Belajar Forex Trading with InstaForex

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Introduction

Before 1970-s currency price of this or that country was determined by the gold reserve of the country – gold-exchange standard took place in the world. Each currency had its equivalent in ounce of gold. Soon the situation changed. They forgo gold-exchange standard and floating currency rates were introduced – the currency price started to determine by its demand and supply. This way the international Forex market was established.

At Forex currency unit of the one country is selling for a certain amount of units of the other country. Due to the fact that it is rather difficult to imagine how to sell money for money you may think about the currency as a security which gives you a right for a share in the economy of the appropriate to it country. That is why country’s economic health is determined by its currency stability. Thus, trading at Forex we trade “parts” of the countries’ economy.

Why forex is so unique? Imagine yourself a market where you may sell or buy everything you want. You bring at this market a product and immediately find a buyer at the mutually beneficial price. These are characteristic of an ideal highly liquid market. Liquidity is an opportunity to sell or buy a product at the mutually beneficial price or as it is written in the books exchange a product in money and vice versa. What do we need for ideal market? It is simple: ban on monopoly and fair competition, great number of participants and 24-hours work. These are the main requirements for the ideal market, if desired we can list ten more, deduce a system with hundreds of levels and defend a thesis. But we are not going to wander from the point, at this moment you need to remember that Forex is the most high-liquid market in the world!

The turnover at Forex is more than 3 billions US Dollars a day. Any person may participate at Forex. All you need is a certain amount of the initial capital (we will have a talk about it later) and access to the Internet. Because of such a great number of participants no one can influence on the demand and supply of one currency for a long period of time. All processes which influence on the demand and supply are natural processes of the different economies. There are both regularity and unexpectedness in these processes. Learn and react on the changes in these processes is a very important part of trading at Forex, which is called fundamental analysis. There is also technical analysis, but we will talk later abut it.

It is rather interesting that till late 90s only huge financial institutes and banks trade at Forex. For trading it was necessary to have capital in the amount of tens millions of US Dollars, exactly on these sums buy/sell contracts between market participants were concluded. With the Internet development everything was changing and stock intermediary appeared. Using an advantages of the margin trading private individuals who has several hundreds of US Dollars capital may conclude currency sell/buy contracts on hundreds thousands US Dollars, risking with their own capital. Principal of the margin trading lies in the basis of the Forex trading and will be examined later.

Forex does not have physical location and central exchange office. The area for trading at Forex is the whole world! Trading at Forex does not stop for a minute. According to the calendar day it begins in the Far East Wellington, New Zealand, passing time-zones in Sydney, Tokyo, Hong-Kong, Singapore, Moscow, Frankfurt-on-Main, Zurich and finishes in New-York, Los-Angeles. Among mentioned above cities the most important are Tokyo, London and New-York. Depending on the time of the day one currency may be more active than another, it is explained by the working time of the major financial centers.

So, let us sum up the introduction part. International currency market has a number of advantages in comparison with the other markets, for example, stock market (shares are traded at the stock market) – there is no necessity not to sleep at night in the Far East of Russia waiting until the stock market in Moscow will be closed. Forex works 24-hours a day and it is the most high-liquid market in the world. Internet development drives to the appearance of the stock intermediaries who provide the private individuals with the opportunity to work and make profit at Forex. It turns out that the competition among such stock intermediaries is very intensive and as a result there are rather profitable trading offers for individuals at Forex. In this part we deliberately do not use special terms in order not to overload a reader with the great amount of information. In the concluding chapters pattern of the trade will become more and more clear.

Sumber : http://support.instaforex.com/en/index.php/Chapter_1_Introduction

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It is necessary to understand what place a private investor is taken in the system of the world currency exchange before starting trading at Forex. Understanding types of Forex participants and their influence on the market helps to make clear how currency rates are changing. A bit simplified scheme of the market participants’ cooperation is described below.
The center link of the international currency exchange system is brokerage companies, or in other words brokerage house. They play a role of the intermediaries between the other major Forex players. Commercial banks are the main Forex participants. They may execute sell/buy deals themselves or on behalf of their clients. Such deals may be executed directly with other banks which they have managed to agree on rates with or via Brokerage companies. Here is the simplified scheme of cooperation – dealing department of the commercial bank contact a brokerage company and ask for the deal conditions which other banks are offering at the moment. In case the conditions of the deal suit, banks close a deal via brokerage company which makes profit on commission (percentage of the executed deal). Thus, brokerage companies act as a central place where currency rates are formed. Commercial banks receive information about the level of rates from the brokerage companies.
Other major Forex players are national banks of different countries. These participants access the market not for profit generation but for exchange rate and as consequence its economy adjustment. Often national banks close deals not directly but via one or several commercial banks covering up their activity. National banks of the developed countries may unite in order to reach the common goal.
All mentioned above Forex players are active participants, they do not only execute operations at the Forex market but offer their own prices (quotes). Active participants as a rule execute deals on millions US Dollars and do not use margin trading. They are also called market-makers. There are also passive participants at Forex, those who do not set quotes and may just close deals with quotes offered by the active participants.
Different investment funds are passive participants. Such companies place funds in the securities of the government and corporations of different countries when execute currency speculations. One of the most famous investment funds is “Quantum” of George Soros. At investment funds disposal there are milliards of US Dollars, moreover the may attract milliards US Dollars of borrowed funds, that is why investment funds may resist to national banks’ interventions.
Other type of the market passive players is participants of the foreign trade. These are companies which export and import goods. If an import deal is executed in the foreign currency this currency should be bought before the deal closed. On the other hand, if an export deal is closing in the foreign currency, this currency should be sold after the deal is executed. Such operations are executed via commercial banks. Next passive participants are international corporations – these are companies which have representative offices abroad. When funds are moved from the representative offices to the Headquarters, conversional operations are used, which are executed via commercial banks.
Step by step we come to the role of the private investor at Forex. Private investor as a rule does not have any capital, which is enough for closing deals via brokerage houses – minimal amount of such a deal is 100000 US Dollars. Via commercial banks private investor may execute buy/sell deals but speculate on exchange rates of the commercial banks is impossible for him/her. Commercial banks’ rates are changing once in 24 hours and the difference between sell and buy rate (spread) is very high. That is why commission houses appeared. Using the principal of margin trading private investor may execute deals even having modest capital.
With the Internet development brokerage houses evolved to the dealing centers and now provide services to everybody. Any person who has several thousands US Dollars may try himself/herself at Forex. But do not hurry! Before you open an account in one of the dealing centers read special materials about Forex and trade at demo-account for several months. You will not lose anything and get invaluable experience.

Sumber : http://support.instaforex.com/en/index.php/Chapter_2_Forex_participants

sdh baca dr awal sampai buntut...

__BlacKy__ wrote:

sdh baca dr awal sampai buntut...

Bagus gan, semoga dapat dimengerti, tapi harus pelan-pelan dan dipahami. ok.

Kita lanjutkan materi :

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How currencies are denominated at Forex

At the common market we sell goods for money. What about world exchange market where money appears to be commodity? Everything is simple we trade one currency against the other at Forex, it means that it is offered several units of one currency for another currency. International Committee for Standardization assigns abbreviation to each currency. First two letters determine the country of origin, the third letter as a rule (but not always) is the first letter of the currency. For example, abbreviation JPY: JP – Japan, Y – Yen. Despite the popularity of EUR at Forex, the world currency is still US Dollar. The trade volumes in different currencies are not the same.

Sumber : http://support.instaforex.com/en/index.php/Chapter_3_How_currencies_are_denominated_at_Forex

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Types of conversion operations
Conception of conversion operations at Forex is deeply intertwined with the financial instruments. We classify the gold market, the credit market, the security market and Forex as the financial markets, where financial instruments are the methods of financial operations executions. Further only financial instruments which belong to Forex will be discussed. Conversion operation – is a transaction closed by Forex participants on exchange of agreed sum of currency which belongs to one country for currency of the other country for a certain date under the established quotation. Conversion operations at Forex are distinguished by the settlement date, i.e. by the date of currency supply in reference to the date of the buy/sell deal execution. According to this feature conversion operations may be divided into two types: current conversion operations (spot) and forward conversion operations.
The main volume of operations at Forex is set to the spot operations. In the international practice it is accepted that settlement date of the spot operation is the second working day after the transaction is closed. Such conditions are very convenient for counterparties because they have time to process documentation. Market, where currency exchanges on spot quotations is called the spot market.
It should be mentioned that this principle of mutual payment on operations of spot type works for the major players of the exchange market. For private investors (clients of different brokerage houses), who work at Forex by means of the Internet, the deal is executed immediately after a trader clicks the button. In such deals settlement date loses its sense – clients account always reflects current work at Forex.
Forward conversion operations include forwards, futures, options and swaps. They are also called derivatives. Such financial instruments were specially created for the real business because they help to decrease possible risks appeared as a result of quotation changes in future. For a private investor who wants to make profit at Forex such financial instruments are not so important. Nevertheless, they will be discussed for understanding the overall picture.
Forwards or forward contracts are closing between the counterparties at the condition to exchange the certain amount of currency according to the agreed quotes and day (settlement date). A deal will be closed regardless of the current (spot) quotes.
For example, forward contract may be useful when Russian company is planning to buy equipment for US Dollars abroad. Let’s imagine that this company does not have enough funds for the deal closing but expect receipt of funds to the rouble account during the month. It also forecasts the rate changes into a negative zone for the company, i.e. the rise of US Dollar. In this situation it makes sense to conclude forward contract with a bank on buying necessary amount of US Dollars with the settlement date of one month and with profitable for the company quotes. Of course, it will be difficult to find a counterparty because banks also expect the rise of US Dollar.
Forward contracts on the one hand minimize risks, but on the other hand may drive to profit loss because in case the fall of US Dollar a company was missed a chance to pay less for the equipment.
Futures in contrast to forward contracts have standard maturity dates and fixed amounts of currency volumes. This peculiarity lets them to be sold as common securities. For futures trading there is futures market. Average time of futures circulation is about 3 months.
Options are the same as futures but they reduce liabilities of the counterparties. Thus if you buy futures you have to close a deal according to the agreed conditions, if you buy options you may refuse to close a deal. Options are traded at the options market.
Swaps – a type of conservative operations when counterparties close buy/sell transactions with the liability to execute a reverse deal in a certain period of time. For instance, a company buys from a bank 1000 US Dollars for rubles at spot quote with the liability to sell 1000 USD for rubles back to the bank in a month at spot quotes which will be at Forex in a month. Swaps are non-standard contracts that is why they are not traded at the separate market.
Among all described conversion operations (financial instruments) for a private investor spot operations are the most important.

Sumber : http://support.instaforex.com/en/index.php/Chapter_4_Types_of_conversion_operations

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Forex quotations
When we buy a good in the shop the price tag of this good reflects its price in the national currency. This situation is common for us, we pay 10 US Dollar and buy a book.
At Forex we always trade one currency against the other that is why regular price tag is not enough here. For example, we deal with USD and EUR. In order to value currencies’ price we need to know the price for one USD, denominated in EUR or EUR price denominated in USD. So, we need to know rate of one currency against the other. Such rate is reflected as quote of A/B type. In our case a quote looks like EUR/USD.
A currency which is placed before “/” is called base currency and currency which is placed after “/” is called counter (quoted) currency. For any currency pair at Forex the position of a currency in the quote is strictly determined. For pair EUR and USD it is EUR/USD and NEVER USD/EUR, thus EUR is a base currency and USD – quoted currency.
How a currency position in the quote is defined? Let’s digress from Forex and discuss separate country, for example, Japan. Historically every country has its own rules of quotes recording. Usually they are created in order it will be more convenient to provide information. It is more convenient to say that one USD may be bought or sold at 104.78 Yens than vice versa. That is why currency rate of Japanese Yen is presented as USD/JPY. The method of currency rate record, when a unit price of a foreign currency is denominated in a certain units of the national currency, is called direct quotation. The method of currency rate record, when a unit price of a national currency is denominated in a certain units of the foreign currency, is called indirect quotation. In our case – USD/JPY – is a direct quotation for Japan.
There is no such a concept as national currency at Forex and the main reserve currency is US Dollar. For quotes with US Dollar the rules of currency rates record, formed in the appropriate countries, are used. The concept of direct and indirect quote is used towards USD. With some currencies USD is a base currency and it is called indirect quote. With other currencies USD is quoted currency and it is called direct quote. For example, USD/JPY: USD is a base currency indirect quoted; GBP/USD is a direct quoted currency.
When we say that a quote A/B equals X, we mean that one unit of a base currency may be bought or sold for X units of quoted currency B. Let’s take again an example with EUR/USD: if we say that EUR/USD equals 1.2845 we mean that we may buy or sell one EUR for 1.2845 US Dollars. In other words, buy and sell transactions always refer to the base currency. Below there are examples of quotes denominated to US Dollar.
EUR/USD 1.2845
USD/JPY 97.50
GBP/USD 1.6260
USD/CHF 1.1623
AUD/USD 0.6735
USD/CAD 1.2535
We may conclude that one EURO sells/buys for 1.2845 US Dollars, one US Dollar sells/buys for 97.5 JPY Yens and so on.
It is important to know that in some lists of quotations in the Internet the authors do not emphasize direct and indirect quotations and it is implied that the user is informed and understands which currency in the quote is a basic one. For example, you may find a quote JPY/USD 97.50, here indirect quote against USD is meant – USD/JPY 97.50. Sometimes quotations against USD are denoted by one currency, for example JPY 97.50. That is why it is important to learn quotation pairs which you are going to use in trading and know what quotation (direct or indirect) it is appear to be against USD. Otherwise you may take incorrect decision regarding deal execution. For instance, CHF which is always quoted currency in the pair with USD. A quote CHF 1.1623 means that one USD buys/sells for 1.1623 CHF and not vice versa.
It is also important to understand how quotations are changing. Your main aim at Forex is to buy cheaper and sell at a higher price. For direct and indirect quotes the direction of the rate changes has opposite value. For a direct quote against USD, for example GBP/USD the increase of a quote means the rise of GBP and the fall of USD. For indirect quote against USD, for example USD/JPY the increase of the quote means the rise of USD and the fall of JPY. That is why it is so important not to confuse the quote type against interesting for you currency when you close a deal at Forex.
For different quotations different accuracy value (the number of digits after decimal point) is used. Minimal quotation value change is called a pip and for different quotations it is different. For instance, for a quote EUR/USD one pip equals 0.0001 and for a quote USD/JPY one pip equals 0.01. It is worth mentioning that big figures are changing rather slow with the course of time.
The price of one pip denominated in USD is of particular interest. If take direct quotes against USD it is not a problem because a pip is already denominated in USD. In case with indirect quotes against USD one pip volume in USD is necessary to calculate according to the special formula. We will discuss it later when begin to learn how to calculate profit and loss.
In this chapter all quotations were denominated in the spot (current) prices. We decided not to complicate the material introducing such concepts as buy/sell price, spread volume and cross-rate. We will touch on these concepts later.

Sumber : http://support.instaforex.com/en/index.php/Chapter_5_Forex_quotations

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Buy/sell rates and spread
Till now by the consideration of quotations, for simplification of understanding of the website material, we intentionally used only current (spot) exchange rates on Forex. Actually any quotation on Forex has two rates (two prices) – buy rate (bid) and sell rate (ask). These rates usually denoted through slash «/» where before the line the buy rate is indicated, and after line – sell rate, for example USD/JPY 104.75/104.85.
The buy rate is price on which the party, exposed the quotation, agrees to buy from you base currency. The sale rate is price on which the party, exposed the quotation, agrees to sell you base currency. That is concepts of buy and sale in relation to you are "inverted". Buy and sell in this formulation not you, and the party offering to you the rate. In other words, if you are going to buy base currency of the rate, it is necessary for you to look at the sell price (ask). If you are going to sell base currency of the rate it is necessary for you to look at the buy price (bid).
For example, if you are going to get 100 US dollars for the Japanese Yens at a rate USD/JPY 104.75/104.85 you need 100 x 104.85 = 10 485 Japanese Yens. If you are going to get the Japanese Yens by selling 100 US dollars, you receive 100 x 104.75 = 10 475 Japanese Yens.
Depending on the trading platform, provided to the clients by Internet brokers for work, graphic representation of rates will differ. As the big figure rarely change, in a sell rate (ask) of official quotations on Forex they often are not displayed. For example, mentioned above the US dollar quotation to the Japanese Yen can look as USD/JPY 104.75/85. The term big figure on a dealer slang means base number in 100 points, therefore in a sell rate (ask) quotations, as a rule, are displayed only 2 last positions.
The difference between the bid and ask prices (right and left sides of rate) is called spread. The spread forms a basis of profit reception for the party exposing the quotation.
Let us consider exchange office with the typical quotation for Forex of US dollar to the Japanese Yen USD/JPY 104.75/85 with a spread in 10 points. You sell 100 US dollars and receive 100 x 104.75 = 10 475 Japanese Yens. If somebody another comes now and will buy in exchange office these 100 US dollars he will be compelled to pay 100 x 104.85 = 10 485 Japanese Yens. Thus, the exchange office will earn 10 485 – 10 475 = 10 Japanese Yens. Apparently from an example, the exchange office earns on opposite transactions with currency i.e. when someone buys, and someone sells. This principle underlies in reception by broker houses of profit on the Forex market.
Profit in 10 Japanese Yens (approximately 10 cents in recalculation for US dollars) is insignificant small in comparison with a sum of transaction in 100 US dollars. For this reason, exchange offices use a much bigger spread, than in quotations on Forex where the minimum size of deal bigger and makes an order of 100 000 US dollars. More real for exchange office quotation would be USD/JPY 102.00/108.00 with a spread in 600 points. Then the profit on the transaction in 100 US dollars would be 600 Japanese Yens (or 5.56 US dollars in recalculation under the same quotation).
We will learn to define profit on the executed deal and to recalculate it in currency interesting us in following chapters of the website. Now it is important to understand that in any quotation on Forex two rates (buy rate and sell rate) are presented, and that the difference between these rates is called spread and is expressed in points.
So, spread – a source of the income for the party exposing the quotation. For this reason, the retail broker houses representing to private investors possibility to work on Forex through the Internet, as a rule do not take the commissions on transactions – they earn on a spread.
In the subsequent chapters of the website when we will learn to open and close positions on Forex, it will be in detail described why the big spread is not favorable for the private investor. For now it is necessary to understand that at a choice of the Internet broker first of all it is necessary to pay attention to the spread size they offers – the less spread, the better!
Where are buy and sell rates from? Who fixes them? Quotations of currencies are assigned solely by a supply and demand of currencies on the international currency market. The main influence on exchange rates exerts major active participants of the Forex market (about classification of participants on the Forex market was told earlier in the corresponding chapter). Carrying on the main change of current rate, major passive participants and millions of small participants also influence the further change of courses. Thus, if the majority of participants try to sell particular currency the price for it falls. If the main tendency goes to buy of this currency the price for it grows. Thus, the goal of the trader is to distinguish this tendency in time.
For different participants of international currency market at different time the spread size in the quotation is not identical. For the major participants of Forex, making the deals on millions of US dollars, spread size is minimum and amount to, as a rule, just few points as even the small spread in such transactions can make notable profit. For the small Forex participants, making the deals with the smaller sums, the spread size is bigger. So, in exchange offices the size of a spread can reach hundreds points.
In the conditions of unstable, fast changing course, the size of spread may increase. So, during the flurry moments of buy or sell of the currency, caused by publication of the important economic indicator.
The size of a spread can depend on liquidity of the separately taken currency market. If the currency does not trade actively on Forex, the spread under corresponding quotations can be bigger. It is especially actual for an interbank currency exchange when banks exchange "exotic" low liquid currencies of underdeveloped countries. Private investors basically work on Forex with quotations of high liquid currencies.
For major participants of the international currency market the spread size can depend on a sum of deal. If the sum strongly differs from mid-market sums on particularly taken currency the spread can be bigger. All big deals subject bank to considerable risks whereas for the smaller sums bank expenses on their carrying out increase.
Finally relations between contractors of the deal can influence the size of a spread. If there are strong business relations between the deal parties, they may come to the agreement on decrease of the spread size. And on the contrary, if the dealer of bank does not wish to perform operation with separately taken contractor, it can intentionally overestimate spread size in the quotation, obviously forcing the contractor to refuse the conducting of the operation.
So, a buy rate (bid), a sell rate (ask) and the size of spread in the quotation – key concepts at work on Forex. It is necessary for private investor to understand their meaning distinctly. At work on Forex decisions should be accepted quickly, and for this purpose problems in understanding of basic concepts should not be!
The private investor should not be frightened by the fact, that transactions on Forex, as a rule, consist on hundred thousand and even millions US dollars. The principle of marginal trade, it will be described in the next chapters, allows private investors to make deals for the sums of hundreds times exceeding means they have.

