Friday December 30, 2016 - 23:03:20 GMT
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A brief overview of the different types of forex broker and market orders.
In order to trade the financial instrument in the forex industry, you need to have a regulated broker. The brokers allow you to trade different currency pairs and financial instruments. For their offered service they charge a small commission to their clients. There are many different kinds of brokers in the forex market. In this article, we will get a general idea about the different types of brokers and some of the importance terms in the forex industry.
For our better understanding, we have divided the forex broker into major three groups
Standard lot broker
- 1. 1 standard lot = $10/pips
- 2. 0.1 standard lot = $1/pips
- 3. 0.01 standard lot = $0.10/pips
- 4. 10 standard lot = $100/pips
- 1. 1 standard lot = $1/pips
- 2. 0.1 standard lot = $0.10/pips
- 3. 0.01 standard lot = $0.01/pips
- 4. 10 standard lot = $10/pips
- 1. 1 standard lot = $0.10/pips
- 2. 0.1 standard lot = $.01/pips
- 3. 0.01 standard lot = $0.001/pips
- 4. 10 standard lot = $1/pips
Mini lot broker
Micro lot broker
As you can see the broker are classified based on their lot size and their provided service to their customers. Now based on your requirement you can easily choose the broker for your forex trading career. Now let’s discuss some of the key trading terms that every single trader needs to know in order to become a full-time professional trader. To be honest, there are many traders in the financial industry trading the forex market without knowing this terms properly.
If you truly want to become a full-time professional trader then it’s imperative to have a proper knowledge about the basic terms of this industry. Let’s discuss some of the basic terms.
Leverage is one of the unique features in Forex trading which can cause an extreme loss when exercised irrationally. Forex broker offers a high leverage to trade the financial instrument so that traders can make a large amount of profit. Typically 500:1 leverage means that for every 1 $ deposit into your account you can open 500$ worth trade. It's always better to use low leverage unless you are extremely qualified in managing your accounts. Leverage is like a double edge sword. It has huge earning potential along with the high risk of drawdown.
Currency pairs in the Forex market
In the Forex market currencies are traded in pairs. There are eight major currency pairs in the Forex market.(USD,GBP,CAD,AUD,EUR,CHF,JPY,NZD).Other than these 8 major currencies all other currencies are known as minor pairs in the Forex market. We have already talked about forex quote. Before proceeding further let’s get a quick recap of the base currency and quote currency! The first currency in a currency pair is known as base currency and the second currency is known as quote currency.
Cross currency or synthetic pair
In the Forex market, there are many different kinds of currency pairs which the traders can trade. If any currency pair is formed without the presence of USD in base currency or quote currency then it’s said to be the “cross pair or synthetic pair”. EURJPY is a classic example of cross currency where the mighty USD is absent in the Quote.
In order to trade the Forex industry, you must sign up with a broker .Before you, signup with any broker makes sure you do some research about the broker performance, reliability and facilities. There is a minimum amount of deposit in every broker which varies significantly from broker to broker. Let’s say you have deposited 100$ into X broker. So when you open a trade, the broker will secure a certain portion of your account balance for the open trade depending on your leverage which is commonly known as margin.
Different types of trading orders
In forex, the word “orders” mean the entry and exiting conditions of a trade for certain currency pairs. There are many different types of orders in the Forex industry which greatly varies from broker to broker. Keeping everything in mind the professional traders have broadly classified the orders into four major categories
Market order: This is the most common orders in the Forex market. Traders take their trade with the best available price offered by the broker at any given time. Basically, the price which you see in your trading platform would be your “order price” when making instant trade execution.
Limit order entry and Stop entry order: A limit order is referred to the action which involves buying below the current price level and selling above current price level. On the contrary, Stop entry order means buying above the current price level and selling below the current price level. Stop entry order is mostly used in breakout trading strategy. This type of order is also known as a pending order.
Stop loss order: This is the most useful order which a trader can use in his trading career to limit their losses. Trader places stop loss order at specified price level so that if the market reached that level, the open trade will be closed automatically without incurring the further loss.
Trailing stop: This is also very vital orders for trend traders. This allows the traders to maximize their profit while riding the prevailing trend .With this type of orders, trader’s book their profit once the market makes a significant move in the direction of the trader’s trade.
Summary: Now you know all the basic terms and the different type of broker sin the financial industry. So before you start your trading career you need to select a broker first. While selecting the broker, make sure that you look at these factors since it will help you to gauge the reliability of the broker. And always try to make sure that all the different types of orders are offered by your brokers since it’s a great tool to enhance your trading performance.
Author: Andrew Bezen
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