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The smallest unit of exchange rate change is called pip. If the euro / dollar exchange rate rose from 1.2250 to 1.2251, then the change is just one pip. Last digit of Forex quotation is binary digit of pip value, and so on.
Spread is the difference between the bid and ask. The smaller the bid price and the selling price, the less the cost for the investor. Long-term trading down, the size of the spread of short-term investors, the overall profit and loss of the larger impact on the long-term investors almost no impact. Take the euro / dollar as an example: the ask is 1.4390, the bid is 1.4393, and the selling price is 3 pips. If you want to buy EUR at this time, it will be at 1.4393, and the profit and loss will show a loss of 3 pips, or $ 30 (3 * $ 10 = $ 30). This $ 30 loss can be seen as the cost of position. Spread is actually the cost of our transaction.
Pip value is the value of between the bid price and the selling price when making a foreign exchange transaction. For details, please refer to the foreign exchange calculation.
Margin refers to the buyer or seller in accordance with the provisions of the transaction market to pay the funds, specifically for the settlement of orders and performance guarantee.
Used margin = number of lots * contract size / lever
Gold and silver used margin = number of lots * contract unit * market price / leverage
CFD margin is fixed
Available margin = net value – used margin – spread
Additional margin refers to the provisions of the liquidation, membership margin account in the amount of short, in order to maintain the amount of margin in the initial margin level, and asked members to increase the deposit to pay. The balance of the current day minus the margin is the balance of the funds. If the day’s equity is less than the margin, it means that the balance of funds is negative, but also means that the margin is insufficient.
Contract Size in foreign exchange is also called the contract unit, that is, the volume itself is the amount of money to buy / sell. For example: foreign exchange, 10 million contract units for a standard lot, also known as 100K (K = kilogram), which means that the minimum transaction share per pen is 100000 benchmark currency.
STP, full name Straight under processing, is a kind of bridge, there is no trader backstage (trader backstage, English for dealing desk, often translated as “trader platform”) in which to quote and control the market price No customer orders), all customer orders directly to the liquidity provider (or liquidity providers, that is, other brokers and banks), buy / sell prices determined by those liquidity providers. The STP platform without the trader’s backstage bridges all order information directly to the liquidity provider, which trades with the opposite position of the customer, and closes the position with the other transaction in order to obtain profit.
Three key elements of STP foreign exchange platform
1) Providing Liquidity
ECN trading platform will be orders to spread to the ECN liquidity pool, which has a large number of inter-bank transactions in the liquidity provider.
The STP platform has its own internal pool of funds, which is made up of some of the scheduled liquidity providers, and only those liquidity providers who have signed up with STP brokers will be there. These liquidity providers provide the best buy / sell price for orders from STP trading platforms. The better the liquidity, the buy / sell price will be more favorable, the lower the spread will be. If there is only one liquidity provider, then there is no price competition between the liquidity providers, which is equivalent to just add a middleman to trade inside.
2) Spread Type
Fixed Spread STP Forex Platform: Spreads are not fixed on the basis of the minimum buy bid in multiple liquidity providers. If the STP broker has only one liquidity provider, the role of the liquidity provider is the only negative side of the trader, in which case the buy / sell price is determined by the liquidity provider.
Floating Spread STP Forex Platform: Liquidity providers offer the best buy / sell prices, STP brokers choose one of the best buy prices from a liquidity provider and choose one of the best Of the bid price, so that customers can provide the lowest point of sale.
3) Immediate implementation or market price implementation
Immediate execution refers to the order will not directly enter the market, will be dealt with by the broker.
The implementation of the market price is that the order information is sent to the market, the price determined by the market liquidity providers.
STP brokers offering market access to direct market access to direct market access (Direct Market Access)
ECN is the electronic communication network (ECN), which makes the order of the ECN users directly on the network. The price of the transaction is made up of all the transactions involved in this ECN environment, including individual investors, small banks, Investment institutions, hedge funds, etc., in accordance with the price and time to optimize the fair match the transaction.
Broadly speaking, the ECN model includes STP bridging. The biggest advantage of ECN is the fair and genuine ECN model, which is only responsible for delivering orders from customers and earning fees, while customer orders are in this ECN liquidity pool and other The counterparty to trade, the opponent may be hedge funds, banking institutions or non-bank institutions, or other investors and so on. And because the ECN brings together a lot of liquidity, so these liquidity providers in order to be able to get more orders to deal with the opportunity to produce a bid between each other, so that customers can enjoy a lower transaction costs is spread, And the fastest speed real-time transactions. But the ECN account threshold is higher, the initial size of the account, the number of transactions, trading volume has certain requirements, suitable for institutional investors and large funds account and so on.
