for ex from scratch

8/2/2019 For Ex From Scratch

http://slidepdf.com/reader/full/for-ex-from-scratch 1/38



______________

★ LINKS

My Blog: http://www.traineetrader.com/popular-posts/ Email: [email protected]

About Me and the book

I am the editor of TraineeTrader.com. I have

had a passion and interest in financialmarkets for the past 12 years. I completed aBachelor in Economics and undertook amajor in Computer Science at the Universityof Adelaide. I am currently working towardsmy CFP. I love all things related to tradingbut my specific areas of interest are:algorithmic trading systems, artificial

intelligence, game theory and poker.

Forex From Scratch is a compilation of the most usefulcurrency trading articles from TraineeTrader.com. They havebeen put together in eBook format to make them easier to readand print. The information provided is basic and is general innature and is intended for educational purposes only. This book

may contain errors and will be periodically updated. If you findany errors or mistakes please let me know.

Mark Dooleyhttp://www.TraineeTrader.com



Table of contents

1. What’s All This Talk about Money? ........ 5 1.1. Introduction to Money ...................................................... 5

1.2. Characteristics of Money .................................................. 5

1.3. Vodka as Money ............................................................... 5

1.4. Paying the Man ................................................................. 6

2. The Forex Market, Exchange Rate & BidAsk Spreads ...................................................... 7

2.1. Introduction to the Forex Market ...................................... 7

2.2. Over the Counter Markets ................................................ 7

2.3. Example: Travel & the Exchange Rate............................. 8

2.4. Exchange Rates: Indirect Quotes ...................................... 8

2.5. Exchange Rates: Direct Quote .......................................... 9

2.6. Base Currency or Commodity Currency .......................... 9

2.7. Exchange Rates: The Bid Price ........................................ 9

2.8. Exchange Rates: The Ask Price ...................................... 10

2.9. Why is the Ask price always more than the Bid price?10

3. Pips, lots and a little bit of math ........... 11

3.1. Introduction .................................................................... 11

3.2 What is a Pip? ................................................................. 11

3.3. How Much is a Pip worth? ............................................. 11

3.4. What is a Lot? ................................................................. 12

3.4. Pip Calculation: Indirect Currency ................................. 12

3.5. Pip Calculation: Direct Currency.................................... 13 3.5. Pip Calculation Summary ............................................... 14

4. Understanding the lingo ........................ 15

4.1. Introduction & Key Forex Terms ................................... 15

4.2. The Spot Market ............................................................. 16

4.3. The Long and Short of it ................................................. 16

4.4. A Closer Look at Currency Symbols .............................. 16

4.5. Liquidity ......................................................................... 17



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F O R E X F r o m S c r a t c h

5. The Big Three in Forex: Leverage,Margin & Equity .............................................. 19

5.1. Introduction .................................................................... 19 5.2. Leverage ......................................................................... 19

5.3. Margin ............................................................................ 20

5.4. Equity ............................................................................. 21

5.5. Final Word on Margin .................................................... 21

6. The Best Trading Times in the 24 HourMarket .............................................................. 22

6.1. Introduction .................................................................... 22

6.2. When Can I Trade Forex? .............................................. 22

6.3. Best Times to Trade Forex ............................................. 23

6.4. Simple Time Zone Conversion ....................................... 24

7. Putting it Into Practice............................ 25

7.1. Setting up a Demo Account ............................................ 25

7.2. MetaTrader Client Terminal ........................................... 26

7.3. Creating a Chart in MetaTrader ...................................... 29

7.4. Chart Time Frames ......................................................... 29

7.5. Charts Toolbar ................................................................ 30

7.6. Line Drawing Tools ........................................................ 31

7.7. Placing an Order ............................................................. 34

7.8. Modifying or Closing an Order ...................................... 36

7.9. Moving Forward ............................................................. 38



1.What’s All This Talkabout Money?