Sumber http://support.instaforex.com/en/index.php/Chapter_6_Buy/sell_rates_and_spread

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Cross-rates
The trading operations in Forex are carried out not only for the US dollar. We intentionally have not considered this kind of operations till now to make the Web-content more intelligible. The currency rates, which do not include the U.S. dollar, are named the “cross rates”. Generally, only advanced traders work with the cross-rates, as for the efficient work with them you should have a good background in economic situation and indexes of specific countries. As an example for cross rates quotations we can take the rate of the British Pound against the Japanese Yen (EUR/JPY), or the price of the British pound in Euro (GBP/EUR).
The currency positions in the major (dollar) price quotations are strictly determined. The positions of the currencies in cross pairs could vary depending on the counterpart, which gives the price quote. For example, a bank in Canada can rate the Canadian dollar as EUR/CAD. This finer point should be kept in mind, when the cross rates transactions are made, unless to meet a bad trade decision. In this case, British pound is an exception. It is always quoted as GBP/___, i.e. it is always a base currency.

Why the cross rates are of a great interest in Forex? Let us imagine a situation, when you are expecting a big economic upturn in Canada due, for instance, to the oil fields newly discovered (Canada is one of the main world oil suppliers). At the same time, in Japan the latest economic indicator gives a sign of a temporary breakdown in the economy. As the economy state of a country directly corresponds to the price rate of its currency on the world foreign exchange, it is obvious, that one ought to buy the Canadian dollars and sell the Japanese yens. But if you make this deal with US Dollars, the result could be pretty haphazard. The US Dollar can move up or drop down as well, because we might have no clear information about the US economic climate. Therefore, the purchase of Canadian Dollars for the US Dollars (by the rate USD/CAD) may not bring an expected profit, as evenly the sale of the Japanese Yens for the US Dollars (at the USD/JPY) could do the same. If we conduct these operations at once in an equal volume, as if we exclude dollar from the “equation”, and we cease to be depended on the situation with the American economy. We attain this effect, using the cross rates in Forex, and thus we omit the factor of US economy influencing the course of the currencies as to our example.
The most operations in Forex are performed in the major (dollar) rates. The Forex market of cross pairs is much less liquid. As a consequence, the cross pair rates are not calculated in regard of asks and bids of the currencies relative to each other, as it is done with the major rates. Otherwise, the cross pairs market could become a speculative one, and any participants could take in under full control. Thus, in spite of absence of Dollar in the cross rate quotations, it is just those major rates with US Dollar which are taken into account while cross rates quotations are formed.
How is the calculation of cross rates made? There are three possible variants of the cross rates calculation depending on whether US Dollar is a base or quoted currency in the major quotations of currencies that we are interested in. Thereby we will use the simple arithmetic rules used for multiplication and division of the fractions, which we know since the school bench. At the same time we should not take literally the USD/JPY pair as a fraction, of course. Then if the Yen for US Dollar was recorded as a real fraction, so the value of the quote 104.78 (the quantity of Japanese Yens exchanged for one US Dollar) could be represented as JPY/USD. From practice, as we know, USD/JPY is the reverse spelling. The first type of calculation is used for the currencies with the direct quotations against US dollar (the US Dollar is the base currency in the pair for both currencies). Let us take Yen (JPY) and Swiss Franc for instance. Having on hand the quotes of USD/JPY and USD/CHF against US Dollar, we can deduce a cross rate of the Swiss franc against the yen with the fractions methods.
CHF/JPY = USD/JPY : USD/CHF,
That means it is necessary to divide the dollar quotation of the Yen by dollar quotation of the Swiss Franc. For instance, at the USD/JPY 104.78 and USD/CHF 1.0505, cross rate of the Swiss Franc against Yen will be equal to CHF/JPY 99.74 (with rounding).
The second type of calculation is used for the currencies with direct and reverse quotations against US Dollar (in this case Dollar is a base currency of the pair for one currency and quoted currency for another). Let us consider the Yen (JPY) and the Australian Dollar (AUD). If there are the quotes of USD/JPY and AUD / USD against US Dollar, we can deduce by the fractions rules a cross rate of the Swiss franc against the yen.
AUD/JPY = AUD/USD * USD/JPY,
So one has to multiply the dollar exchange rate for the Australian Dollar with the dollar quotation against the Yen. For instance, if there are USD/JPY 104.78 and AUD/USD 1.0564 in hand, the cross rate of the Australian dollar to the Japanese Yen is equal AUD/JPY 110.69 (with rounding).
The third type of calculations is used for the currencies with the reverse quotations against the US Dollar (Dollar is in this case a quoted currency for the both currencies). Let us consider the British Pound and the Australian Dollar. Having the GBP/USD and AUD/USD quotations against dollar, we can deduce by the fractions rules a cross rate of British pound against the Australian dollar:
GBP/AUD = GBP/USD : AUD/USD,
i.e. we have to divide the dollar quotation of the British pound by the dollar quotation in Australian dollar. For instance, if there are GBP/USD 0.5028 and AUD/USD 1.0564 in hand, the cross rate of the British pound for the Australian dollar is equal GBP/AUD 0.4760 (with rounding).
It ought to notice, that we have excluded from our consideration the notion of bid and ask price of the currency rate to simplify a bit the calculation formulas, and till now we used only current (spot) prices. But each major (dollar) quotation has two prices, and as the cross rate quotation has these both prices as well, so where in formula should we put the biding price and where goes the asking price to? The answer to this query is in understanding of logics in the cross rates calculation. Let us return to our example of the first type calculation, which involved Swiss Franc (CHF) and the Yen (JPY). We are interested in the cross rate quotation CHF/JPY. In order to define the biding price of the Swiss Franc in such a quotation (the biding/asking rates, as we have just known, always refer to the base currency) we need to argue like this. As we are interested in buying Swiss Francs, so we have to purchase first dollars for the Japanese Yens, and then sell them for the Swiss Francs. Thus, the biding rate USD/CHF is important for us, and in USD/CHF it is the asking price that we need to consider first. Thus, the buying rate of the Swiss Franc to be exchanged for Japanese Yen in the cross pair CHF/JPY is calculated by the formula:
CHF/JPY(bid) = USD/JPY(bid) : USD/CHF(ask)
In the same manner one can deduce a formula for the selling rate of Swiss Franc for the Japanese Yen in the cross pair quotation CHF/JPY:
CHF/JPY(ask) = USD/JPY(ask) : USD/CHF(bid)
In the examples of the second and the third types of calculation we use the same formulas:
AUD/JPY(bid) = AUD/USD(bid) * USD/JPY(bid),
AUD/JPY(ask) = AUD/USD(ask) * USD/JPY(ask),
GBP/AUD(bid) = GBP/USD(bid) : AUD/USD(ask),
GBP/AUD(ask) = GBP/USD(ask) : AUD/USD(bid).
It is to be noted, that the dealers do not use these formulas because of their awkwardness. There is more convenient way to calculate the buying and selling cross rates in Forex. This way is as the following. One takes an average of the biding and asking rates for each of the dollar quotations. Then, using the formulas for the current (spot) prices, we can calculate the current value of cross rate quotation. After that, this resulted value is quasi “drawn” apart by some points (the spread is settled up), and in this manner we receive the buying and selling price for the cross rate quotation.
Let us consider an example of Swiss Franc (CHF) and Japanese Yen (JPY). Supposing, the selling/buying rates of these currencies are: USD/CHF 1.0502/08 and USD/JPY 104.74/82, so the average rates let be calculated:
USD/CHF(avg) = (1.0502 + 1.0508)/2 = 1.0505,
USD/JPY(avg) = (104.74 + 104.82)/2 = 104.78,
which are further used in the quotes calculation formulas with the cross rates for the current (spot) prices. The resulting value of the cross pair price CHF/JPY(avg) 99.74 undergoes then the drawing apart, for instance, by 5 points in both directions, forming the biding and asking price of the pair CHF/JPY 99.69/79.
It is to remember, that there are some underlying potential problems in this simplified way of calculation. As traders earn money in Forex just with the conversing (over crossing) transactions, the spread must be quite big to escape the losses at the reversing trade with another counterpart. It is particularly vital for the low liquid markets of the “exotic” cross rates. In the summary of this chapter we would say, that the analysis and forecasting on the cross rates do not differ from the testing and prospecting for the major pairs in regard to US Dollar, i.e. there are the same tools in effect.

Sumber : http://support.instaforex.com/en/index.php/Chapter_7_Cross-rates

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Forex trading hours

Despite that Forex market operates clock round, there are certain time frames during which it can be more or less active in relation to transactions with different currencies. It can be explained by work schedule of the world’s major financial markets.

We all know about time zone existence, besides Russia is a very unique country firm that aspect – its territory stretches over 10 time zones. It means that at one moment the local time varies in different cities of the world, and the day in one part of the planet may mean night in another one. For convenience there was introduced Greenwich time or coordinated universal time which is denoted as GMT (Greenwich Meridian Time). GMT is a local time in the neighborhood of the Greenwich (mean) meridian. This European countries neighborhood includes Great Britain and Portugal.

As a Forex trader you can be in any part of the world, but it is essential to know which time zone you are in and how your local time corresponds to the local time of the global financial centers.


Worth noticing that in some countries daylight saving time is practiced, so in different season such countries will be in two neighbor time zones. Winter time zones are illustrated at the picture.

All activity at Forex market is divided into 4 trading sessions: Pacific, Asian, European and American. Each session is active during the working hours of a proper region.

The Pacific session starts first while financial markets of Wellington (New Zealand) and Sydney (Australia) begin opening. The next to open are the Asian deals, at the same time Tokyo (Japan), Hong Kong (Hong Kong) and Singapore (Singapore) wake up. The most active trading during these sessions is fixed with the British pound: GBP/JPY, GBP/CHF. Aside from this, the following pairs with the US dollar are traded: USD/JPY, AUD/USD и NZD/USD, as the Asian session opening comes in line with closing of the American one of the previous day. The Euro is almost not used for the European session opening in London.

By the end of the Pacific and Asian deals the European session starts. The major financial centers of Europe start up in London (England), Frankfurt/M (Germany) and Zurich (Switzerland). London is the largest financial center of the world where 30% of all deals at the) international exchange market are completed. During the European session pairs with the British pound (GBP and Euro (EUR) are actively traded. The Japanese yen (JPY), to the contrary, loses its attractiveness during the trading day. Additionally, the following pairs are traded with the US dollar: USD/CHF, USD/CAD, EUR/USD.

In the middle of the European session the American market opens its gates beginning from the financial center in New York (the USA), up to 15% of the global trading volume at Forex takes place here. The most deals are executed within the operating period of both European and American trading sessions, when the liquidity of such pairs as: USD/CHF, GBP/USD, USD/CAD and EUR/USD is great. By the middle of the American trading hours when Los-Angeles wakes up, the trading in Europe stops, that is why the deals liquidity of the European cross-rates (EUR/GBP и EUR/CHF) falls. Experienced traders almost do not trade with these pairs during the American trading timeframe.

According to summer or winter season the time in different financial centers of the world will differ from the universal time GMT by number of hours shown in the table below:

The financial center: hour difference from GMT: Winter/Summer:

Wellington: +11/+12

Sydney: +9/+10

Tokyo: +9/+9

Hong Kong: +8/+8

Singapore: +7/+8

Moscow: +3/+4

Frankfurt/M: +1/+2

Zurich: +1/+2

London: 0/+1

New York: -5/-4

Los Angeles: -8/-7

It can be seen from above that all countries practice daylight-saving, as they are in the same time zones in winter and in summer.

Working at Forex, apart from the major financial centers of the world during the trading sessions, there should be taken into account the fact that on Saturdays, Sundays and official holidays the financial centers are closed. The work efficiency in the global exchange market is minimal these days, consequently the liquidity rate is low too. The market is like in a pending mode. Even the market’s reaction to essential global events is delayed till Monday (next working day). That is the reason why professional market players try to close all opened positions on Friday (we will tell about opening and closing the positions later) in order to avoid unpredicted currency rate fluctuations caused by events which took place in weekends.

On Monday, Forex usually in waiting and there are no dynamic deals. The participants just try to determine dominating trends of rate movements. From Tuesday active trading starts and it lasts till the end of the Friday’s American session.

Sumber : http://support.instaforex.com/en/index.php/Chapter_8_Forex_trading_hours

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Forex and exchange office

Working at Forex is targeted to gaining money on currency speculations. We have been talking much about the currency market above. But such topics, as what beginning capital is needed for work at Forex, and what profit can be expected at Forex, have not been discussed yet. In this chapter we will try to make it clear.

As the currency exchange in the exchange office is a simplified model of yield at Forex, we will start with its description. Theoretically, profit can be gained from buying or selling currency in the exchange point, but (what we will become assured of in the process of reading the chapter) the profit sum is tiny, as compared to the opportunities of earnings at Forex and via the Internet.

So, fancy that you have 1000 USD and want to earn on currency speculations in the exchange office. Assume that the US dollar versus the Japanese yen is quoted at 104.15/106.65 in the exchange office. We forecast the increase of the Japanese Yen versus the US Dollar, and hence, decide to buy the Yen for all our dollars. From the preceding chapters we know, that the rates of ask and bid are related to the basic currency of the quote, in our case it is to the US dollar. Thus, we are selling the dollars, which are then bought by the exchange office. The rate of buying or bid, is shown first in the quote, thus we get 104.15 * 1 000 = 104 150 JPY.

If we sell our yens for the US dollars immediately, according to the given quote we will receive 104 150 / 106.65 = 976.56 USD. That means we will have losses at this operation, equal to 1000 – 976.65 = 23.35 USD. What is needed to get profit? It is obvious that we need the ask price in the quoting USD/JPY to fall lower, than the initial buy price, that is, the bid price should fall by more than 250 points. Note that 250 is the size of the quoting spread, that is, the ask price should change at least by the size of the spread, so that we could at least get back our 1000 USD. The problem is that we can wait long enough (weeks, months) for the change of the currency rate by 250 points, depending on the current situation at Forex. But fancy, that the rate after all has changed for 500 pips in the favourable for us direction; that means the quoting is USD/JPY 99.15/101.65. What profit will we gain after selling our Japanese yens? We will get 104 150 / 101.65 = 1 024.59 USD. Thus, our net profit from the operation will be 1 024.59 – 1 000 = 24.59 USD. In reality, one can wait too long for the currency rate to change by 500 points. That means, 24.59 USD can become our month or even quarter profit. Naturally, it is not the profit we would like to gain. But you can relax, as working at Forex is completely different!

From the previous example we learned the important information, that the lower is the spread volume of the offered quoting, the more profitable it is for traders. In the exchange points the spread can equal to hundreds of ticks, and the quoting, as a rule, is only changed once in 24 hours. At Forex, the size of the spread depends on the party, which sets the quoting. For a private investor, who is working in the Internet, the spread volume is set by his Internet broker (the brokerage house). Therefore, it is important to choose the Internet broker, which offers the most favourable working conditions. Depending on the currency pairs, the spread volume usually varies from 1 to 10 pips. But as it was stated above, when the currency market is instable, the Internet brokers can increase the spread volume, so we should not forget about this as well.