EA refers to Expert Advisor (EA), which can also be translated as a “expert consultant”, commonly known as an intelligent trading system, which is a process of machine transactions by computer simulation traders. The computer is based on a pre-edited trading strategy Program to execute a trade order. Automated trading strategy mainly includes three elements: order execution, risk management and fund management.
The intelligent trading system is an international financial and monetary trading system running on a specific trading platform. The principle is that the effective international financial and monetary trading strategy is written in a special programming language (MQL / Java / C ++) into a computer program. Set the conditions for the automatic implementation of positions and trading, the results of the loss depends on the trading system of the strategic quality.
Complete trading logic includes: 1, admission conditions to determine; 2, position conditions to determine; 3, position control; 4, the conditions to judge. Traders can write their own trading strategies into EA, invocation of various indicators, price cycle, historical data comparison, etc. can be implemented in EA through the programming method can be achieved. The speed of the computer is much faster than the human brain, so it can be in some fleeting admission opportunities in the rapid trading, greatly improving the quality of the transaction.
The quality of the intelligent trading system depends directly on the trading strategy developed by the trader, and a good trading strategy can achieve a stable profit, even if the loss will be in a very small range of control, and poor trading strategy may be Resulting in trading accounts in a very short period of time on a huge loss or even burst warehouse. EA currently available on the market are fully automatic and semi-automatic two, fully automatic EA will be completely independent of the implementation of trading strategies, and semi-automatic need to manually assist the order or liquidation.
Traditional EA is divided into: grid type, trend type, hedging type, arbitrage type.
Refers to the financial market, a number of independent securities dealers, investors bear a certain securities to buy and sell, buyers and sellers do not have to wait for the emergence of counterparties, as long as there is a market maker to bear the transaction counterparty to reach a deal The Market makers use this constant sale to maintain market liquidity and meet the investment needs of public investors. The market maker compensates the cost of the services provided by the appropriate difference between the sale and the offer and makes a certain profit.
In essence, the emergence of market makers from the supply and demand imbalance. In a market that lacks liquidity, this difference in time and space results in a transaction that can not be achieved because buyers and sellers do not necessarily appear or trade the same number of products at the same time. The emergence of market makers, making the arrival of different time to meet the needs of the transaction.
1) Profit model, through the control of buying and selling spreads for profit, there is no obvious speculative intent;
2) Trading methods, market makers need to provide bilateral quotes to the market, and do not know in advance the direction of the opponent’s trading, the market is a passive transaction, to a certain extent, with the role of stabilizing market price fluctuations;
3) Risk management, due to light trading, market makers to hedge the way to manage inventory risk;
4) Obligation to do business, if the customer needs to quote when the inquiry, reported the bid to buy and sell must be within a certain range, and the minimum amount of the sale to meet the requirements;
5) Providing liquidity, when the lack of market liquidity or price volatility when the market maker by offering a quote to promote the transaction to achieve.
According to the coexistence model of the bidding system, the market maker system can be divided into a purely market maker system and a mixed market maker system. The so-called pure market maker system, refers to a product of the transaction entirely through the market maker to complete. The so-called mixed market maker system, refers to a product transaction may be completed through the auction transaction, may also be done by the market maker, a bid and the market maker coexistence model.
However, MM model of the market makers will usually be classified customers, resulting in customers facing slippage, orders difficult to deal, repeat the offer and other multiple obstacles, and market makers and customers to gamble transactions, usually a great odds, and transparency Depending on the market maker itself.
Bid price is the price on the foreign exchange market willing to buy a particular currency pair. The trader can sell the base currency at this price, which is on the left side of the quotation. For example, the dollar / Swiss franc offer is 1.4527 / 32, the purchase price is 1.4527; that is, you can sell 1 US dollars 1.4527 Swiss francs.
Ask price is the price on the foreign exchange market willing to sell a particular currency pair. The trader can buy the base currency at this price, which is on the right side of the quote. For example, the US dollar / Swiss franc offer is 1.4527 / 32, the selling price is 1.4532; that is, you can buy 1.4532 Swiss francs for $ 1. Foreign exchange selling price is also called selling exchange rate.