1.1. Introduction to Money

Everyone deals with money on a daily basis. People often

complain “I don’t have enough money”, “I don’t have anymoney” and more rarely “I have too much money”. Money is

such a big deal, as without it we could not survive. Money isoften linked to the state of a person’s happiness, however Idon’t subscribe to this school of thought.

1.2. Characteristics of Money

Money generally has four important characteristics:1. It acts as a medium of exchange.2. It is a unit of account.3. It is a store of value.4. It offers a standard of deferred payment.

Put most simply money is anything that can be exchanged forgoods and services. This is referred to as a medium of exchange. For example in Russia in times of high inflationcigarettes and vodka was used as a medium of exchange.

1.3. Vodka as Money

It is widely understood that there are five criteria that needs tobe met to ensure a good as suitable to be used as money.

The good has to be acceptable to most traders.

It should have a standardized quality.



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F o r e x F r o m S c r a t c h

It should be durable.

It should be valuable relative to its weight.

It should be divisible.

Vodka meets all but one of these criteria. In order to purchase ahouse there would be significant cost in transfer of the vodkafrom buyer to seller. All things considered vodka meets theserequirements fairly well.

1.4. Paying the Man

By now you should have a good understanding about thefundamentals behind the concept of money. Money makestransactions in the economy more efficient.

The use of money to facilitate a trade or exchange is referred toas a payment system. As with anything payment systems haveevolved over time. From precious metals to currency, checksand credit to electronic money.



2. The Forex Market,Exchange Rate & BidAsk Spreads

2.1. Introduction to the Forex Market

The term Forex is short for Foreign Exchange. The Forexmarket is the most widely traded market in the world. Thefigure most often cited as the trading volume for the Forexmarket is $1.9 trillion US dollars daily. If you wish to readmore about where this figure came from read making up thenumbers.

One thing that I will note here is that this figure is often quotedon broker’s website and information material however this doesnot draw a distinction between the retail Forex market and theinstitutional Forex market.

2.2. Over the Counter Markets

The Forex market is quite different from other markets youmight be familiar with. The Forex market is known as aninterbank market or an Over The Counter (OTC) market. Thereis no centralised exchange were trading takes place like in thesecurities market.

In the Forex OTC market there are hundreds of entities usuallybanks offering to buy and sell different currencies at given

rates. These banks tend to offer the currencies at very similarprices due to the arbitrage effect.

http://www.traineetrader.com/forex/making-up-the-numbers-in-forex/








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Getting back to the meaning of Forex we can think of Forex assimply the exchanging of one currency for another. The need

for Forex arises when individuals from one country wish topurchase goods or services from a foreign currency.

2.3. Example: Travel & the Exchange Rate

I wish to travel to America and visit New York’s financialdistrict. In order for me to pay for goods and services I need toexchange my Australian dollars for American dollars. I take my

Australian dollars down to my bank and on a large screen I readthe exchange rate information. The rate I am interested in isshown below:

I now hand over $AUD 3,000 and the teller consults the rateabove and she would for every Australian dollar I give her giveme back $USD 0.8186 which off course is $USD 2,450.40.

The above example highlights what is known as an exchangerate. An exchange rate is most commonly defined as the price

of one currency in terms of another. Exchange rates are usuallyquoted in two different ways an indirect quote and a directquote.

2.4. Exchange Rates: Indirect Quotes

An indirect quote can be defined as;A quote that expresses a

currency price in terms of one unit of the home currency and xunits of the foreign currency. In short it just means that thehome currency is the base currency or first currency expressedin terms of the foreign currency.



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If we live in Australia an example of an indirect quote would beAUD/USD 0.8168. Generally the banking system of England

and countries formally of the Commonwealth quote on anindirect basis.

2.5. Exchange Rates: Direct Quote

An Indirect quote can be defined as;A quote that expresses a

currency price in terms of one unit of the foreign currency and xunits of the home currency. If we live in Australia we can

convert the indirect quote AUD/USD 0.8168, into a direct quoteof approx. USD/AUD 1.2243. This is achieved by dividing oneby the indirect quote and adding one.