Another lesson, which we learnt from the previous example, is that for turning profit from currency rate speculations in the exchange point, it is necessary to buy currency in order to make a reverse operation in due time, that is to sell it. Besides, in the example with the exchange point, in order to buy the Japanese yens for the US dollars we need to have the whole sum in dollars. This is vivid, of course, but at Forex everything is easier, and this will be commented on further. One more thing, which we should pay attention to in case with the exchange point is, that for currency speculations we can use only the funds, which we have in cash. Of course, nobody prohibits us from taking a bank credit, but no bank will give you a credit for speculations on the currency exchange; moreover, you would not like to lose the most part of your credit on such speculations and get into debt, would you? With Forex, everything is easier. Using the principle of margin trading, which will be discussed in the next chapter, and having comparatively inconsiderable funds (even a few thousands of the US dollars), we can control the capital, which by hundred times exceeds our own funds. The bigger capital we manage, the higher can be the profit. If we bought the Japanese yens not for 1000 USD, but for, let us say, 100000 USD, we would gain not 24.59, but the entire 2459 USD, and this makes it worth to continue Forex education, doesn’t it? Hence, let us finish the discussion of the exchange point and pass to currency market Forex.

In order to work at Forex via the Internet, you should choose the Internet broker (we will call it simply “a broker” for convenience). The broker opens an account for you, in which you should deposit a certain sum of money, called the security deposit. The amount of the security deposit is a philosophical and, at the same time, a practical question. It depends on how aggressive you are going to trade, and on the leverage (it will be discussed in the next chapter), which you will be using, on how many lots (it will be discussed later) you are opening at the same time, and what experience of Forex trade you have etc. For a novice, it is recommended to have not less than 1500-2000 USD on the security deposit. The security deposit, as a rule, is kept on special multicurrency accounts, which the broker opens for you in the bank, where it is serviced. Generally, the majority of the Internet brokers are foreign corporations, registered off-shore. For this reason, the accounts are opened in the US dollars, but this (unlike in the example with an exchange point) does not mean, that you will be able to work only with the dollar quotes. To buy the Japanese yens for pounds, the Internet trader does not need to have pounds on his account. The advantage of Forex market is the possibility to earn on the currency rates without real currency supply, i.e. the date of the currencies valuation loses its significance. Having the US dollars on the security deposit, we can make deals on any other currency. Let us remind the example with the exchange point, where we were waiting for the growth of the Japanese yen rate versus the US dollar, in other words, for the falling of the dollar rate versus the yen in the quote USD/JPY. And what if we were on the contrary, waiting for the uprise of the dollar rate vs. the yen? It would be more logical to buy the US dollars for the Japanese yens, but what should we do, if we have only 1000 USD and no yens? Naturally, we would not be able to make such operation in the exchange office. Thus, working at Forex via the Internet, a trader can make such deals, since there is no real support of the currency (as we have already mentioned), the money is gained only on speculations, and the profit is converted into the currency of the security deposit, i.e. into the US dollars.

But the principle of gainings is the same: to make an operation, we should at first buy the currency at a lower price in order to sell it at a higher price later on. Or first, sell the currency at a higher price, in order to buy it later at a lower price, which is almost the same. Because one type of the currency is always bought or sold for another type. The first operation stage at Forex is called the opening of the position. The second one is called the closure of the position. At the moment of the position closing, the profit or loss from the deal is calculated, which is either added to or minused from the security account correspondingly. You can open the deal by a buy- or a sell- order of the base quote currency. If you open the position by currency buying, such position is called the long position. If you open the position by currency selling, such position is called short. When, for instance, you hear a phrase “I have an open long position on the US dollar vs. the Japanese yen”, it is meant, that waiting for the rise of the US dollar rate versus the Japanese yen, a purchase of a certain quantity of dollars for yens was made.

The minimal volume of the operation at Forex is called a lot. Its size is depicted in the quoted currency, but as a rule, is equal to 100 000 USD. Working at the currency market, you open and close positions, the size of which is always equal to a whole number of lots. The question, that may have arisen, is how a private investor can work at Forex, if the minimal sum of the deal is so high. Do not be scared, the principle of the margin trading, which will be discussed in the next chapter, will let you manage the funds equal to 100000 USD, having only some thousands of dollars on your security deposit and risking of your deposit only.

But even the margin trading principle cannot save those, who do not have such amounts. As someone can have a relatively small capital (around 1000 USD), but would like to work at Forex as well. For such investors, the Internet brokers introduce mini lots, which are equal to 10000 USD. And some brokers even offer micro lots, equal only to 1000 USD, and to control it, one needs only a few hundreds of dollars, but these lots are used rather rarely. In practice, being a novice Internet trader, you will most likely work with mini-lots.

It should be noted, that the higher your security deposit is, the more lots you can have, opened simultaneously at Forex. As depending on the strategy, which is worked out by every trader, you may need a number of simultaneously opened positions, and this should be taken into account at trade. Therefore, you should always control the amount of your security deposit.

What is the approximate profit from one operation at Forex? Imagine, that we are dwelling with mini lots, the security deposit amounts to 1000 USD; we are forecasting the increase of the US dollar rate versus the Japanese yen at the current quotation of USD/JPY 104.75/80. As we can see, the spread is equal to 5 points, which is typical of Forex and considerably less, than in the example with the exchange office. Fancy that we are opening a long position on the US dollars with one mini lot at the quotation of 104.80 JPY for one dollar. Our forecast of the rate movement confirms, and at the moment of the position closure the rate is USD/JPY 105.10/15. So, we have managed to “catch” the profitable for us rate movement equal to 105.10 – 104.80 = 30 ticks. It should be noted, that the ticks correspond to the quoted currency, i.e. the Japanese yen. In order to calculate the value of our profit in the US dollars, it is necessary to convert 30 ticks in the dollar equivalent and multiply by the size of the mini lot 10 000. To convert pips to the dollar equivalent we divide 0.30 by the rate of the US dollar selling for the Japanese yens, that is 0.30 / 105.15 = 0.0029. The received value corresponds to 29 points in the dollar equivalent, and multiplying it by 10 000, we can receive the sum of our profit- 29 USD. The rate movement in our example was equal only to 30 ticks, and on this movement with 1000USD we have managed to get profit amounting to 29 USD. Actually, this movement can be “caught” at Forex within a few hours or even minutes.

To summarize the chapter, let us compare the profit, received from the operation in the exchange office, described at the beginning of the chapter and the operation at Forex, discussed at the end. It is evident, that the opportunities, which Forex provides, cannot be compared to those of the exchange office. The profit, which can theoretically be gained within a month in the exchange office, can be achieved within an hour at Forex!

Sumber : http://support.instaforex.com/en/index.php/Chapter_9_Forex_and_exchange_office

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Margin trading
In the previous chapter we compare work at Forex with opportunity to gain on the buy/sell operations in exchange office. It is obvious that Forex has a range of advantages which allow traders to take significant profit in a short period of time. The main benefit which may also be called “the base of pyramid” of such earning is Margin Trading which was introduced in Forex in 1986.
Margin trading allows investors with comparatively small capital work on Forex market. Without it private investors will not be able to trade, because marginal amount of contract on Forex (1 lot) is about 100 000 US dollars (1 lot volume in InstaForex is 10 000 US Dollars and it is 10 times less than standard market lot). The principal of margin trading is as follows. Stock intermediary (Internet broker or Dealing company) issues a loan to its clients for operations with currencies, charged upon client’s money called security deposit. The amount of security deposit is 1-5% of the deals size made by a client on Forex and depends on the leverage. Leverage can be 1:20, 1:50, 1:100 and even 1:500 and depends on the conditions of a certain Internet broker. It means that having security deposit in amount of $1 000, a client can get as a credit from 20 000 to 500 000 US dollars for execution of operations at Forex. Opening orders for big sums of money we can get a huge profit. But taking into account the fact that deals are executed with the loan proceeds, the risk of losses increases proportionally to the expectable profit. In other words, we can double the balance of our account as quick as lose everything.
As it was said above, a credit is issued against a pledge of security deposit, which is also called margin deposit or margin (hereof the title margin trading). It means that taking out a loan on speculative activities with currencies on Forex market, a client risks only his only funds. The client may not lose more money that he has in his trading account. In this regard, companies providing intermediary services on the international currency market are fully protected.
Why do Internet brokers (dealing centers) allow you a credit on deals execution at Forex? There are several sources of income for such companies and we will consider them in details.
Firstly, commission may be charged for every deal a client makes. It means that when you close the order, some amount will be automatically withdrawn from your trading account regardless of whether the deal was profitable or not.
Secondly, such companies earn on spread, because they provide higher spread in comparison with real market quotations. Mind that company executes client’s deals in his/her name and for its funds (lent you as a credit) according to the quotations which are provided by bank. Clients get quotes corrected for the Internet broker’s benefit.
Thirdly, if a client works with mini or micro lots, he/she in fact “plays” against Internet broker, because neither mini no micro lots are traded in the interbank area. If you get profit, money are paid by the broker itself, if you lose, broker puts your money in its pocket. As such scheme of taking profit works, we can make a conclusion that the most part of beginning traders, trading micro and mini lots, lose their money. In order not to make the same mistakes and not be among them, learn Forex thoroughly before you start trading at the real account.
The fourth, a company may add the interest on the given you loan. It means that interest will be added on all positions which weren’t closed by the end of a day. At best, it will be percentage rate (overnight refinancing rate), i.e. rate which the central bank issues commercial banks in the country with. In such case, it is told about bank interest (it is explained in details in the appropriate chapter). Different countries have different interest rates, so depending on the currencies which positions opened with and type of order (buy or sell), bank interest may withdrawn as well as deposited to the client’s account.
There is no real delivery of currency in margin trading, and the date of valuation of currencies loses its meaning. Internet trader earns on speculations, opening a deal at one price and closing at another. Traders may work with any currency pair, and not only with currency of his/her security deposit. Moreover, traders may open short positions as well as long ones by any currency pair. All profits and losses are converted in the currency of their security deposit.
Let’s consider the principal of margin trading by the example. Suppose that you work with mini lots and expect the upturn of the US dollar rate against the Japanese yen USD/JPY. There are 2000 US dollars at your account, and the size of 1 lot is 10000 US dollars. Suppose that Internet broker provides you with leverage 1:50. It means that to be able to open a deal, you need a security deposit in the amount of 200 US dollars (because 200 x 50 = 10000). In the moment of opening long position the security deposit in the amount of 200 US dollars is frozen, and only 1800 US dollars, which is called free margin, remain at your disposal. You may open other deals only for that amount.
It is not recommended to leave too small amount of free margin. The reason is the following: as soon as you opened position, fluctuations of the US dollar against the Japanese Yen could temporary move to the unfavorable for you direction. It means that if you close position at this moment, you will suffer losses which will be withdrawn from your account. Internet broker will not allow you to lose more than you have at your trading account, otherwise it will have to pay from its own pocket. Consequently, as soon as your current (floating) losses will reach the level when your deposit can not cover them, you position will be automatically closed or blocked by the Internet broker.
Such automatic closing of position precedes by so-called margin call, which will be described in details in the next chapter. So more money you have at the account, the wider fluctuations you can stand avoiding margin call. Because the price can change direction to the one you need and you can take profit, but if the size of your account could not withstand temporary negative fluctuation of the rate, you suffer losses.
It worth noticing that the more positions (lots) you open, the more funds you need to be kept at your trading account. If considering our example we open not 1 (lot) position but four, then security deposit would be not 200 US dollars but 800. Consequently, free margin would be 1 200 US Dollars. Since temporary lossmaking rates movements influence all four positions, the chance to receive margin call increases proportionally – by four times! In the next chapter such situation will be described in details.
Thus, margin trading gives a range of opportunities to the novice Internet trader. With competent approach to trading it can be the source of your profit growing. But, on the other hand, increase of probable income means increase of risk to lose. So margin trading is “double edged sword”. It can make you rich or poor. Only your intelligence, experience and luck determine your success!

Sumber : http://support.instaforex.com/en/index.php/Chapter_10_Margin_trading

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Margin call
Each time when a trader opens a position by means of on-line broker services (dealing company), the part of funds on his account is frozen. This part is called a security deposit and used for guarantee submission of that a trader will never lose more than he has on his account. Unblocked funds are called free margin and can be used for opening new positions. But it is not recommended to use all balance amount to open positions, as free margin is also needed for backing up the current losses (temporary losses) of the opened positions which turn to suffered losses if the position was closed at the current moment.
If the client does not have enough funds for covering the current losses, then so called margin call takes place signaling about that the account should be replenished. Otherwise, the position is closed automatically by the Internet broker, the client bears real losses. The current losses can be caused by unpredicted rate movement, opposite to the opened position direction. For example, you have opened a long position with the US dollar at USD/JPY quotation and the dollar began falling. It does not mean that you will suffer losses, because at a certain moment the rate can reverse and the US dollar will move upwards again. But if at some moment of the dollar rate downturn against the yen there will be not enough funds on your account to resist the present losses – your position will be automatically closed and you will meet real losses.
The account balance is divided into security deposit and free margin. The size of security deposit depends on the leverage size provided by the dealing company (see the previous article), the lot types which the trader works with and the number of such lots. With 1:50 leverage and long USD/JPY position opened by one mini lot (10 000 USD) the size of security deposit will be equal to 10 000 / 50 = 200 USD. If we had 1 000 USD on our account – 200 of them get frozen, 800 – at our disposal.
From the moment of opening a position the current profit and losses are calculated, as the dollar rate against the yen fluctuates constantly. Imagine that the current losses amounted to 800 dollars, i.e. there has come such moment when if we close the position our loss will reach 800 USD. But the position is still opened and the rate may turn to another direction bringing a profit. We still believe that a long position opening was right decision. But the dealing company realizes that if the current losses exceed our account balance then it will have to handle the deficit by means of its own money that is certainly not suitable for the company. For this case, the dealing companies hedge, so as soon as your operating expenses cover a certain part of your security deposit – margin call is activated and all your opened positions are closed automatically. Only untouched part of your security deposit is left on your account which turns into free margin. At the picture is shown an example when 30% of security deposit is a threshold amount. That means that when margin call is active, only 70% of your security deposit is left on your account. In our example with margin call at a long dollar position 0.7 * 200 = 140 USD will be left on the account. Such amount will not be enough even to open a position, so additional funds must be added to the account.
What rate movement must take place for margin call activation? Let’s say that the US dollar rate versus the yen was at 104.75/85 by USD/JPY quotation at the moment of opening the position. In other words, we bought the dollars for 104.85 yens per dollar. The position is closed by a reversing deal, i.e. dollar is sold for yens and the profit/loss is revalued in dollars. Suppose that the spread size is fixed (10 pips) and we are interested in such quotation USD/JPY X/(X+10), which will cause margin call. As we have 1 position opened by a mini lot (10 000 USD), 200 USD is the amount of security deposit, 800 USD – free margin, so we get the following equation:
10 000 * (104.85 – X) / (X + 10) = 800 + 0.3 * 200
It turned out that X=95.76. So, the quotation which activates margin call looks like this: USD/JPY 95.76/86. We see that the rate must fall by 900 points to induce margin call. In practice, for such a huge rate adjustment a lot of time is required, so we are not likely to activate margin call.
What would happen if we open a position by 4 mini lots instead of one (in the amount of 40 000 USD)? Then the security deposit would total to 800 dollars, free-margin - 200 USD and our equation would be the following:
4 * 10 000 * (104.85 – X) / (X + 10) = 200 + 0.3 * 800
In this equation X would be equal to 103.6. So the quotation which activates margin call would be 103.60/70. We see that in such case, the rate movement slightly more than by 100 points would bring margin call into action. Worth pointing out that 100 points price fluctuation during the trading day – it is an usual situation at Forex. This example shows that the bigger is amount of your opened positions the fewer funds are left on your free-margin, the higher opportunity of getting margin call. Take it very seriously!
From said above it can be concluded that for avoiding margin call it is necessary to watch over all opened position and close them in advance in order to minimize the losses if the trend changes to unfavorable one. To relieve the Internet trader from permanent watching over quotations – “limit order” option was introduced. By means of it you will be able to specify threshold values for current losses when opening a position (stop-loss) and current profit (target, take-profit). As soon as the current profit and losses overcome threshold amounts – the position will be closed automatically. Unlike to a market order which comes as an order to open or close a position at current market rates, limit orders restrict your loss risks and your expectable earnings.
In summary, as an Internet trader you have to afraid of margin call very much, as its activation can make you a bankrupt. For this reason try to avoid situations when a big part of your account is frozen for a security deposit and keep watch over your free-margin to be enough. Do not try to open positions for all free funds on your account and use limit orders for restricting possible losses and expectable gain!

Sumber : http://support.instaforex.com/en/index.php/Chapter_11_Margin_call

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Bank interest

At present moment we have already clarified that the margin trading supposes the usage of the loan capital, trader borrows assets from his/her Internet broker for deals at Forex. For understanding of this chapter it will be necessary to study the principle of cash assets turnover in the state. Imagine that there is a new state. There is a working-age population, but there are no money in state yet, what to do in this case? The Central Bank of our virtual state entrusts the Mint to issue the banknotes of the standard pattern. Suppose that the banknotes are issued, but how to distribute them among population? The number of commercial banks emerges in the state, which borrow from the Central Bank. The credit, as we know, is not granted without special purpose, the interests for this credit should be paid. This is a key moment of monetary policy formation. The Central Bank fixes the interest rate, on which the commercial banks are credited. In different countries such rate is called differently. In Russia it is called as refinance rate (interest rate). In foreign literature it can be called as interest rate, base rate, key rate, etc. Let’s get back to our virtual state, now the commercial banks have money, and they, in their turn, start to grant loans to organizations at higher interest than the refinance rate. In this way, the commercial banks gain profit on difference between rates on credit. Organizations arrange business, hire employees, and pay them salary. As a result of business processes in organizations goods are produced (or services are provided). The organizations get profit and payback the borrowed assets and interests to the commercial banks. The commercial banks, in their turn, payback the credits with the Central Bank. As a result money is distributed on the state. Of course, this is a very simplified scheme, but its understanding is very important for study of borrowed capital trade at Forex.

