents one day of trading and contains the opening price, highest price, lowest price, and closing price (OHLC) for a trade. A dash on the left is the day’s opening price, and a similar dash on the right represents the closing price. Colors are sometimes used to indicate price movement, with green or white used for periods of rising prices and red or black for a period during which prices declined.

Bar charts for currency trading help traders identify whether it is a buyer’s market or a seller’s market.

Candlestick Charts
Candlestick charts were first used by Japanese rice traders in the 18th century. They are visually more appealing and easier to read than the chart types described above. The upper portion of a candle is used for the opening price and highest price point used by a currency, and the lower portion of a candle is used to indicate the closing price and lowest price point. A down candle represents a period of declining prices and is shaded red or black, while an up candle is a period of increasing prices and is shaded green or white.

The formations and shapes in candlestick charts are used to identify market direction and movement. Some of the more common formations for candlestick charts are hanging man and shooting star.
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Difference Between Spot Rate and Futures Rate
The currency spot rate is the current quoted rate that a currency, in exchange for another currency, can be bought or sold at. The two currencies involved are called a "pair." If an investor or hedger conducts a trade at the currency spot rate, the exchange of currencies takes place at the point at which the trade took place or shortly after the trade. Since currency forward rates are based on the currency spot rate, currency futures tend to change as the spot rates changes.

If the spot rate of a currency pair increases, the futures prices of the currency pair have a high probability of increasing. On the other hand, if the spot rate of a currency pair decreases, the futures prices have a high probability of decreasing. This isn't always the case, though. Sometimes the spot rate may move, but futures that expire at distant dates may not. This is because the spot rate move may be viewed as temporary or short-term, and thus is unlikely to affect long-term prices.

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Two effective Trading Strategies using Williams % R
Williams % R for Trading Strategies is a very simple but effective is a technical analysis oscillator described by Lary Williams in the year 1973. It measures the capacity of bulls and bears to close prices each day near the edge of the recent range. Williams % R confirms the trend and gives us a warning of the upcoming reversal.

Williams % R gives us 3 types of trading signals. They are as follows-​

1. It defines the overbought and oversold zone​
2. It defines failure swings​
3. It identifies bullish and bearish divergence​

Case 1:
When the price closes below the 100 DMA and the Williams % R is below the 50 line, a short signal is generated. We will remain in the trade until the Williams % R gives closing above 50 line and the price closes above 100 DMA.

In the first scenario, as we can see in the chart, that when the price closes below the 100 DMA and the Williams % R was also below the 50 line, we could have taken a short trade. However, when the Williams % R crossed back above the 50 line, we could book our trade, thus making a fair amount of profit in the process.

Case 2:
When the price closes above the 100-period moving average, from below, and the Williams % R is above the 50 line, a buy signal is generated. We will be there in the trade unless the Williams % R gives closing below 50 line or the price closes below the 100 DMA.

In the second scenario, we saw that as the price closed above the 100 DMA and as long the Williams % R is above the 50 line, we could remain in the trade. However, when the Williams % R closed below the 50 line, we could have exited the trade. This trade could give us very good profit.​

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Trading with Elliott Wave (Part 1/2)​

Technical analysis’ Elliott Wave theory is used to explain price changes in the stock market. Ralph Nelson Elliott created the hypothesis after observing and identifying recurrent, fractal wave patterns. Consumer behavior and stock price movements both exhibit waves. The theory holds as these are recurring patterns, the movements of the stock prices can be easily predicted. Investors can get an insight into ongoing trend dynamics when observing these waves which also helps in deeply analyzing the price movements.​

What is Elliott Wave?​

The Elliott wave principle is a form of technical analysis that helps traders in analyzing the financial market cycle. With the help of this Elliott wave theory, traders can forecast market trends by identifying extremes in prices and investor psychology. Elliott Wave Theory suggests that movements of the market follow a sequence of crowd psychology cycles. The Elliott Wave Patterns are formed according to the ongoing market sentiment, which alternates between bullish and bearish cycles.

How does Elliot Wave work?​

The Elliott wave theory is a type of technical analysis that aids traders in understanding the cycles of the financial markets. By spotting extremes in price and investor psychology, traders can predict market patterns using the Elliott wave theory. According to Elliott Wave Theory, market movements are said to be influenced by a series of cycles in crowd psychology. The current market attitude, which alternates between bullish and bearish cycles, determines how the Elliott Wave Pattern is generated.

The concept of wave analysis as a whole does not equal to a typical blueprint formation where you just follow the instructions, unlike most other price formations. Wave analysis provides insights into trend dynamics and aids in a deeper understanding of price movements.​

Decoding Elliott Wave Impulsive Pattern​

Five sub waves make up an impulse wave, which moves overall in the same direction as the trend of the largest degree. The most prevalent and straightforward to identify motive wave in a market is this pattern. It is made up of five sub-waves, five motive waves, three of which are likewise motive waves, and two corrective waves. This is classified as a 5-3-5-3-5 structure, as was previously illustrated.

Its creation is governed by three unbreakable rules:​

• Wave two cannot retrace the preceding wave more than 100%.​
• Of waves one, three, and five, the third wave can never be the shortest.​
• Wave four cannot ever advance past the third wave.​

The structure is not an acceptable structure if one of these rules is broken.​

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[Tetrik]

Is there any provision for traders in the case of bankruptcy? What will happen if solid ecn gose bankrupt?

 

[SOLID ECN LLC]

Is there any provision for traders in the case of bankruptcy? What will happen if solid ecn gose bankrupt?​

Hello,

Thank you for sharing your concern with the community.

Solid ECN Securities is not a market maker, therefore the company won't be effected by the market crisis. Our business model is "A Book", and that guarantees the company's financial stability.

Should you have any questions, please do not hesitate to share with the community.​

 

[Pharaoh]

Hello,

Thank you for sharing your concern with the community.

Solid ECN Securities is not a market maker, therefore the company won't be effected by the market crisis. Our business model is "A Book", and that guarantees the company's financial stability.

Should you have any questions, please do not hesitate to share with the community.​

For forex products, ECN with LPs would protect a broker from a black swan price movement. Some of the other products offered by Solid ECN appear to be CFDs. Is there a counterparty serving as LP for all trading products?

Sometimes brokers go bankrupt when there have been no major market events or wild price swings. How are client funds protected in the event of a possible bankruptcy that's unrelated to market movements?