Posts

A word about grids

I often have people asking me about the risks of grid trading. For those that don't know Grid Trading" is a strategy that is employed in an attempt to turn losing trades into winning trades. It takes various forms such as cost-averaging which is a common strategy when you are building up stocks in a portfolio over time. The theory is that as price drops you buy more because you are getting them cheaper. All the while, the average purchase price of your portfolio is getting less and less. It is a valid strategy and works well for scaling into stock......of course with highly leveraged trading such as forex, it comes with risk. You are compounding a leveraged losing position and it is possible for the price to drop far enough that you run out of money in your account and the broker will liquidate some of your positions for a substantial loss. The so-called margin call. Even worse than cost-averaging is where traders increase their trade sizes as the market moves against them(c
3 comments
Read more

Understanding Trade Orders

There is often a lots of confusion between how different orders work and what their characteristics are. This post will serve to try and clear up some of this. Metatrader 4 Metatrader offers 6 types of orders......well, actually 3 types, but duplicated for Buy and Sell. Be aware that stock trading platforms often have more types of orders although they are commonly combinations of these orders in order to circumvent some of the shortcomings of different order types. These expanded orders are of no interest to us in the MT4 environment. Order Types Moving onto our order types. I said we have 3 kinds of orders. This can be broken into 2 groups ie instant orders(buy or sell right now), or pending orders(buy or sell when price hits a defined point). Most of you will have used market orders already. They are the easiest to understand. You tell the broker to Buy or Sell EURGBP immediately at the best price you can get. The broker fills you at the best available price for your order
5 comments
Read more

New Forex Blog

Thanks for dropping by my blog. This is not intended to be a comprehensive blog. It's sole purpose will be to explain some of the concepts in trading forex as well as using trading software, specifically strategies and concepts associated with my EA's.  It is intended as an extension of my website  www.compu-forex.com It will allow my clients to further understand some of the concepts involved in the FX markets when using my robots. Although not required in order to successfully use them, knowledge is always good. Some of the posts will be rough and ready. I that is because it is a work in progress in tandem with my website.
7 comments
Read more

What is Swap and how does it work

Image
So you have heard the terms swaps and are wondering how it works. Basically swap is interest.....the same as you pay on any load be it auto loan or mortgage, etc. How does this apply to forex trading, you ask. Let's consider a trade that you wish to make, and I will use a 1 lot EURZAR as an example. In your trading account you have $10 000 and account leverage is 1:100. When you trade 1 lot, you will be using 100 000 Eur to buy ZAR(Remember we are selling EUR so this means we are getting ZAR in return). The broker will "virtually" lend you the EUR. Of course, the broker isn't physically going to lend you the money.....they whole process is transparent or invisible to you.....all you see is the profit or loss. Just because you cannot see the process, doesn't mean that it doesn't happen. Your broker will expect you to put something on the table.....the margin. Since your leverage is 1:100, you need to put 1000 eur on the table. This is about $1 180 dep
5 comments
Read more