The interest rate in the state is one of the major control levers of inflation rates. The inflation consists in the quantitative growth of the cash assets in circulation. In other words, the number of banknotes in circulation becomes larger, and more things can be bought for them. In this situation the organizations try to increase prices for goods and services, as a result money fall in value. In order to slow the growth of inflation it is necessary to decrease the amount of cash assets in circulation. For this purpose the state advances the interest rate. The raise of the interest rate for the decline of the inflation rates, at first sight, is not evident, and for its understanding it is necessary to know the base of money introduction in the state. The higher is interest rate, the higher will be the interest on the credit of the commercial banks, granted to the organizations. As a consequence, the organizations incur fewer debts, the production winds down, the salary is paid in lesser amounts, and as a result the quantity of cash assets in circulation decreases. As a side effect of this “interference” the level of unemployment increases in the state because of production cutback. On this example we can see that all processes in the state are interrelated.

What for Internet trader needs all this? Let’s consider an example, when we intend to buy the US dollars for the Japanese yens on the quotation USD/JPY. We open an account for 1000 USD with Internet broker. We have already discussed that the principle of the margin trading allows us to buy the dollars for the yens, even if we do not have the yens. However, we should understand that these yens we borrow from Internet broker! We buy dollars for them (Internet broker purchase them on behalf of us). One more important moment, the bought dollars remain at Internet broker; we do not dispose of them. The only one thing which we can do is to sell back these dollars for the yens, i.e. to close the position with profit or losses. This means that Internet broker owns the bought dollars. In other words, we lend them to Internet broker.

We have already discussed that if we take assets on credit, we should pay on the corresponding loan rate. Since all deals at Forex are made at the inter-bank level, the interest rate, which is fixed by the Central Bank, is used. At that if we have already taken the US dollars on credit, then we payback on the interest rate fixed by the US Central Bank (Federal Reserve Bank). If we take the Japanese yens on credit, then we payback on the interest rate fixed by the Japanese Central Bank (Bank of Japan). In different countries the different interest rates function, we will talk about this below.

The interest rate is represented in annual interest rate (%). In Japan at the time of this chapter writing it is fixed as 0,5%, and in the USA it is equal 3,0%. This means that for the Japanese yens borrowed from Internet broker we pay 0,5% per annum from the sum of the credit. On the other hand Internet broker for the US dollars borrowed from us pays 3,0% per annum. Note that this principle works only if our opened long position on the quotation USD/JPY is not closed during couple of days. It means that interests are counted every day on the opened positions! If we close position at the day when we have opened it, then the interest rates are not taken into account in calculations. Suppose our position was opened during one month and at the end of the month we decided to close it. For simplification suppose that BID price is equal to ASK price, the rate on the quotation USD/JPY did not almost change for the month. We did not earn on the difference between rates. What about credits? We have to pay Internet broker 0,5% per annum per month, i.e. about 0,5% / 12 = 0,04% from the credit. We should pay this sum in the yens, but all calculations are converted to the currency of our account, in this case in the US dollars on the selling rate in the quotation USD/JPY. Internet broker should pay us 3,0% per annum per month, i.e. 3,0% / 12 = 0,25% from the borrowed sum in the dollars. We should understand that the borrowed sum, which we owe in the yens, and the sum which is lent to us in the dollars, are equivalent to the volume of the opened position, i.e. the volume of one lot, mini lot or micro lot, depending on what volume of the lot we use. Suppose, that the position was opened with one mini lot (1 mini lot is equal to 10 000 USD). Then in our example we will earn on the difference between interest rates 0,25% - 0,04% = 0,21% from the volume of mini lot, i.e. about 10 000 * 0,0021 = 21 US dollars.

It should be taken into account that if we opened a short position on the US dollar (were selling the dollars for the Japanese yens) then we would lose 21 US dollars on the difference between interest rates. The situation whether you earn or lose on the difference between interest rates depends on the traded currency and type of the opened position (long or short). The sum, paid on the interest rate is called as bank interest. In the margin trading the bank interest is always earned on the currency, which is bought and paid in the currency, for which is sold.

As we can see the profit at Forex can be gained not only on the change of the currency rates, but also on the difference between interest rates of countries. The type of trading at Forex, which assumes the earning on the difference between interest rates, is called carry trading. Not all Internet brokers pay the bank interest, there are some which make money on the interest rate, but never pay back on it. The current interest rates of some Internet brokers may differ from the rates fixed by the Central Bank of the corresponding countries, and also may change with the course of time. That is why consult with Internet broker concerning the question of bank interest payment on the interest rates before you open the account with this broker! Having opened a position you should understand clearly the components of your income and spending, in order not to open certainly loss position or not to close it with losses. In this case the position should be closed in the way that it will cover spreads and spending on the bank interest.

The concept of the bank interest and interest rate may embarrass the beginning Internet trader that is why if you do not want to sort out with these notions, do not left your positions overnight. Use the exclusive strategy of the day trading. If position is opened and closed in one day, then the bank interest is not counted on it.

We have already discussed that on holidays and weekends there is no active trading at Forex. That is why the bank interest can be counted unevenly during the week. This means that on holidays the bank interest is not counted, and the corresponding part of it is distributed on week-days. Taking into account that there is 7 days in week, we can have the situation, when for Monday, Tuesday, Thursday and Friday comes 1/7 of weekly bank interest, and for Wednesday 3/7. As a rule Internet brokers publish table in which they show the distribution of bank interest on the days of week. Remember the bank interest is counted everyday! It is necessary to know that from time to time countries increase or decline the value of the interest rate for correction of the economic situation in country. That is why it is necessary to follow economic news in the world, in order to react on changes, caused by the issue of the economic indices.

Sumber : http://support.instaforex.com/en/index.php/Chapter_12_Bank_interest

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Forex participants’ profit

As we have already mentioned, a private Internet trader has access to Forex market through the Internet broker or a dealing company. The Internet trader earns money by means of currency speculations, closing positions at more favourable conditions of the currency rate, than at the position opening. For the Internet trader, working at Forex is connected with risk. Depending on the developed trading strategy, the effectiveness of trade at currency market can be different. Not the least factor of success is the trader’s character, his or her ability to control emotions and take reasonable decisions.

The services of brokers at Forex market, on the contrary, can be called a real business. This business is almost not subjected to risks. The principle of margin trading, like it has been discussed in the correspondent chapter, does not let the dealing company’s client lose more funds, then he has on the account and “pick the Internet broker’s pocket”.

We already know, that deals at Forex are accomplished at the interbank level. The dealing company has multicurrency accounts in the bank, where it is being served. This bank provides the dealing company with the quotations, and it, in its turn, passes these quotes to its clients. As a rule, these quotes are a bit different- the Internet traders get the quoting rates with a little bit increased spread volume. This lets the dealing company earn from the difference in spread, as at the interbank level the deals are made at more favourable rates. For example, a bank gives a dealing centre a quoting rate USD/JPY 104.75/104.77 with the spread volume equal to 2 points. The dealing centre increases the spread to 4 points and passes to its clients the quote USD/JPY 104.74/104.78. Assume that a trader opens a short-term position (sells the US dollars) for 1 lot, which is equal to 100 000USD (we remind you that one InstaForex lot is equal to 10000 $, which is by 10 times less then the standard Forex lot). The Internet trader sells dollars at the price of 104.74 JPY for 1 USD. We receive the difference here 100 000 * (107.75 – 104.74) = 1 000 JPY, which in conversion to the US dollars at the interbank rate is approximately equal to 1 000 / 104.77 = 9.54USD. This sum is a regular yield of a dealing company, which is not exposed to any risks. It should be noted that this is just a profit from the client’s position opening. And the same sum is earned by the company at the client’s position closing. The total income equals on the order of 19 USD from one transaction. If a dealing company has thousands of clients, and they are conducting a score of deals each, thus, the daily income of a dealing company can be equal to hundreds of US dollars! As we can see, this is a very profitable business.

But spread can be not the only source of income for the Internet brokers. Some dealing companies take commission fees per deal, or even separate fees for opening and closing the position. Basically, this commission is analogical to the profit from the spread. In our example, the dealing company can give its clients the interbank quoting USD/JPY 104.75/104.77 directly without a spread increase, but can take 19 USD from each client’s operation. The profit remains the same. It should be noted, that some Internet brokers can even take commission along with the spread increase. In reality, it is very difficult to check whether a dealing company is increasing the interbank spread, as quoting rates are constantly being changed and the interbank spread is not revealed to the Internet trader.

The above described method of the dealing company’s profit takes place, when the Internet trader during his work at Forex uses standard lots. If mini or micro lots are used, the situation is a bit different. A dealing company cannot make a transaction for such a small sum via bank at the interbank level. The volume of one mini lot is equal to 10 000 USD, and one micro lot- to 1 000 USD. The minimal volume of the deal at the interbank level is 100 000 USD. How are the deals conducted in this case? Here, simple statistics works- about 95% of the beginning Internet traders lose money starting to work at Forex. Usually it happens, as the majority of people at the beginning are looking for “a fast buck”. They do not study thoroughly the currency market theory, its analysis instruments, and the influence of the economic indicator releases on currency rate changes. For such people, working at Forex turns into a roulette game. Just because usually the beginning traders and amateurs work using mini and micro lots, the dealing company does not conduct the deals on such lots at the interbank level. If the Internet trader closes the position on mini or micro lot with losses, then such losses are received by the dealing company as yield. If the Internet trader closes the position for mini or micro lot with profit, the profit is paid by the company. As 95% of novices sooner or later lose their money, the left 5% in order to make the company bankrupt need to earn the profit higher than the amount of losses of those 95% luck hunters. If we suppose, that initial sizes of the accounts of traders are equal, this profit should increase by 19 times, and the possibility of this is negligibly small. Moreover, if he Internet trader is working profitably at mini lots, he passes to usual lots soon, where the dealing company does not pay him from its own funds, but conducts the operations via bank at the interbank level.

The above described type of earnings is not revealed by dealing companies. The majority of them claim that all transactions are made at the interbank level, with no difference in lot size. But common sense and logical reasoning lead to the contrary. The truth can be somewhere in the middle. Everybody decides himself, what to believe in. But realizing that the majority of traders lose their money at the beginning is very important. Earning at Forex is possible and this is not a myth. But to accomplish this it is not enough just to click a “gain one million” button. Working at Forex is a risky thing, which requires certain knowledge, skills and experiences.

An additional source of income for a dealing company can become bank rates, described in the previous chapter. But the profit from it in general is insignificant, and to get it, an open position should not be closed for a long time. It is more profitable for the Internet broker, if the positions of the Internet traders are opened and closed as often as possible. Since, as it was described above, every conducted deal brings the Internet broker profit in the form of commission or spread. Yield from the bank rate as compared to profit from commission and spread is tiny. It should be stated, that dealing companies can not only earn from bank interest rates, but also pay them, and this was discussed in details in the previous chapter.

As we can see, dealing companies are in better conditions than the Internet traders. They have a steady income and their business activity can be called successful. Dealing companies get the profit from spread, commissions, bank rates, loss deals of their small clients, who are working with mini and micro lots. The profit of the Internet traders is usually limited only to profitable deals on the currency rate exchange (currency speculations), and in some cases, bank rates. Nevertheless, working at Forex is very attractive. If we consider this type of activity as a job, but not as a game, we can earn steady high profits. The yield in such case can exceed the profit from financial investments, bonds, investment funds. If you get tempted and start working at Forex without certain knowledge and skills, there is a great possibility that you can lose your money. Now you have a good advice and, in the end, it’s for you to decide.

Sumber : http://support.instaforex.com/en/index.php/Chapter_13_Forex_participants%E2%80%99_profit

Profit and loss calculation

Up to the present we have thoroughly learnt the basic terms and notions applied at Forex, and also principal of margin trading. It is the time to study how to calculate profits and losses of the executed deals.

We know that Internet trader enters the international currency market with the help of dealing company which opens an account for trader in the US dollars. To be able to work on Forex trader should transfer initial amount of money to that account. All profits and losses regardless the currency of a deal, are converted into the US dollars. In this chapter we will consider in details the principal of profit and loss estimation.

In general case the formula for computation of the financial result after you made a deal looks as follows:

Financial result = (buy price – sell price) * number of lots * lot size – commission * number of lots ± bank interest

Obviously the financial result consists of three parts: trading result, paid commissions and bank interest.

We know that there are two types of quotations on Forex (not taking into account cross rates) – direct and indirect quotes. In the first case, the base currency of quotation is a foreign currency in relation to the US Dollar and it is expressed (quoted) in the US dollars. In the second case, the US dollar is a base currency of quotation itself and it is denominated in the foreign currency unit. The trading result in the given above formula is calculated in the quoted currency. Commissions and bank interest are usually denominated in the US dollars, so the formula is true only for the direct quotes. It should be mentioned that in this formula buy and sell prices are not components of the quotation but real price which we bought or sold currency at, regardless which operation was before (buy or sell). If the financial result is positive, we get profit. If it is negative, we lose.

For indirect quote the difference between buy and sell price is expressed in the foreign currency, while total financial result is in US dollars. So to compute the financial result on the indirect quotes we should use the following formula:

Financial result = (1/buy price – 1/sell price) * lots number * lot size – commissions * lots number ± bank interest

The lot size depends on certain quotation (on currency pairs) and on the preferences of certain Internet broker. Presented above formulas are used, if the lot size is denominated in foreign currency (not US dollars). For instance, the lot size in the direct quotation GBP/USD can be 70 000 pounds sterling. Or lot size in the indirect quote USD/JPY can be 12 500 000 Japanese yen. If your Internet broker designates the lot size in the US dollars, then you will have to convert US dollars in the appropriate currency. The lot size denominated in foreign currency in such cases will not be fixed but will depend on the current rate relevant at the moment of position opening. In the US dollars the size of standard lot is usually equal to 100 000.

Estimation of the financial result on cross rates occurs in another way. As we learnt from the previous chapter, cross rates – rates of currencies against each other excluding the US dollar. Any cross rate can be presented by two US dollar quotations. For instance, cross rate EUR/JPY can be calculated by the quotes EUR/USD and USD/JPY. Computation of profit and loss occurs in the following manner. Firstly, it is estimated the financial result by the quotation EUR/USD, then financial result by USD/JPY. These results are summed up for getting total financial result.

As we all know, currency rates change by points. In different quotes the point size is various. Opening a deal, one has to know what result will be when the price changes by 1 point in the US dollar equivalent. It will help to assess your current profits or losses and close position in time. You can easily do it using the formulas given above and the value will depend on the type of quotation (direct or indirect), lot size, currency which lot is denominated in and a point value.

Let’s consider direct quote GBP/USD with 1 lot size in the amount of 70 000 pounds sterling and 1 point value 0.0001. As the quotation is direct, we use the first formula for calculation of the trading result. Minimal difference between buy and sell price is always 1 point, and in this case it is 0.0001. Thus, the trading result of currency pair GBP/USD rate change in 1 lot by 1 point is 0.0001 * 70 000 = 7 US dollars.

Let’s inspect the indirect quotation USD/JPY with the lot size 12 500 000 yen and point size 0.01. Because a quote is indirect, we use the second formula to assess the trading result. It is insufficient to know only a pip value in case of indirect quotation, because the trading result depends also on buy and sell prices. Suppose that the current rate is 104.75 Japanese yen for one US dollar. Thus, the trading result of the price change in volume of 1 lot by 1 point is ((1/104.75 – 1/104.76) * 12 500 000 = 11.39 US dollars. Worth mentioning that when buy and sell prices are different then the trading result is also different. If lot size was denominated in US dollars, then we would have to convert it to Japanese yen by the current price at the moment of position opening. And if one opens long position (purchase of dollars for yen), the calculations would be carried out by sell price, and if it is short position (selling dollar for yen), then it would be buy price.

As we can observe, the price change of different currency pair by one point leads to various trading result. In quotation GBP/USD it is less than in USD/JPY. The less trading result of rate changing by one point, the less loss you would suffer in case of unfavorable price movement. But on the other hand, you would have less profit if you catch Lady Luck. Beginning traders are recommended to work with less “aggressive” quotations such as GBP/USD and USD/CHF.

At the first glance, calculations presented at this chapter may seem too complicated. But you do not have to worry about because all estimations of profits and losses are made by the platform automatically. Different dealing companies use different trading platforms, but the principal of calculation remains the same. It is important to know what your profits and losses compounds of in order not to close a deal with losses by mistake!