2.6. Base Currency or Commodity Currency

Another important thing you need to know is about exchange

rates is the base currency or the commodity currency. The baseor commodity currency is the currency whose price is given inthe exchange rate. The base currency is always the firstcurrency quoted and is always one.

2.7. Exchange Rates: The Bid Price

The next aspect we need to understand about foreign currency

transactions are the bid and ask prices. You may have noticed inthe figure on the previous page that the AUD/USD has a bidprice and an ask price.

The bid price is the price the bank is willing to buy thecurrency for. If you wanted to sell one Australian dollar to thebank they would buy it to from you for $USD 0.8158. This isknown as the bid price.



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2.8. Exchange Rates: The Ask Price

The ask price is the price the bank is willing to sell thecurrency for. If you wanted to buy one Australian dollars fromthe bank you would need to give them $USD 0.8168. This isknown as the ask price.

2.9. Why is the Ask price always more than

the Bid price?

The difference between the ask price and the bid price is knownas the bid ask spread. This is very simple when you think aboutit, the bank will always sell the currency for a higher price thanwhat it pays for it. In the above example the bank would make$USD 0.0010 for every buy/sell transaction they undertake.

After reading this section you should understand the keyfinancial terms and also what Forex actually means. It is veryimportant that you thoroughly understand difference betweenbid and ask prices. The terms may be confusing at first howeveras time goes on it will become easier.



3. Pips, lots and a littlebit of math

3.1. Introduction

If you have had any experience in the foreign currency market

or the forex market, I am sure you would have heard of the termpip. If however you are new to the forex market the term pipwill probably have you thinking of those little seeds found infruit.

3.2 What is a Pip?

In terms of Forex a pip is the smallest increment a currency can

move, it is usually the fourth decimal place in a quoted price. Inote however some brokers are now quoting in fractional pipsand use 5 decimal places.

If for example, the Australian dollar moves from $0.8342 to$0.8343 we can say the Australian dollar has increased in valueby one pip. If the Australian dollar moves from $0.8342 to$0.8242 we can say the Australian dollar has decreased in valueby one hundred pips.

3.3. How Much is a Pip worth?

Now that we all know what a pip is, what is a pip worth? Thereis good and bad news here. The good news is the softwareprogram you use as a trading platform will usually calculate this

for you. The bad news is I think it is a requirement that youunderstand how to do this manually. Before we get ontocalculations, we need to know a few basics first.



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3.4. What is a Lot?

In forex, the standard unit size of a transaction is referred to as alot. In general, there are three lot sizes offered by forex dealersor brokers.

Standard lot- A standard lot is usually equal to 100,000 unitsof the base currency.

Mini lot- A mini lot is usually equal to 10,000 units of

the base currency.

Micro lot- A Micro lot is usually equal 1000 units of thebase currency.

Returning to the discussion about pip value. Pip value can befixed or variable dependent on the base currency of youraccount and also the currency pair in which you are trading. Itis also very dependent upon the size of the lot that you trade.

3.4. Pip Calculation: Indirect Currency

First, we will look at the pip calculation for an indirectcurrency. The currency, we will use is the AUD/USD. Most of the time calculating the pip value will be a three-step process,

using AUD/USD 0.8232 as an example.

Step oneThe first step is to divide one pip by the current price.

Current price = 0.8232

Pip = $AUD 0.0001

Pip / Current price

= 0.0001 / 0.8232

= $AUD 0.00012148



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Step twoThe next step is to convert to the currency in which our account

is based. In this example our account is based in US dollars.

Current price = 0.8232 = 0.00012148 * 0.8232

= $USD 0.0001

Step threeThe final step, we multiply the previous result by the lot size todetermine the profit or loss from one pip.

For a Standard lot0.0001 * 100,000 = $10 per pip.