Spread is the difference between the bid price and the selling price.
Exchange rates in the foreign exchange market are expressed in the following format:
Basic currency / quote currency bid / selling price
Such as: EUR / USD 1.2604 / 07, GBP / USD 1.5089 / 94, Swiss franc / JPY 84.40 / 45
Under normal circumstances, only the last two numbers are displayed. If the bid price exceeds the bid price of 100 pips, then the right side of the slash will have three numbers (such as the euro / Czech kroner 32.5420 / 780). This is only the case when the quote currency is so weak.
Liquidity is actually the ability of investors to quickly trade a certain amount of assets at a reasonable price based on the basic supply and demand conditions of the market. Simply put, liquidity is the cost of executing a certain number of transactions quickly. The higher the liquidity of the market, the lower the cost of real-time transactions. In general, lower transaction costs mean higher liquidity, or a corresponding better price. How to measure liquidity?
Market depth: depth indicators mainly refers to the depth of the offer, that is, at a particular price (usually the best offer) on the number of orders.
The depth of the transaction: the size of the transaction, which is an after the indicators to measure the best trading price on the number of transactions.
Depth improvement: refers to the order when the number of orders over the best bid on the offer, the order is equal to or better than the price of the transaction price of the situation.
The rate at which the order is actually executed in the market. The turnover rate includes three indicators: First, the market price orders and better than the best offer price limit orders the probability of real-time transactions; Second, the order in accordance with the single price of all transactions ratio; Third, the order part of the implementation of the volume of orders The ratio. The turnover rate is also a very important indicator for price orders that are inferior to the best offer.
In a foreign exchange transaction, each transaction involves two currencies, which contain two different interest rates, and the payment or collection of interest is based on the difference between the two and the position of the position. The interest rate is calculated on the basis of the difference between the two countries’ interest rate differences. When the investor has a higher selling rate and a lower interest rate, the interest rate will be paid. When the investor’s interest rate is higher, The lower the currency, you can earn overnight interest. Interest is based on bank practice in accordance with T +2 delay settlement, that is, two banks began to calculate the work later. See Forex calculations
Overnight interest = annual interest rate difference / 360 days * 1 standard lot contract size * lots * exchange rate price (long / short) * interest rate days
Throw the risk to the market or the liquidity provider (the banking institution)
Scalp refers to a fast-track out of the ultra-short-term trading method, refers to the trading investors in a very short period of time frequent orders and other operations. Very easy to fast-forward out of ultra-short-term trading. This requires investors to market trends, support resistance to make some accurate judgments, and then use the highly leveraged interest rate to profit, is a most of the probability of profit by the model.
PAMM management model is the percentage of the distribution management model (Percentage Allocation Management Module) abbreviation, refers to a Valet financial account, investors and account fund managers in accordance with the agreed proportion of distribution of profits. Investors can use the PAMM account manager’s wisdom and wealth of trading experience, the money into the PAMM account, by the account manager with a centralized management interface on behalf of its transactions. The account manager extracts a portion of the proceeds from the transaction proceeds as management pay.
MAM is a multi-account management software that helps professional traders to manage multiple accounts, MAM accounts can add an unlimited number of trading accounts, and the distribution model can be distributed by percentage or by asset. MAM account orders can be bulk transactions, the occasional allocation of multiple management accounts, you can also all orders, set up for the money manager.
The LAMM management model is an abbreviation for the Lot Allocation Management Module. It means that the fund manager has the ability to individually trade different customer accounts and manage it through a single interface, allowing the fund manager to trade, Account, and print multiple accounts of the report, without having to log in each of the individual accounts. As the funds manager for each customer account for separate management, so different customers of the margin, profits and losses and rolling costs will be different. LAMM is a general management account, the customer must sign a “limited power of attorney”, commissioned by the operator to use LAMM account to manage their trading account, and the customer’s account will be placed under LAMM. The LAMM account can be used to select those accounts under the name of the account before each order, and set the amount of operation. The account under LAMM is a read-only account and the customer can not trade on his own. The customer can fill in the “revoke limited power of attorney” to withdraw his account from LAMM, after which the customer can trade his account.
Risk Disclaimer：Forex margin trading carries a high level of risk to your capital, may not be appropriate for all investors. Investors shall carefully consider your financial condition and affordability before trading any financial product. Trading could lead to profits as well as loss of your investment capital, you may lose all your initial invested capital. Please ensure you've read all the risk warning before trading.