Sumber : http://support.instaforex.com/en/index.php/Chapter_14_Profit_and_loss_calculation

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Forex and Casino: what’s the difference?
In the Internet there are many articles, in which working at Forex is equated to gambling in the casino, and in particular, to roulette. The authors of these articles bring out different proves, bring forward mathematical extracts from the theory of probability, often even not realizing its sense. In this chapter we will try to destroy a myth of Forex belonging to gambling games.
A roulette game is as old as time. It can be easily named one of the genius inventions of the mankind. The roulette structure and playing rules are really simple. But behind the visible simplicity of winning, the mathematical laws are covered, which bring milliards of dollars profit per year to gambling establishments; and makes millions of luck hunters bankrupts every year. Let us try to understand the roulette mechanism and realize, why it is not possible to get a stable income playing it.
In the theory of probability, the fundamental are two core notions: the event and the probability of the event’s occurrence. Anything can be understood as an “event”. A sunny day after a number of cloudy ones, a strike of workers at the factory, a casual overrunning an old friend in the street, an accident on the road, a flight delay for reason of technical problems with the plane, these are all events, which happen with a certain part of probability.
Among great amount of events, there are those, which can occur simultaneously (then we talk about a complex event), and those, which are mutually exclusive and can never happen at one and the same moment. For example, you can go out and meet your long-time friend not far from the factory, where a strike of workers takes place on a bright sunny day. In this example, three events happened at one time. But such events, as a rainy day and a sunny day, are mutually exclusive and can never happen at the same time. It is easy to understand that a probability of the occurrence of a complex event is lesser, than of a single event, which is included in a complex one. As for the occurrence of a complex event, a number of factors should happen together. Let us consider another classical example - dice throwing. A dice has six cube faces, on each side, there is a number applied in the form of pips (from 1 to 6 pips). The number, which comes out, is an event. Only one number can occur at a time. Thus, there are only six variants of the event in the example with a dice, and all of them exclude one another.
It is vivid, that when we are throwing the dice, one number always comes out. It means, the probability, that a particular number will occur, can be considered as1, or 100%. What is the probability of a certain number occurrence, for example, 1 or 5? Are these probabilities equalized? We will try to sort it out.
In the theory of probability, there is a notion of frequency distribution. It is a probability function of the occurrence of the event from the event. We will not go into details, and will just say, that a number outcome on a dice, has a random probability distribution, that is, the probability of any number outcome is equal. This happens, because a dice cube has a regular shape and a uniform density. Thus, as there are only 6 numbers on a cube, a probability of a certain number occurrence equals to 100 / 6 = 16.6666…%.
The following important step in mastering a theory of probability, is the law of large numbers. In our example with a dice, its sense is, that if we throw the dice for a great many times, a single number will occur proportionally to the probability of the occurrence of its event. And, as all six numbers have the same probability of occurrence, every number comes out for the equal number of times. Besides, the more times a dice is thrown, the lesser is the measure of inaccuracy of this statement. The inaccuracy tends to zero with a quantity of throws verging to infinity. It comes out, that if we throw the dice for 1 000 000 times, every number will occur approximately 166 667 times with a certain inaccuracy.
What if the distribution frequency is not equal? Suppose, that we have covered one cube face with lead, having changed by this operation its density distribution. The probability of number 1 occurrence now is equal to 50%, and the probability of the occurrence of the left five numbers has remained equal to 12.5%. Now, if we throw the dice for 1 000 000, number 1 will come out for about 500 000 times and other numbers will come out for about 125 000 each. Let us go back to the roulette game. There are 37 cells on a table field: numbers from 1 to 36 and a zero. The frequency distribution of a number outcome in a roulette game, like in the situation with a dice, is equable. That means, that the probability of the outcome of a single number in the roulette is equal and amounts to 1/37. The gain which is paid to the winner by the casino, is equal to 1:36. Thus, for every rouble bet, with a probability of 1/37, we will get 36 roubles. In accordance with the law of large numbers, if we play the roulette game for X times, and if every time we bet 1 rouble on one number, our gain will equal to:
36/37 * X – X =
X * (36/37 – 1) =
–1/37 * X
You understood everything correctly; the minus in the received formula denotes the loss and the gain in the casino. It does not matter, on what numbers you will bet. Every time the same or different, the formula does not change. The more is the value of X, the less is the measure of inaccuracy of the formula. When the value of X is small, the inaccuracy can be significant, thus, if you came to a casino, made a few bets, won, went away and never came back, the casino sustained losses from you. But having won once, hardly anyone can stop; the roulette game becomes a lifestyle. A person comes back with a hope of winning again, and starts to play constantly. The number of played games increases, the inaccuracy of the formula lowers and in the end, a person loses. Even if a certain person after a big win at the casino will never come back, anyway, other people will, who are hunting for luck; and gambling business will profit.
There is one more comment. According to the formula it comes out, that having played 1000 games on 1 rouble, the player loses only 1/37 part, that is, around 27 roubles. At such speed, it is possible to stay on the float, getting pleasure form the game. In real life, hardly anyone bets 1 rouble in roulette game, a person is wrecked by his own hazard. Making risky high bets, one comes to the situation, when he has not enough funds to recoup. And this brings to bankruptcy- the lack of funds for further play- after-game. If all players were billionaires, they could be playing for a long time, losing only 1/37 part of their bets. 1/37 is approximately 2.73%. This exactly is the advantage of a casino over a player. In the American variant of the roulette game (unlike in European) there are two zeros on the table field (0 and 00), in such roulette, the lead of the casino over a player is 2/38- which is almost 5.26%, and stiffens the conditions of the game even more.
Of course, in the roulette it is possible to stake not only on one number, but also on 2 or 4 or the whole sequence of numbers at the same time. However, at such bets the win is lowered proportionally, i.e. the formula remains the same. A casino is always winning, and its anticipated profit can be calculated mathematically. With European roulette, it is equal to 2.73% from all bets of all players, in American roulette it is 5.26%. For other games, there also exist formulas of the probability calculation, and correspondingly, the expected profit of a gambling house. The real profit of the casino differs from the expected, as people simply have no funds for recoupment, because they are gambling everything away.
That is why it is impossible to get a steady income at the casino. But at Forex, the situation is completely different. Here, we also have events (increase or fall of the currency rate) and the probability of its occurrence. But the distribution of these probabilities is irregular, and a strict mathematical formula cannot be received. Moreover, these probabilities can be forecasted, and if the analysis instruments, such as technical analysis and fundamental analysis, are used properly, it is possible to get a regular income.
Why can the currency rates behaviour, which seems chaotic at first sight, be forecasted, will be discussed in other parts of the site. Now we will just say, that the currency rates’ movement is caused by people (brokers, dealers, the Internet traders). If the majority of them are buying currency (a bullish sentiment dominates), the rate is increasing. If the majority of them are selling (or the bearish trend prevails), its rate is downfalling. If you can determine the tendency of the market timely and be on the majority part, you will get a steady profit. As most part of traders at Forex, for the estimation of a market tendency, uses similar analysis instruments, all you need to do, is to follow the majority. Here we should make a little remark. The majority at Forex, in this situation, is determined not by the number of traders, but by the volume of the operations conducted by them. Significant transactions at the currency market are made only by experienced traders- the dealers of big investment companies, investment funds and banks. They are people with special education, year’s long experience and high level of knowledge. In order to trade successfully at Forex, you should imitate the behaviour pattern of these people at the currency market, and this is impossible, without correspondent education.
That is why, before start working at Forex, it is needed to study this market thoroughly, as well as the instruments, which are used by professionals for the forecast of its behaviour. This is the only possible way to success!
Thus, you see that working at Forex has little in common with a roulette game. Keep reading the information on the website, and you will learn much, which means, that in course of time you will get steady income at Forex. The amount of this income will depend exceptionally on you! Your success is entirely in your hands!

Sumber : http://support.instaforex.com/en/index.php/Chapter_15_Forex_and_Casino:_what%E2%80%99s_the_difference%3F

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Forex and stock market: what’s the difference?

Speaking about trading in the financial markets there are adherents and opponents of certain activity lines. The financial market includes the gold market, exchange market (security market), Forex (exchange market), different commodity markets. You can not consider one market regardless of others, as all processes in the global economy are interrelated. The share market situation can impact the currency rates at Forex (exchange market), that can affect in its turn the gold market. Converse propositions can be also reasonable. In this chapter we will confine to Forex exchange market and stock market, stand out the advantages and disadvantages each of them for the participants (brokers, dealers, Internet traders).

Prior to this chapter we have already been studying the basics of Forex exchange market. Now let us get acquainted with the stock markets. At stock markets stock instruments or securities are presented. A security is some kind of capital ownership evidence, the right of disposal is assigned permanently or provisionally to other persons for the right sharing the profit made by this capital. That is to say, equity instruments is documents containing some ownership rights, their implementation is possible in case of claiming. It is accepted to distinguish the following major types of security papers: shares, bonds, derivatives (warrants, futures, options), savings and deposit certificates and bills of exchange. Let us describe briefly each type of the listed securities.

Shares is the primary type of security papers which determines ownership rights of the holder for the profit part of the joint-stock company. The shareholder has his equity stake in the capital of a corporation. There are personal shares, share warrants, ordinary and preferred shares. The first two types are self-explanatory. Ordinary shares give the voting right at the general meeting of shareholders, and the size of distribute profits is determined by an annual financial result of the stock company. Fixed dividends are paid at preferred shares, but they do not give the voting right at the shareholders meeting. As it can be seen the shares give their holders rights in capital and profit getting in the form of dividends.

Bond is a debt security. It confirms the fact of funds loaning to the emitter (one who places the bonds issue) in exchange for right to get profit in a specified way. As a rule, the profit is made from the fixed annual interest rate of the issue cost or of the nominal bond cost. There are also public and corporate bonds. The public bonds are more reliable, but less profitable. The corporate bonds are, to the contrary, more gainful, but less reliable. As it must be, the profitability and risk of holding the bonds are directly interrelated –the higher risk the higher profitability.

There are derivative financial instruments in the stock market as well at Forex market. Derivative instruments of Forex were already discussed in the proper chapter, here and now let us puzzle out derivative stock instruments. Warrant – a security which defines the rights for commodity option on certain terms or for share exchange.

Futures – a security paper appears as a sale-and-purchase contract for a certain number of shares in future at the fixed price for the moment of contract awarding. For guaranteeing the fulfillment of futures contract terms the both sides must deposit a pledge which size is determined by the stock exchange and saved in that stock exchange where the deal is carried out. Option is a security paper similar to futures except that it does not impose obligations on its buyer, but just gives the right of their fulfillment. The American type of such option gives such right during a certain term. The European option grants such right upon expiry of a certain term. The option seller must is obliged to fulfill the contract terms, that is why he bears a risk. On the back of it, the option buyer pays the option seller a reward. If finally the option buyer refuses from the deal terms fulfillment – he loses this reward. In order to guarantee the deal terms fulfillment the seller deposits a pledge, similar to futures case, the pledge size is set by the stock exchange and saved there. In fact, the object of option trading is the reward amount paid by the buyer.

Security papers also include certificates. Certificate is a written bank testimony of funds depositing which give the depositor a right to receive the deposit amount and the accrued interest for it upon expiry of the contract. Deposit certificate is given if the depositor is a legal body. A savings certificate is given if the depositor is an individual person.

Bill of exchange is one of the varieties of the debt commitment which gives a right to demand payment of amount specified in it within the term of its validity. There are promissory and transfer bills. A promissory bill is a promise of paying a certain sum, which is drawn by the debtor and given to the creditor. A transfer bill (draft) – is drawn by the creditor and must be accepted or protested by the debtor. In case of acceptance the debtor agrees to repay the amount specified in the bill of exchange.

Now after getting insight into the financial instruments of the exchange market, let us point out the peculiarities of such trading. In contrast to Forex, the stock market has location restrictions – the venue of trading is the stock exchange. The stock exchanges are located in the world’s major financial centers, and the share types and quotations may vary in different stock exchanges. However, with the communications and Internet development the stock exchanges obtained an opportunity to exchange their quotations fast in order to minimize the execution of arbitrage transactions. Arbitrage transactions assume a share purchase at one stock exchange with further selling at another one at more beneficial rate. Arbitrage operations accomplishment is impossible at Forex, because the currency market does not have centralized trading playgrounds.

For buy-sell operations implementation at the stock exchange it is necessary for the buyer and seller to find each other. Due to that the number of participants of the stock exchange is limited, the share operations liquidity is much lower than with the currency transactions at Forex. You may not find a buyer for your shares at the stock exchange and bear significant losses, if your shares fall dramatically. Other than at Forex, you can gain profit from speculative operations at the stock market only orienting to the rate advancement. In other words, firstly, you have to buy the shares at lower price in order to sell them at higher one later. It is impossible to sell the shares you don’t have. Although, there are some schemes for avoiding such restrictions, when one can make a fictional deal of securities selling not having them actually, with an obligation to carry out a reverse repurchase transaction – such service is provided by exchange intermediaries to private traders of the stock market.

In the stock market you can take priorities of margin trading as well as at Forex currency market. You can buy shares only for existing funds. As the shares can be bought not only with the purpose of speculation. As it was mentioned above the shares give a right for the organization capital, allow to take part in voting at the general shareholders meeting, the dividends are pair from them. That is why you can buy shares not only for further selling. In that case a notion “opened and closed position” loses its weight as well as trader lending with provision of leverage.

In contrast to Forex currency market which works clock round, the stock exchange has certain work timeframes. These timeframes are determined by work schedule of a proper stock exchange (as a rule - 8 hours in working days) where the trading takes place. If you use Internet for stock exchange trading and you are not in one time zone with it – that brings some inconveniences for trading. Working hours of the stock exchange may fall on night time in your region that makes you fly with the owl. That is why at Forex currency market you have more opportunities for trade running due to 24 hour work.

For successful work in the stock market the usage of analysis mechanisms is not enough which are common to Forex market. The technical and fundamental analysis can be used for forecasting the share rates fluctuations, but microeconomic factors influencing on the company’s activity are also of a great importance. For taking a right decision concerning buy/sell of shares there must be an access to the financials, information on personnel replacements in the company, state orders of its production. As per foreign countries, such information is available only from foreign sources: television, newspapers, magazines, published financials. Certainly, such information is published in foreign language, that can be difficult for its studying and comprehension.

Worth noticing that in contrast to financial instruments of Forex market, the given financial instruments of the stock exchange has its own advantages. One of them is dividends receipt from shares and participation opportunity in the management of the company, state securities redemption and coupon bond payments. Partly, these benefits lower the loss risk during the work at stock exchange.

In this chapter we made a comparison between Forex currency market and stock exchange. We have found out that each of them has its own pros and cons, each of them is attractive for investors in its own way. In the next chapter we will take a detailed look at correlation (relation) of these markets and comprehend how forecasting one market can help in making decision of buy/sell at another one.

Sumber : http://support.instaforex.com/en/index.php/Chapter_16_Forex_and_stock_market:_what%E2%80%99s_the_difference%3F

Ok guys, mari kita lanjutkan pelajaran.

Stock exchanges and stock indices

Despite that Forex arena portal subject is Forex education, we will consider stock exchanges and stock indices in this chapter. At first sight, it can seem that the chapter is not related to Forex, but, in fact, it is. Currency rates are in correlation with stock indices in the world exchange market, therefore, studying of the later can become a good instrument in your arsenal of analysis and forecasting tools in Forex.

Before getting acquainted with the main stock exchanges, we will consider stock market participants to understand its organization better. As it has already been mentioned in the previous chapter, people trade with securities in the stock market. Issuers (companies and organizations) release securities to attract funds for their businesses. Investors, who have available monetary means, place them in stocks for the purpose of profit earning in the future. Brokers are licensed professional financial intermediaries. They help buyers and sellers of stocks to find each other in order to complete mutually profitable deals. Brokers operate on their clients account and by their orders, obtaining fees, when clients make deals. There are two places for trading with securities - the stock exchanges and the off-exchange trading systems, allowing trading by means of electronic trading terminals. A special company, called the register, keeps track of the issuer’s securities and their current owners. Security portfolio of a single investor is registered at the depository, where he is served. As in any other type of business, in the stock exchange, there are government regulatory and control authorities, counseling services, and information agencies.

Thus, trading with securities is carried out at the stock exchanges and the off-exchange trading systems. The major volumes of deals with shares globally are concentrated in following places:

•NYSE (New York Stock Exchange)

•NASDAQ-AMEX ((National Association of Securities Dealers Automated Quotations and American Stock Exchange)

•LSE (London Stock Exchange)

•TSE (Tokyo Stock Exchange)

•DB (Deutsche Boerse)

•SEHK (Stock Exchange Hong Kong)

When you invest your monetary funds in shares of one or another company in any industry, one fact is always the same – the earnings are bigger, the risks are higher. It is necessary to know that there is a quantitative analysis of the financial statement (annual, quarterly) and a qualitative analysis of a company’s management policy.

Let us focus on what correlation exists between Forex currency market and the stock exchange market. We have already known that the currency rate directly depends on economic climate of its country. And, economic climate depends on many factors. The overall measure of these factors is the gross domestic product or GDP. There are several methods of calculation of the GDP. Within the scope of the chapter, it is necessary to understand that the companies’ financial position in the leading industries of the country is better (higher shares quotations in the stock exchange), the GDP is bigger, therefore, the currency rate is more stable. This means, if shares of the key industries companies rises in price, then the currency of this nation increase too.

So, next question is how to measure quantitatively the situation in the market of one country. For this purpose, the special indicators, called the stock indices, were created. In every stock exchange, the certain indices are used. The stock indices are calculated on the base of stock value of the companies (in a certain ratio), included in the basis of estimate of index. Despite a great number of stock indices, in every trading area, the most important indices, which reflect economic conditions of a country best of all, are used. The stock indices are listed below:

•DJIA (Dow Jones Industrial Average – the Dow) in the USA;

•NASDAQ Composite (National Association of Securities Dealers Automated Quotations) in the USA;

•S&P 500 (Standard and Poor’s 500 Index) in the USA;

•FTSE-100 (Financial Times Stock Exchange 100 Index) in Great Britain;

•DAX (Deutscher Aktienindex) in Germany;

•CAC 40 (Compagnie des Agent de Change 40 Index) in France;

•Nikkei 225 in Japan;

•SMI (Swiss Market Index) in Switzerland;

•RTSI (RTS Index) in Russia.

The stock index value depends directly on share prices, included in the basis of the index estimate. Therefore, for example, DJIA index rising witnesses to the US economy growth. The inverse statement that DJIA index decrease denotes the US economy recession is also true.

The stock indices influence on Forex currency market. As in Forex, one currency is bought or sold for another, to learn about how the stock indices affect one currency quotation, it is necessary to study a time history of two stock indices. For instance, in case of the USD/CHF currency pair quotation, you need in studding of the time history of DJIA and SMI indices. If DJIA index is growing firmly and SMI index is sharply declining, then we can affirm with the specified degree of accuracy that such tendency will inevitably have an impact on Forex currency market, and the US dollar will climb up against the Swiss franc. If both indices have a growth dynamics, you should consider by how much the growth dynamics of one index exceeds another’s, and, then, you cannot decisively speak about the influence on Forex market.

Summarizing all said above, we can tell that forecasting is a creative process. You can use the stock indicators for predicting currency rate changes in Forex or you can ignore them. Obviously, your desertion will depend on how you trade in Forex. The stock indicators applying for forecasting currency rate changes make sense in middle- and long-term outlooks. Moreover, the stock exchange influence on the currency market has certain inertia and is not instant. In some cases the inverse effect takes place, when currency rate changes lead to increase or decrease of share quotations. Therefore, it is important to understand what influence is primary and it is not always a trivial task. Finally, to use or not knowledge, obtained from this chapter is your own choice. But, it is necessary to understand that the world’s economic activities are interrelated!

Sumber : http://support.instaforex.com/en/index.php/Chapter_17_Stock_exchanges_and_share_indexes

Semoga belajar forex trading Anda menyenangkan, mari kita lanjut....

Commodity currencies at Forex

As we have already found out from previous chapters the currency price is determined by a great many of factors, such as: economic, political and some others. All listed factors concerning each country separately affect its currency in its way - some of them more and some less. But at Forex market there are currencies, the prices for which are valued by almost one factor – the country’ export. Such currencies at Forex are called - commodity currencies.

The specifity of commodity currencies is that these countries economy is based on the export of a certain raw materials type – oil, gas, metals, and farm products. The number of countries which suit this definition is big enough, but the major of them are Canada, Australia and New Zealand. As the currency of these countries is the dollar (local in each country), at Forex market it is common to call them commodity dollars, comdolls. The fact that raw materials export is the main factor of economic welfare for these countries, price advance for proper raw materials of the global market result in the national currency upturn, and vice versa. That is why it is common to speak about correlation (interaction) of the oil price in the world market with the commodity currency price.

The Canadian dollar (CAD), the Australian dollar (AUD) and New Zealand dollar (NZD) are among the major currency pairs at Forex, that is why learning their peculiarities as commodity currencies is an integral part of successful work in the currency market. Then we will consider each commodity currency separately and give comments for each of them.

Canada is famous for its oil reserves after Saudi Arabia, Oil is called a “black gold” that means a high demand for this resource in the world arena. In such a manner, due to its advantageous location Canada appears to be the major oil exporter in the world. The USA is in short supply of this resource being its major importer. That is why, oil price fluctuations reflect the currency rate USD/CAD in the reverse proportion. The oil price upturn leads to USD/CAD lowering (dollar appreciation). It is customary to consider inverse correlation between the oil price and USD/CAD rate. From January 1988 the oil price USD/CAD rate had more than 68% of inverse correlation – it is rather solid interrelation! This fact knowledge can become a good additional instrument in forecasting USD/CAD rate movements at Forex currency market.

The Australian economy mostly depends on gold finery export which makes more than 50% of the country’s export. This happens due to gold fields which Australia has at its disposal because of its geographical position. The world price for gold and AUD/USD rate has stronger correlation than the oil price and USD/CAD rate. From January 1980 to 2006 the rate fluctuations of AUD/USD and the gold prices were almost equal, as you can see at the chart below. Besides, there was a tendency that the gold rate reversal was anteceding the AUD/USD rate reversal – at the chart the rate reversals are marked by stars showing it visually. In 2005-2006 the correlation changed when the gold price surged and there was no uptrend of the Australian dollar versus the US currency. Nevertheless, in a long term the correlation remains and can be used as an additional forecast instrument at Forex market. You should know that the world price for gold and AUD/USD rate have direct correlation.

The New Zealand economy mostly depends on export as well as its western neighbor. But in contrast to Australia and Canada, there is no any certain dominative type of raw materials in the New Zealand export. The country exports dairy goods, meat, fish, wood, wool etc. Due to such a great variety of sold raw items Commodity Research Bureau Index, CRB Index is used for determining the correlation between the export goods cost and the national currency rate against the US dollar. This index involves the major raw commodities and appears to be the inflation growth indicator in the world. CRB Index value and NZD/USD have direct correlation. Below you can see the chart where 60%-correlation was observed from January 1990 to January 2006. It is visible that NZD/USD rate depends significantly on the global raw prices. This fact comprehension can serve as an extra tool for analysis and forecasting at Forex. In summary, worth noticing that it is better to take into account the correlation between the raw prices and commodity currency rates at Forex only in a mid and long term. Also remember that export is just a part of country’s economy. Making a decision about opening or closing a position with commodity currencies at Forex bring to notice other factors influencing on the country’s economy, such as: refinance rate, political satiation in the country and etc.

Sumber : http://support.instaforex.com/en/index.php/Chapter_18_Commodity_currencies_at_Forex

Tidak terasa sudah sampai di pelajaran ke 19, mari kita simak dulu.


George Soros: story of one trader

Like in every sphere of life, there are outstanding personalities at Forex, whose names went down in history. At the currency market, George Soros is one of the most successful traders in history. His career began from the establishment of the Quantum Fund in 1969 on Curacao (Netherlands Antilles in West India). During the time of its existence, the Quantum Fund conducted a great number of profitable speculative operations at Forex currency market. For example, on the spot market in 1996 only, the Fund received the profit equal to that of the annual income of McDonald’s Corporation. Though, the most money-making deal of George Soros is considered to be the operation on the currency speculations at the British pound sterling in 1992, due to which within a period of one month a net profit of USD 2 billion was gained. Thanks to such success and the facts, by which it was caused by, George Soros got the reputation of "the man who broke the Bank of England."

For such triumphant currency speculation, George Soros owes to the situation in the world in the 90s. In 1979 on the initiative of Germany and France the European Monetary System (EMS) was established. The EMS was targeted to maintain the stability of the currency rates of the European countries- members of the System, and also to prepare for the currency integration. The initial members of EMS were Germany, France, Italy, the Netherlands, Belgium, Denmark, Ireland and Luxemburg. The mechanism of the currency rates maintenance (the European Exchange Rate Mechanism (ERM), which was the main purpose of the EMS, was grounded on the introduction of the European Currency Unit, ECU, which was a prototype of the today’s Euro (EUR). For every EMS member, the central rate versus ECU was set, and also the currency rate limits (a corridor), within which the change in currency exchange rate was allowed. The members of the EMS were obliged to maintain the rate of their national currency by any means under conditions of the agreement, or leave the System. The central rates of the countries- members of the EMS, under the terms of the treaty, could be changed, which had happened 9 times in a period from 1979 to 1987.

In 1990, the Great Britain joined the EMS and the rate of the pound (GBP) was fixed at the level of 2,95 (DEM) with a permissible currency corridor ± 6%. By the middle of the 1992 thanks to the ERM, a considerable decrease of the inflation tempo in European countries- members of the EMS, was reached. Nevertheless, the artificial maintenance of the currency rates in the limits of the currency corridor arose doubts of the investors. The situation got worse after the reunion of West and East Germany in 1989. The weakness of West Germany’s economy brought to the incensement of the national outlay, which forced Bundesbank to issue more money. This policy brought to inflation, and Bundesbank reacted to this by uprising the interest rate. The high interest rates attracted foreign investors, this, in its turn, caused an excess demand on the Deutschemark, and resulted in the growth of its rates. The Great Britain, being bound by the EMS agreement, was to maintain its national currency rates within the fixed limits of the currency corridor versus the Deutschemark. The British economy at that time was destabilized; the unemployment rate of the country was high. The uprising of the interest rate after Germany in such conditions could only make the situation worse. But there were no other possibilities to strengthen the domestic currency rate in the near term. At that time, George Soros and many other investors considered, that the GB would not be able to maintain the domestic currency rate at the needed level, and it would have either to announce about its devaluation, or refrain from the ERM.

George Soros took a decision to contract debts for the pounds (GBP), and to sell them for the Deutschemarks (DEM), and invest them in the German assets. As a result, almost GBP 10 billion was sold. George Soros was not alone thinking in this direction, and many investors followed his actions.

As a consequence of such speculations, the unstable economical situation in Britain became even worse. The Bank of England in the attempt to set the situation right and to increase the currency rate repurchased for its reserves around GBP 15 billion. But it did not bring the desired result. Then, on the 16th of September 1992, on the day, which would further be called “Black Wednesday”, the Bank of England declared about the interest rate increase from 10% to 12% in the attempt to neutralize the boom, but the expectations of the English politicians did not prove.

The investors, who sold pounds, were sure that they would gain an enormous profit after the further downfall of its rate. A few hours later the Bank of England claimed to increase the interest rate to 15%, but the traders kept selling pounds in large quantities. This continued till 19:00 of that very day, later on the Chief Secretary to the Treasury Norman Lamont pronounced, that the Great Britain was seceding the European Exchange Rate Mechanism (ERM) and the interest rate would be lowered to 10%. From that day on, the pound rate fall had started, which fell by 15% versus the Deutschemark and by 25% versus the US dollar within 5 weeks. This brought a gigantic profit to the Quantum Fund – within only one month George Soros gained around 2 billion US dollars, buying for the German assets the significantly cheaper pounds. The downfalling of the pound currency rate versus the US dollar after the above described events is shown on the image. As it can be noticed, that only in September 1992 the pound fell by almost 3000 ticks!

Thus, George Soros, "the man who broke the Bank of England" showed, to what extent the Central Banks can be vulnerable to currency speculations of the large investors in the conditions of the artificially maintained currency rates. The use of the borrowed funds allowed George Soros to gather wealth within just a few weeks, which set a beginning to his charity work. As we have seen it, in order to prevent the negative influence of the currency speculations on the economy of the country, Central Banks create reserves in the form of foreign assets. But as the practice has shown, such reserves can prove to be ineffective, if they are opposed to the large capitals of the investors, who have the same goal.

Today, the currency market Forex is far more liquid than at the beginning of the 90ies. Therefore, no investor, even having a billion capital, will hardly be able to influence on the currency rate for a long time. “Black Wednesday” of September, 1992 is left far behind, but the historic facts should not be ignored, because the history has a tendency to recur.

Sumber : http://support.instaforex.com/en/index.php/Chapter_19_George_Soros:_story_of_one_trader

Tidak terasa sudah sampai pelajaran 19 dan mari kita lanjutkan langkah pembukaan demo account di InstaForex.

Membuka rekening demo

Sebelum melakukan trading dengan rekening nyata, kami anjurkan anda untuk membuka rekening pendidikan, yang tidak terlalu berbeda dengan rekening nyata, kecuali kerugian dan keuntungan dalam hal ini bersifat virtual.

Ketika anda bekerja dengan rekening demo, anda tidak berisiko kehilangan uang dan dapat melakukan hal berikut:
• Mendapatkan pengalaman trading FOREX secara praktis;
• Mempelajari proses analisa pasar uang;
• Mencoba menggunakan penawaran nyata secara real time, dan meningkatkan strategi trading anda tanpa risiko;
• Mengembangkan sistem manajemen risiko anda sendiri (Manajemen Uang);
• Mendapatkan pengalaman praktis ketika bekerja dengan InstaTrader.
Langkah-langkah membuka rekening demo:

1. HANYA mungkin membuka rekening dengan terminal trader. Silahkan download di sini.

2. Ketika file setup telah didownload, silahkan install programnya.



3. Ketika programnya telah terinstall, silahkan jalankan terminal. Sekarang anda dapat membuka sebuah rekening. Pada menu bagian atas, di bawah File ->, silahkan pilih item Open Account.




4. Silahkan isi formulir pendaftaran. Tentukan jenis rekening yang ingin anda buka. Juga pilih nilai setoran awal untuk rekening pendidikan. Jumlah tersebut akan secara otomatis didaftarkan ke rekening belajar anda dalam bentuk uang virtual. Jumlah setoran khayalan ini akan dalam bentuk USD.


5. Ketika semua bidang telah diisi dengan benar, dan anda telah memilih pengaturan anda, pastikan “Receive news via email” telah dicentang, kemudian tombol “NEXT” akan menjadi aktif. Klik tombol “NEXT” dan lanjutkan. Berikutnya, anda akan menerima nomor dan password rekening anda. Simpan nomor dan password tersebut di tempat yang aman dan jangan sampai lupa.

Anda bisa membuat rekening demo sebanyak mungkin, oleh karena itu anda bisa membuka rekening baru untuk mencoba strategi baru pada terminal anda dengan rekening pendidikan.

Salam weekend, setelah anda mendownload aplikasi InstaTrader4, maka akhir pekan ini gunakan untuk mempelajari fitur-fitur platformnya. Serta fungsi-fungsi offline dari tools di instatrader4. Nah, jangan lupa untuk menguatak-atik agar bisa fasih. Sehingga senin nanti bisa mulai demo lagi dengan bagus. Happy weekend.

Perlu diketahui bahwa untuk hari libur maka chart instatrader tidak jalan. Untuk besuk maka jadwal market buka dimulai jam 04.00 WIB. Salam trading. :)

Okay, kita lanjutkan belajar forex bersama Instaforex.

Types of Strategies in Forex trading.

Automatic Trading

Automatic trading is the last step of becoming a trader. If a person is able not only to create his/her own trading strategy, but also code it correctly and make it functional – financial independency is secured.

What is automatic system?

Automatic trading system is a program code which is based upon the certain trading strategy with the help of indicators and other useful instruments. System is called automatic, or mechanical, because it can operate without trader just having been constantly connected to Internet. Everyone who has programming skills and trading platform MetaTrader 4 which is integrated with the area of applications’ developing on the MQL4 language can create such system.

Algorithmization and automation can cause some difficulties so it is important to apply the best efforts for testing the correctness of program code execution. Should we entrust the system with our funds without confidence in its profitability?! For this purpose there is an opportunity of testing automatic system, indicators and Expert Advisors with capacity of their parameters’ optimization in the terminal. One of the obligatory functions of such system is visualization of trade to have opportunity of controlling the current situation and correcting possible defects. There is only one answer for the question whether it is worth getting to automation – it is worth it!

Advantages and disadvantages of automatic system:

Advantages:

1. There is no need to be in front of the computer all the time. 2. Constant execution of orders after the signals are received. Often the reaction of trader is slower than reaction of computer systems, not taking into account hesitation “to open or not to open the position”. 3. Enhance the number of deals due to 24-hours trading. More deals – more potential profit. 4. Opportunity of insertion the standard and additional scripts in the program code. Useful applets such as floating stop loss can be integrated into the program and executed automatically for each order. 5. Opportunity of parameters’ optimization. It can be advantage as well as disadvantage at once, so optimization becomes the advantage with reasonable control and usage. 6. 24-hours trading is also positive because orders can be closed by the receipt of an appropriate signal and this will protect gained profit. 7. Reduction of human factor for mistake to the minimum. Automatic trading system is not subjected to greed, spite and other emotions which are so peculiar for human being and not always help to trade successfully. 8. Strict compliance with the chosen strategy. The program will not think for a long time whether to open position or not if a signal was not confirmed or slightly looked like a signal. 9. Trading on the system of volumes’ enhance following the chosen criteria. Excellent opportunity to involve a large part of assets.

Disadvantages:

1. Absence of flexibility. It is rather significant disadvantage because the market is unsteady, so trading system can not to gain dividends if there are unforeseen fluctuations. 2. Absence of intuition. Often most part of profitable deals are opened according to a trader’s intuition such as “I have seen it before…”. 3. Instability of optimization. Optimizing the program settings you can make abnormal profit only at the short distance, then the same optimization can lead to significant losses.

Source : http://support.instaforex.com/en/index.php/Automatic_trading

Wiliam Alligator

Bill Williams’s indicator – Alligator is a combination of three balance’s lines:
Alligator’s jaws (blue line) – 13-period smoothed moving average built at the median price (High + Low)/2, moved into the future by 8 bars;

Alligator’s teeth (red line) – 8-period smoothed moving average built at the median price (High + Low)/2, moved into the future by 5 bars;

Alligator’s lips (green line) – 5-period smoothed moving average built at the median price (High + Low)/2, moved into the future by 2 bars.

In order to add Alligator indicator to MetaTrader 4 chart, you need to go Menu – Insert – Indicators – Bill Williams – Alligator.

Alligator indicator helps to determine the presence or absence of the trend as well as its direction.

If all three lines are interlaced, then Alligator is “sleeping”. At this time the market is traded in the small price bracket (flat), having taken away the trader’s profit earned on the last price change. The longer Alligator sleeps, the hungrier it is, and stronger will be the following price movement. While Alligator sleeps, you should not open new trades. When Alligator awakes it opens jaws (lines of the balance diverge) and starts to hunt for food. Having eaten enough, Alligator falls asleep again (lines of balance join together). If Alligator does not sleep, there is an upward or downward trend (the food runs away from Alligator): if the price is higher than Alligator’s jaws – the trend is upward; if the price is lower than Alligator’s jaws – the trend is downward.

Alligator can be used as a helping indicator to identify Elliot waves. If the price is outside Alligator’s jaws, the impulsive wave is forming at market, when the price is inside Alligator’s jaws, the corrective wave is forming.

Alligator formula:

Median price = (High + Low)/2

Alligator’s jaw = SMMA (Median price, 13, 8)

Alligator’s teeth = SMMA (Median price, 8, 5)

Alligator’s lips = SMMA (Median price, 5, 3)

High – the maximum price of the bar;

Low – the minimum price of the bar;

SMMA (A, B, C) – smoothed moving average (A – smoothed data, B – period of smoothing, C – movement into the future)

Alligator’s jaws (blue line);

Alligator’s teeth (red line);

Alligator’s lips (green line).

Source : http://support.instaforex.com/en/index.php/Williams_Alligator

Intraday Trading

Perhaps, one of the most complicated types of trading at Forex market and at the same time the most widely used by independent individual traders is intraday trading. According to such system of trading at Forex market positions are opened and closed during one day, i.e. during 24 hours. Its popularity among individual traders can be easily explained by some subjective reasons. First of all, it is connected with small size of investment capital (initial deposit) and, of course, desire of a trader to get the huge advantage from trading with large levers. As a consequence, talking about short-term trading, I suppose opened trading positions (deals) with support from several minutes to several days.

Short-term trading is considered as rather difficult type because its results are influenced by the market noises, which can have significant range sometimes compared to the average range of day fluctuations. Almost all intraday trading is based upon the market noises; trader’s task is to catch fluctuations of small and middling size (from 10 pips to 200 pips).

The main advantage of intraday trading is possibility of working with the small investment capital opening numerous positions during one trading day and putting rather close stops (Stop Loss and Take Profit). It should be mentioned that in terms of profitability, short-term trading can be more preferential than long-term trading, although not all the time. Basically, it is the full list of intraday trading advantages.

The following peculiarities of short-term trading generally have negative features:

•continued tension;
•inveterate tiredness;
•long working days;
•hazards;
•high labor costs.
By certain conditions of intraday trading there is needed absolute discipline, calmness, fast reaction of speculator and, of course, endless patience. Absence of these features increases the risk of losing the deposit during very short period of time. But real key factor of success is reliable and effective trading technology, specially developed for intraday trading allowing trader to make proper decision in conditions of limited market space and time.

Source : http://support.instaforex.com/en/index.php/Intraday_trading

Elliot Wave Theory

Elliot Wave Theory is a development of the well-known Dow Theory. It is applied to any free traded asset, liability or commodity (shares, bonds, oil, gold, etc.). The Wave Theory was proposed by an accountant Ralph Nelson Elliot in his monograph “The Wave Principle” published in 1938. Elliot Wave Theory is based on some constant cyclical pattern of people’s behavior psychology. According to Elliot the market price’s movement can be clearly determined and shown in the chart as waves (wave – is a clearly visible price movement). Elliot Wave Theory is a system of empirically deduced rules for market behavior’s interpretation.

Within the framework of bull trend, waves 1, 3, and 5 are impulse, and each wave subdivides in five smaller waves, while waves 2 and 4 are corrective, and subdivide in three waves. The impulse waves are marked by numbers and corrective waves – by letters. Concerning all time scales, Elliot theory says:

1. The market can be only bullish or bearish.

2. Both stages in the chosen scale are described by 8-wave formation of market movements.

3. First five waves of any stage (are marked by numbers) form the main market trend, impulse. The last three waves (are marked by letters) form the correctional movement, directed against main. The further development along last three waves can lead to the market stage’s change.

4. Each market wave move in time by its own rules. The moment of its end, as well as its size, can be predicted with small limits, if all market waves are determined correctly, having bigger time scale and the current market’s condition is exactly defined.

5. If the predicted moment of the wave end or its size does not match earlier determined values, it means that initial analysis of Elliot waves was made incorrectly.

There are rules for interpretation of Elliot waves:

1. The turn of the second wave is never equal to 100% upward move of the first wave. For example, at bullish market the low of the second wave will be never below beginning of the first wave.

2. The third wave in impulse sequence is never the shortest, usually it is the longest.

3. The forth wave never ends in the price range of the first wave, except that it forms the chart in a special way, the market movement is the same as before it, regardless of its size and movement period.

Source : http://support.instaforex.com/en/index.php/Elliot_Wave_Theory

Bagaimana liburan Agan-agan kali ini? Menyenangkan bukan? Saya harapkan tentunya demikian. Marilah kita lanjutkan pelajaran mengenai Strategi Trading.

Long Term Trading

Long trading way is considered as the most predictable in the technical sense. The matter is that long-time price trends tend to continue and to be stable for a long period of time. Absence of noise (frequent small price fluctuations) makes technical picture intuitive and predictable, and indicators give less false signals. So trading ads up to determination of the appropriate signal and long control of the position. Trades by daily and weekly charts can bring large dividends on conditions of long-term trend and adequate choice of entry point. Moreover, high levels of stop loss are paid by one profitable deal. The difference between the intraday and long-tem trading is period of order execution, if consider the results by the end of the year. However, by skillful handling of hour charts the potential profit can be much higher than long-term trades. For training, undoubtedly, the best variant of proportion noise/period is hour charts. H4 – charts can also be useful for market investigation but the process significantly slows down this way.

Source : http://support.instaforex.com/en/index.php/Long-term_trading

Tipe strategi trading selanjutnya :

Long-term trading strategy for currency pair EURJPY

During the development of long-term trading strategy for work with cross-course EURJPY it will be useful to look through the history of this currency pair for last years.

So, if you look at the weekly chart of EURJPY you will notice continuing growth from October 2000 till July 2007. About seven years of uninterruptible increase from the level 88.87 to 168.93. Ladder to the sky at a height of eight thousand points! There have been composed some legends about gold era carry-trade on Forex. One would think there is nothing difficult: buy on pullback and hold the position until the patience allows you. Then gather the gold harvest. But everything in this world (good and bad) comes to an end some day or another. On the 20th of July 2007 cross began its catastrophic falling from the level 168.93, which ended in a month on August 17, 2007 at the level 149.26. Just for a month cross fell off by almost 2 thousand pips. Just frames of that giant surge determined the behavior of this instrument until the present moment. It can be said, that after the giant trend we observe the giant flat.

In fact, if you move from the weekly chart to the daily one, you can distinguish several rather good trends within the bounds of huge sideways trend. The most stable trend is upcoming one which started on March 20, 2008 from the level 151.71 and finished on June 14, 2008 at the level 169.96. The price twice tested this new historical level, then turned down and went almost a half of giant price band. This situation can hardly give a hope for any sharp trend movements. Of course, trends exist here, but from the point of medium and short-term perspectives. At the global level the price continues fluctuating within the band of 2000 pips until the global reverse is outlined or the upturn movement goes on.

So opening long-term positions for this instrument it is worth using outlined relevant price levels. The relevant price levels are accumulation of price levels 169.96, 168.93 and 167.67 at resistance level. Also price levels 152.11 can be considered as relevant. It was tested three times by the price: 22nd of January, 14th and 20th March 2008. Support level 149.26 can also be mentioned as relevant, though it has never been reached after August 17, 2007. It is also important to take into account the price band from 158.27 to 159.34 because there is the great number of reverse points during the medium-term fluctuations. Furthermore, this diapason located approximately in the middle of global price channel. Strategy is very simple. Waiting for achievement of relevant price level by the instrument, observe the price behavior and according to the results of observation make trading decision. Finally, the author insists on the review character of this article. Make your own decision for position opening. At the best case you make a fortune yourself, at the worst case there will be no one to blame.

Source : http://support.instaforex.com/en/index.php/Long-term_trading_strategy_for_currency_pair_EURJPY

The Mirror Market Theory

Elliot Wave Theory was very popular in due time and remains the same nowadays, but modifications and additions are usually attending any new tendency. The mix of Chaos Theory and Wave theory, joining in order to present the world the Mirror Market Theory became as such example.

In the Internet you can find a lot of different things. The mirror script developed by the ChaosTradingGroup team was a surprise for me. Despite the quite ambitious manners for the exact predictions of the price fluctuations movements, their developments fully justify its mission. What is the point of this wonderful mirror developed by chaos adherents?

The market movements form the infinite sequence of “inflow” and “outflow” cycles of price fluctuations, as Elliot had noticed. The perfect wave is built by cycles 8, 34, 144, all waves of which come from the zero point. Script-mirror searches such zero points, after which the market starts to reflect itself. The script’s point is that from the set of such points to find the most important centers, which very precisely repeat the historical data and afterwards forecast further price movement.

The usefulness for trader is undeniable, but, unfortunately, there is no full instruction for work with script and, moreover, the trading strategy with clear rules on the script’s installation and points of the entry and exit in the free distribution.

Source : http://support.instaforex.com/en/index.php/The_Mirror_Market_Theory

Short Term Trading

The “secret” is the shorter your time frame of position, the less money you earn.

It is sad, but it is true. Think about any investment you have ever been involved in. Did you succeed in hustle through everything for one day? And if you were so lucky, how many times did you repeat it? Not so many. It is because the universal rule of existence, i.e. growth, is the same as universal rule of speculation:

It takes time for profits to grow.

Successful traders know that a market can move only for a little distance for one minute, for 5 minutes it can move further, for 60 minutes – even more, and, who knows, how further – for a day or a week. Losing traders want to trade within very short periods of time, automatically limiting the potential of their profit.

Inherently, they restrict their profits and follow the scenario of unlimited losses on purpose. It is no wonder so many traders obtain such a bad result in the short-term trading. They locked themselves in impasse, following the delusion which is spread by brokers and sellers of trading systems: it is possible to make huge profit catching highs and lows of the market during the day. This opinion is supported by seemingly rational statement – trading during the day and not leaving the position opened at night, you are not exposed to news and sudden changes, limiting your risk. It is totally wrong, moreover, by two reasons.

First, your risk is under your control. The only control measure in this business is setting of stop-loss point – a level which position closes at. Next morning market can open with gap much further than your stop-loss (jump over your stop-loss), though it is rare case, but even in that situation we can limit the losses having stops and fierce desire to come out of losing deals. Losers hold on to loses, winners – never do that.

As soon as you open position with stop-losses, you can loose only estimated before amount of money. No matter when or how you opened position, your stop-loss limits your risk. Your risk is the same whether you buy at absolute high of new market or at its absolute low.

Rejection from overnight positions limits the period of time, during which your capital should be growing. Sometimes market opens against you, but if we follow the right direction, in most cases market will open in our favor.

And what is more important is finishing trading by the end of day or, worse, in some artificial moment, let’s say, by 5- or 10-minutes chart, we cardinally limit the potential of profit. Do you remember, I said that difference between losers and winners is that losers hold for their losses? Another difference is that winners hold their winning positions, meanwhile losers leave “too early”. It looks like losers cannot stand successful positions: they are so damn happy to get any profit, that leave the game too early (usually during the entry day).

You will never gain a lot of money until you learn to hold successful positions, besides, the longer you hold them, the more potential of profit you have. When successful farmers plant the field, they do not dig out the plants every minute to see how they are growing. They allow them to spring and grow up. We, traders, could adopt many things of this natural process of growing. Success of traders’ work is the same as farmers’ work, to raise successful deals, time is needed.

An extract from the book “Long-term secrets of short-term trading” by Larry Williams

Source : http://support.instaforex.com/en/index.php/Short-term_trading

Locking Strategy

Locking is derivative from hedging, the technique of covering risks connected with changes in markets behavior. The difference between hedging and locking is the following: hedging is used with different trading tools, lock – with one trading instrument.

Locking is applied as or instead of stop-loss for losses limiting. The mechanism of lock establishment is rather simple – if a deal is unprofitable, there is set pending order at some distance from the price. Such tactics allows escaping the moss and even initially unprofitable order closing with profit, on the condition that the price will return to the necessary level or total volume of profitable positions will exceed the losses.

Let’s consider the method of locking placed in public in Internet. This method is based upon the “catching” of movements by 40-50 pips, so it can be successfully applied in the intraday trading. In opinion of this method author, you may not use any indicators; it is your personal decision. For a start, it is necessary to digest some rules of risks’ limitation:

1. Total volume of opened positions should not exceed 10 % of deposit. 2. Maximal quantity of opened positions should not exceed 10. 3. The volume of deposit should be not less than 30 lots (it is supposed the ratio of deal volume to deposit amount, i.e. if the deal volume is 0.1 lot, deposit should be min 3000 USD).


Then setting of the method itself:

1. Put pending order at level 30-40 points from the price. 2. As soon as the first position is opened, put the second stop-order in the same direction at the level 10-15 points from the first deal and one more pending order in the opposite direction at the level 10-20 points in the same volume, or be ready to open it manually, if price goes other way. Lock is forming this way and it fixes loss in amount of 10-20 points, if entrance will be unlucky. 3. If order opened, but price moved in opposite direction, touched reversed pending order, put pending order in the direction of price (i.e. opposite to the initial way) at the level 10-15 points. 4. Profitable positions can be placed in break-even position by trailing stop, and reverse stop-orders which were not touched are moved by 10 points from the next opened position. 5. As soon as the sum of profit and loss becomes positive or negative with minimal value, all positions may be closed. In such way, you can try to make more profit. 6. The volume of every opened position can vary, but total volume of opened positions should be more at the place where price is moving to.




Example of trading by described above method: currency pair EUR/USD jumped from 1.2195 and moves up. Buy position in volume 0.3 lot was placed at the level 1.2225 – 30, buy stop order in 0.2 lot and two sell stop orders: 1.2200 0.3 lot and 1.2285 0.2 lot.

The price touched buy stop order and moved down, but having reached 1.2201 changed its direction again. In 11:00 – 20 GMT after attaining 1.2234 the pair began to descend till 1.2200 touching sell stop. And turns upwards again till 1.2223. Situation: volume of buy orders 0.5 lot, sell 0.2 lots.

In 14:30 GMT states open. Choose the worst variant – i.e. do NOTHING until the states. Cancel pending orders sell stop and wait for news release. After – add by the price movement and do nothing with losing positions. States open and the pair swiftly falls….

Orders are activated: #1 sell stop 1.2200 0.3 lot

1.2 sell stop 1.2190 0.2 lot we add pending orders #3 sell stop 1.2180 0.2 lot,
1.4 sell stop 1.2170 0.2 lot
1.5 sell stop 1.2160 0.2 lot
Price touches 1.2170 and opens the fourth sell stop 0.2 lot and jumps off. Let’s close the positions: sell 1,2200 0,3 lot, sell 1,2190 0,2 lot (closing approximately at 1,2178-80). Profit 10 pips in 0,2 lot and 20 pips in 0,3 lot.

Opened positions 0,5 buy and 0,4 sell (sell from 1,2180 and 1,2170). Jumped off to 1,2287 the pair moved down again… Order № 6 sell 0,3 at 1,2280-82 (at closing level of sell-orders or – or some pips higher).

From 1.2179 down again….

Waiting for further fall and add for sell every 10-15 pips. Sell stop #7 1.2150 0.2 lot. Sell stop #8 1.2140 0.2 lot.

At the level 1.2134 we get: buy 0.5 lot and sell 1.1. Close all orders. Total position – profit.

Opinions of traders on advisability of locking split over contrarily. If one can consider this technology as breakeven, flexible and not requiring indicators and even special skills of fundamental and technical analysis, others say about pointless of its usage on all criteria adding psychological factor and opportunity to bitch things up which can lead to fatality of deposit.

Traders who successfully apply locks also differ in opinions. Ones consider them as the last means for rescue of unlucky opened position; others apply locking as the main strategy of trading. In both cases, traders close with profit or, at least, make serious loss minimal.

Locking has significant advantages compared with stop loss. Firstly, skillfully used locks can turn your losses into profit. Secondly, as a consequence from the first conclusion, complicated market analytics lose its importance. It is rather difficult to predict the market behavior even for the next hour, but with the help of lock you can change the situation for your own benefit, placing the next pending order in the direction of price movement, covering negative positions by volume. Thirdly, the essence of the technology and described above method is rather simple and evident, so it can be used even by newbies. And at the end, usage of locking does not contradict to the rules of capital management, and so it is serious rival of risks limitation instrument, stop loss.

Reverse of the coin is necessity of rather large deposit relatively to allowable working orders volume. As it was pointed by the author of locking method, it is necessary, at least, 30 working lots, and ideal ratio is 100 working lots. So, rather big amount of investments will stay at account unengaged. Also fundamental defect of locking connected with money stock at trading account, - long-term hanging up of lock, for example, during transition to flat with fluctuating market movements in 20-30 pips in both directions, it will be rather difficult to put a lock and, moreover, without skills you can quickly make a real mess of things. Antagonists of locking confirm that in the same situation using stop loss and increasing the volume of trades, more quantity of pips can be made. There is the point, in fact, reverse orders in larger volume and stop losses are frequently practiced and they prove their efficiency. Moreover, after position with stop-loss is closed, a part of margin becomes free, and it gives an opportunity to increase the volume by several times for reverse order unlike locking where every new order uses new amount of funds.

In spite of this, many dealing centers allow opening the same by volume but differently directed positions, calculating margin as for one deal. It means that 2 opened positions by one currency pair for buy and sell in volume 1 lot will have margin in amount of 1000 USD with leverage 1:100 instead of 2000 USD. However, often in many DC such case will not be approved. Locking loses its essence, because it will be necessary to increase the deposit by several times in order to get significant results.

From psychological point of view, locking gives the opportunity not to be afraid of losses as it is with stop loss. From the other side, it can stand you in bad stead, if you open huge number of orders and get confused regarding that everything can be corrected.

The main things which gurus of locking pay attention to are:

1. Limited quantity of allowable orders in trading - 10. 2. Limited volume of trades, total volume of all opened positions is 10% of deposit or not more than 25% of deposit. 3. Constant migration of pending orders following the price for reverse orders and moving before the price for direct ones. 4. Necessity of catching price movements not less than 40-50 point.

Source : http://support.instaforex.com/en/index.php/Locking

The Martingale Strategy

The martingale strategy is well-know for gamble players since XVIII century. It consists in the constant parlays’ raise in the case of failure. In such way all previous losses are easily covered by one gain. The size of the parlay becomes minimal, as soon as player wins. This strategy works perfectly in games such as “heads or tails”, “more or less” with payments more than 2 to 1 (if the payments are 2:1, one gain will cover all failures, but nothing more than that). Does this approach is applicable for the currency trading?

In point of fact, not focusing attention on trifles, the currency rate can go either upward or downward. In other words, if to limit the order by the clear values of swaps and profits, than the differences from gambles become minimal. Instead of the parlays’ size, the value of order is increasing and trade stops to depend on the analytics, release of news and other events, which influence the price formation.

In spite of its simplicity, it is not as good, as it should be. The first problem – the residual on balance: it has to be as large, in order to withstand more than 5 (at least!) sequential upward movements of the order’s value, taking into account the automatic stop, which every dealing center has in case if the deposit size will decrease greatly, for example at InstaForex Company the automatic stop will work out when the deposit size will be 10% of the initial amount.

Secondly, upward or downward movements of the rate must be considered. If a probability of head or tail falling at the endless quantity of gambles tends to ½, then, let say, in the presence of defined downward trend, it will be very hard to make a profitable closure of more than one or two orders in profit of 10 buying commands.

Thirdly, if instead of order’s value increase to put take-profit higher, or to advance it along with values, the probability to “catch loss” uprises (stop-loss activates). Despite all rules of the capital management, it will be needed to keep the ratio stop/profit 1:1. Otherwise, the winning deal can take a number of months.

Finally, the fourth, the psychological factor. Accumulating the critical balance mass (it mean the sum on the balance, which allows trading with large volumes and can lead to the major losses in the case of deal’s unprofitability), it is very hard to control emotions. That is why it is very difficult to start with minimal value of the order, and at the same time, to observe the next loss.

As it seen from above, the martingale works badly as a main strategy. However, for all that, the martingale is a good variant not to recede from the progressive increase of the orders’ value. How to use it correctly for trading at Forex we will discuss later.

Source : http://support.instaforex.com/en/index.php/Martingale

Pipsing Strategy

Actually, such approaches to trading are rather complicated, but in spite of this, almost all newbies are trying to trade in such way.

Now about the method itself.

This approach is applied for making profit from fluctuations during the day. During the day some traders make more than 200 deals, the period of such positions’ life in this way is about several minutes. Of course, profit by such positions separately is small, but it can reach significant amount in total.

The idea of pipsers – earn on intraday movements. On the average during the day currencies move for about 50-60 points. However, this can be calculated if we take the price of day opening and the price of day closing. But if we take into account that currency rates do not constantly grow or fall within the day but make insignificant fluctuations, it will be in the end that currency moves for much more points for a day. Pipsers are trying to catch these fluctuations.

This approach is compared with roulette – the same playing methods, approximately the same chances, though probability of victory at Forex using this approach is twice higher.

Such system is doomed. There are several reasons for that.

1. Trying not to miss even the smallest rate movement, pipsers use levels of losses limitation (stop-loss) which are very close to the market.

Setting this level, probability of catching the loss during market noise is very high, even if you correctly determined trend direction but misjudged rather opposite strength of bulls and bears. It is very easy to make a mistake ascertaining the direction for the next hour. It is more difficult that to determine the aims of daily movement.

The simplest decision protecting against the order execution which fixes the loss, is absence of this order, but then you have a risk to lose more funds after fast movement against you, when price moved so far that it did not seem rollback to the previous levels in the next minutes or hours probable. Trading with large part of deposit not putting stop-losses can lead to margin call, i.e. losing the whole deposit.

2. Stress when you are trading with real money. As a rule, such strategy is firstly used at DEMO accounts, where you have virtual money, so there is no fear to lose them, and orders execution is made automatically, i.e. instantly.

So there are several factors, speed of requests’ execution and stress which become worse along with every pip of price changing against you. Pipsing implies constant stress, and affected by stress you can not make rational decisions.

Also we should mention the fact that brokers do not like clients who request huge number of operations. There are some limits for quantity of requests in a unit of time and too aggressive customers requesting orders every second can be asked to close an account.

Scalping is closer to achievement of some positive result. It is similar to pipsing, but its goal is more than several pips by one position.

Here are several rules of scalping tactics:

Simultaneous work with several currency pairs and effort of investigating their group movement. 90% of these systems are based on the group movement of currencies against the US Dollar. Though, there are systems based on the euro and the pound. Currency- engine and lingering currency are chosen. Let’s say, EUR/USD is chosen as alarm, AUD/USD as currency for trade (supposed, that it moves with delay compared to the euro). M1 chart or tick chart is chosen. The majority of manipulations are executed by orders.

Described above ideas are actively discussed at different forums. Usage of these approaches requires strong nerves and good reaction.

Source : http://support.instaforex.com/en/index.php/Pipsing

Pipsing EURJPY

The daily work in front of the monitor, minimum of news and maximum of luck, somebody use additional measures – for example valerian tincture, all these are included in pipsing. There is no need to know the financial tools of the world economy’s regulations, and countries’ GDP do not take a dominant lead. Even at bullish market, during the day, there are a lot of pullbacks, basically, at which the positions can be opened and closed on the presumptive maximums. The main rule of the pipser is not to go against the trend.

The strategy of pipsing for the EUR/JPY pair allows fixing stops not at the maximal nearness to the opening price, but to take into account the risks and to admit the possible losses by stops. Such “relaxed” behavior for this pair is caused by the relatively low volatility at Forex market. The daily changes do not exceed 200 pips, very rare are to 300 pips, there are no more than 10 such situations a year, and intraday changes of 400 pips in 2008 have happened only once in January, in 2007 it was twice, in February and in August.

These things allow to open short positions without serious risk, anyway it is necessary to look at hourly chart, in order not to miss the reversal of the tendency, and in the case of situation’s worsening, or for example natural disaster in Japan, it is needed to buy the euro against the yen.

The optimal profit for pipsing on the EUR/JPY pair is 5-7 pips, stop order can be set at 15-20 pips. From the beginning of 2008 the Euro has strengthened for 600 pips, but now bears got their way and the EUR/JPY rate returns to the beginning, in August the euro price reduced to 160 against 162 in the beginning of the year.

Pipsers’ recommendations – dealings for a fall (bear operation), in spite of all changes during the day there is no point to flatter yourself and to buy in the moment, when market “says” sell, it is better to wait pullbacks. Because of negative data concerning unemployment rate and other news of Eurozone, as well as positive data of Japan it is possible to conclude, that the price for Euro will be falling. The general sentiment of the market and traders’ forecasts testify about this.

There is no need to flatter yourself with the less steady pair, because the changes of 100 pips for the pipsers mean the losing of the deposit, the result of pipsing is determined in the end of the day and consists of the spread, losses and profit, of course if the profit is higher this mean that the day was good. That is why you should set up the resistance levels, follow the figures, and do not spare to close them, if there is a breaking through. Despite the fact that the intraday trading is the strategy which means the setting of the stop-orders, a lot of traders who “catch” profit’s points – ignore this rule, explaining that if he/she is working right now at the terminal, nothing will happen.

It is recognized that some brokers do not like pipsers and sometimes execute all our requests with delays, ignoring them. This is a fate of anybody who is making about 200 transactions a day. If your broker is honest, then you will not feel that you are infringed or ignored. The EUR/JPY pair is a good tool for traders who work during the day.


Source : http://support.instaforex.com/en/index.php/Pipsing_EURJPY

Money Management

Money Management is a set of rules and specific techniques, simultaneously oriented to the risk minimization and profit maximization.

Risk is a maximal amount of assets, which will be lost until a decision about closing of an unprofitable position will be made. In such way, the risk is a difference between opening price of a position and price of the stop-loss order or overturn of the position multiplied the deal’s volume.

The main principles of the money management:

1. The total amount of the invested money should not exceed 50% of the total capital. This principle prescribes a rule about calculation of margin for open positions: the sum of the obligatory reserve for usage in non-standard situations and continuation of the normal work must be no less than the half of the capital.

50% is a value brought by Murphy; however, a lot of analysts think that the much less percent of invested assets must be 5% - 30%

2. The total amount of assets, invested to the only one market, can not be more than 10% - 15% of the total capital. In this case the trader is secured from investment of the extra assets to the one deal, which can lead to the downfall.

3. The risk rate for each market should not exceed 5% of the total capital invested by trader. In such way if the deal turns out be unprofitable, then the trader is ready to lose no more than 5% of the total assets sum. 5% is a value brought by Murphy, however, for example, Elder gives a value 1,5% - 2%.

4. The total sum of the guarantee fees, depositing at position opening at one market group, should be no more than 20% - 25% of the total capital. The markets, which compose one group, move more or less similar. Working at Forex four major markets can be determined, inside of which the movement of the currency rates is almost the same: the dollar area, the sterling area, the yen area and the euro area.

5. Degree determination of the portfolio diversification.

Diversification is one of the ways to secure a capital; for all that the variety must have limits. It is always needed the sensible compromise between diversification and concentration. You can more or less securely distribute assets by opening positions at the same time at 4 or 6 markets of the different groups – but no more. The larger importance of the negative correlation, existing between markets, the higher is diversification of the invested assets.




6. Determination of the stop-loss levels. The value of the stop-loss, at first, depends on how much trader is ready to lose at one deal, and, secondly, depends on traders’ assessment of the situation at market. Suppose that trader has the dollar deposit in amount of S. At the position’s opening trader concedes the losses in amount of L% of the deposit sum.

Suppose the contract for 100 000 was opened by the buying of the USD against the Swiss franc (CHF), with that the cost of the opening was p1. Buy USD 100 000; Sell CHF p1 x 100 000. At what p2 level trader has to set the selling order, for the purpose not to exceed the level of the allowable losses SxL?

If your order at p2 level has worked out, then the loss of the position would be: Loss – CHF (p1 – p2) x 100 000. On the other hand the loss should not exceed the USD SxL, or in the Swiss franc (CHF) SxLxp2. Consequently, we have: (p1-p2)x100,000 SxLxp2, there we have the following formula for the order’s level: p2 p1-p1 xSxL (SxL+100,000).

It should be noted that at determination of the stop-order it is needed for trader to rely upon the reasonable combination of the technical factors, displayed at the price chart, and own considerations concerning secure of funds. More changeable market, more removed should be the stop-loss levels from the current price level.

It is a trader’s benefit to set a stop-loss. At the same moment the extra “hard” stop-orders can lead to the undesirable position closing at the short-term price fluctuations (“noises”). Very remote stop-orders are not “noises”-sensible, but can lead to significant losses.

7. The determination of the ratio between potential profit and losses. For each potential deal the profit rate is determined. Such rate should be well-balanced with potential loss in case the market is going in undesirable direction. Usually such ratio is settled as 3 to 1. Otherwise, you should to refuse the entrance to the market. For example, if a trader supposes that margin will be $100, then the potential use should be $300.

Because the comparatively small number of deals during the year can make a considerable profit, it is necessary to try to maximize the profit, remaining the profitable positions as long as possible. Otherwise, it is needed to minimize the losses at bad deals.

8. The trading with several positions. Entering the market with several contracts (i.e. trend positions are executed with rather liberal stop-orders, which allow keeping safe these positions in the conditions of consolidation and prices correction. These positions give trader a possibility to make a greater profit. The trading positions are meant for the short-term trading and are limited by the strict stop-orders. In this case at the achievement of the certain price guideposts they are closed, and at the tendency’s resumption are recovered).

9. Conservative and aggressive trading approaches. The most part of analysts prefer the conservative approach. For example, Teweles J. Richard, Charles V. Harlow and Herbert L. Stone in their book “The Commodity Futures Game” wrote: “… Murphy is held to the same opinion: “…The trader is gambling aggressively when strives to make money promptly. The profits are significant, but only at time when market is moving fast in the favorable direction. When the state of the market is changing, the aggressive strategy as a rule is leading to the failure”.

10. Rules of the position opening: a) open the positions only at the presence of the one major and at least one additional signal; b) at the opening, by all means, form and write down: the price at the entrance the market; the price at which you will close the profitable position; the price at which you will close the loss-making position and the estimated time of the position’s closing.



11. Support rules for position and partial closing till the estimated time: a) support the positions only in case if the analysis confirms the conclusion made earlier; b) partly close positions: at receiving losses above supposed; if the price achieved the supposed rate for profit making; c) wait: at receiving losses below supposed; if the price is at the same level; if the price did not achieve the supposed rate for the profit making.

12. Rules for position closing: - after the expiry of an estimated time; - at the receiving of the supposed profit; - at the receiving of the supposed losses; - at the achievement of the profit’s maximum.

Source : http://support.instaforex.com/en/index.php/Money_Management

Very Short Term Strategy

The perfect strategy for beginning traders but it quickly leads them to the total smashup. Seduction of short-term rates quotations in amount of several points leads to trader starting “catching points”, 1-5. Success for several times, he/she earns 20-40 points. Then there is movement against trader’s position and he/she quickly starts suffer losses. According to this reason, such work requires very fast decisions in conditions of huge psychological tension and for a short period of time which is really possible only for experienced traders; newbie just observes how his/her deposit is vanishing. So for the beginning, it can be recommended to use medium-term working strategy with stepwise implementation of advantages of first and one before the last strategy when there is slack or sideward trends. It should be mentioned that “it is better not to do anything than do something”. You should not order just on the basis of your desire to do, which is often provoked by long inaction. Every deal should be based upon the reason – fundamental or technical.

Source : http://support.instaforex.com/en/index.php/Very-short-term_strategy

Scalping (Strategy)

This article is devoted to such trading strategy as scalping. (I do not recommend using this strategy because the possibility of losing the deposit is quite big). There is no definite opinion about this trading approach, but scalping was interesting and will be interesting. Why does scalping arouse such interest? Probably, because it is one of a few methods allowing to earn quickly at Forex.

The main idea of scalping is earning on intraday price movements.

Intraday trading appeared along with first stock exchanges. What can be easier, buy something cheap in the morning when stocks open, and at the end of the day sell it at higher price. From the beginning, intraday trading was available only for stocks members, because it was necessary to be there for quick deals execution. But technological advancement did not stand still. Telegraph, then telephone appeared. Necessity of presence at the stock exchange vanished and, as a consequence, the number of traders dealing with short-term speculations started increasing. Telegraph provided stock quotations and telephone became a way of sending requests to broker. Such trading was popular until computers and computer networks were invented.

After the Internet appearance trading at different markets, stock exchanges, Forex became available for everyone. And along with trading terminals’ development transmitting quotations right to the screen and allowing execution instantly, intraday trading got the second breath.

Forex market fits scalping in the best possible way. Why, you may ask? It is possible to trade at Forex with amounts, 100-500 times exceeding the deposit which allows making significant profit. Plus, Forex market has the greatest volatility. On average, currencies make 50-100 points during the day. However, this can be calculated if we take into consideration the price of day opening and the price of day closing. But if we take into account that currency rates do not constantly grow or fall within the day but make insignificant fluctuations, it will be at the end that currency moves for much more points for a day.

Scalpers’ task is to earn on every micro movement. During the day some traders make more than 100 deals, the period of such positions’ life in this way is about several minutes. For these several minutes Forex market makes movement in the correct direction by several pips, which scalper takes as a profit after closing the position. Of course, profit by such positions separately is small, but it can reach significant amount in total.

Deals are not always profitable and if the market moved in the opposite direction, the position should be quickly closed with out any regrets, otherwise, losses would be great.

The rules of classic scalping:

Scalping is a trading at ALL micro movement, exceeding double spread and allowance for slipping.

Scalper does not care about where market moves, the main thing is strong oscillators.

Strict risk-management – closing position by the smallest reverse. Profit fixation by the end of a day.

Telling straight, scalping strategy is rather complicated, but in spite of this, almost all newbies are trying to trade this way.

Let’s consider obvious disadvantages:

In scalping stop-loss level is very close to the market. Setting this level, the possibility of catch the loss just on market noise is very strong. The simplest decision is do not put stop-loss order, but then it can be enough one strong market movement against you to cancel out all your previous achievements and even to lose your deposit.

And probably, the main disadvantage is constant stress.

Scalping presupposes constant present at the market, and it means incessant stress. It is necessary to have strong nerves to be able to stand such trading conditions – there is no right to mistake. So if you trade for a long time in such conditions, most likely you will lose your deposit. And how long it takes is probably individual for everybody.

Progress does not stand still.

Along with development of the software, scalping with usage of different mechanical trading systems became more popular. Scalping slowly turns from daily monitoring the quotations at the screen into the writing and constant refining of the program which works during the whole trading session and collect the pennies at every tick. My opinion: mechanic trading system for scalping cannot be written, because trader’s intuition plays one of major parts in this strategy. But program can make the work easier. It is just my opinion; I think you have your own.

At the end of the article I want to cite a passage from the interview of famous scalper Paramon:

“Scalping for me is trading method complies with my psychomotor system. As well as other strategies it has its advantages and disadvantages. For example, in long-term trading we get much free time, we do not have it in scalping; using scalping it is necessary to work the whole trading day and by the end of trades you feel exhaustion, but from other point of view, scalper can earn much more than medium- or long-term trader. Moreover, the process of price movement is always in front of your eyes and you can always quickly react on any market changes and just this very tiresome trading allow you gaining invaluable experience. You start to understand the price movement of some currency pairs, start feeling and predicting”.

Source : http://support.instaforex.com/en/index.php/Scalping_(strategy)

Swing Trading

The purpose of swing-trading is taking profit in long-term prospects. This is the main difference of this tactics from intraday ones. With the help of swing-trading profit is made of 3-5 days time frames. The majority of the most successful traders of the world use exactly this strategy.

From the very beginning we have to understand the determination of trends. Market movement is characterized by chain of fluctuations. If every forthcoming maximum is higher than the previous one, and every forthcoming minimum is higher than the previous one, then there is up-going trend, or, as it is called, “rally” or “uptrend”. If market makes down-going movement, where every next maximum is lower than the previous one and minimum is lower than preceding one, then it is down-going trend, “downtrend”.

Meanwhile, smooth currency rate changing is not really a trend yet. Dynamics shows three conditions of currency market at once: accumulation – stage where those people work who can afford to have the staff of analysts; trend and distribution. It is not recommended for private traders to pay attention to the accumulation stage – in this condition “smart money” comes into the market. “Smart money” leaves the market at the stage of distribution, instead of that “stupid money” appears.

We started narration about trends not accidentally. The main thing for swing-trading tactics is discipline, necessity to follow the trend accurately and do not even try to trade against it. Just following the main trend supports the impulse to traded currency pair rates to move in your direction. Currency dynamics holds the trend, until it changes under the pressure of fundamental driving forces. Unfortunately, traders, from force of habit, often do not follow this rule.

According to the Dow Theory, there are three trends at the market: long-term, intermediate and short-term. Long-term trend is used by traders who have investment purposes. This trend is identified on weekly, monthly and quarter charts. Day traders work with short-term trends which can be seen on hour charts. To work at Forex market, it is necessary to choose one trend. The main thing is to understand what trend is and how to identify it.

Just in “core-movement” condition, i.e. in trend, it is better to work at Forex market. After all, trend has two peculiarities useful for us – it is determined easily and changed difficultly.

Source : http://support.instaforex.com/en/index.php/Swing-trading