For a Mini lot0.0001 * 10,000 =$1 per pip.

For a Micro lot0.0001 * 1000 = $0 .10 per pip.

3.5. Pip Calculation: Direct Currency

Now, we look at the pip calculation for a direct currency. Thecurrency we use is the USD/JPY. We apply the three-stepprocess to this new currency pair. We will use USD/JPY 115.69as an example.

Step one

The first step is to divide one pip by the current price. Noticewith this example, one pip is equal to 0.01. As alreadydiscussed a pip is the smallest increment in which a currencycan move.

Current price = 115.69 Pip = 0.01

Pip / Current price = 0.01 / 115.69= $USD 0.00008644



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Step twoThe next step is to convert to the currency in which our account

is based. In this example the account is based in US dollarstherefore no conversion is necessary.

Step three

The final step, we multiply the previous result by the lot size todetermine the profit or loss from one pip.

For a Standard lot

0.01 * 100,000 = $8.644 For a Mini lot

0.01 * 10,000 = $0.8644 For a Micro lot

0.01 * 1000 = $0.08644

3.5. Pip Calculation Summary

If you have your account balance in US dollars general rule of thumb emerges. For indirectly quoted currencies likeAUD/USD, EUR/USD and GBP/USD the pip value for astandard lot will always be $10.

To recap, calculation of the pip value is usually a three-stepprocess with step one determining the value of a pip and thendividing one pip by the current price, step two is to convert to

the currency in which your account is held and the final step isto multiply by lot size. You should practice this for yourself, acouple of times just too get the hang of it.



4. Understanding thelingo

4.1. Introduction & Key Forex Terms

In the Forex market as with any market there are many termsyou have to be familiar with, some of these are unique to theForex market. As already discussed an exchange rate is quoted:

Once again we should think back to what a Foreign Currency orForex transaction actually is, it is the simultaneous buying of one currency and selling of another currency.

In the above example when we place a BUY order we arebuying Australian dollars and selling US dollars. Conversely if we place a SELL order we are selling Australian dollars andbuying US dollars.



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4.2. The Spot Market

The next term you will hear is Spot Market. This term is notunique to the Forex market. In general any financial market thatdeals with an instrument based on current price is usuallytermed a spot market. Nearly all retail Forex brokers deal in thespot market.

4.3. The Long and Short of it

Two other terms you need to get your head around that are notunique to the Forex market are “long position” and “short position”.

Long PositionA “long position” or “going long” refers to the buying of a

given exchange rate or currency pair. Or more simply you buythe commodity or base currency and sell the counter or quotecurrency.

Short Position

A “short position” or “going short” refers to the selling of agiven exchange rate or currency pair. Or put more simply yousell the commodity or base currency and buy the counter orquote currency.

4.4. A Closer Look at Currency Symbols

Let us now take a closer look at currency quotation symbols.Currency quotation symbols are governed by ISO 4271, this is astandard defined by the International Standards Organization.

The standard defines a unique three letter symbol for each

country. The first two letters represent the country and the finalletter represents the unit in which the currency is expressed. For



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example AUD represents Australia and the currency is dollarswhile GBP represents Great Britain and the currency is pounds.

Below is a table of the most commonly traded currencies andthere nicknames. You should familiarize yourself with theseterms.

Country Nickname Symbol Currency Australia Aussie AUD Dollar Canada Loonie CAD Dollar

Euro Countries Fiber EUR Euro Great Britain Cable GBP Pound Japan Yen JPY Yen New Zealand Kiwi NZD Dollar Switzerland Swissy CHF Franc United States Buck USD Dollar

The eight currencies shown above are known as the major

currencies. As a new trader it is best to focus on thesecurrencies.

These currencies are generally more liquid and it is easier toobtain commentary and data on them. Another advantage withfocusing on these currencies is they tend to have a lower spreadthen some of the minor less liquid currencies.

4.5. Liquidity

Liquidity refers to the ease in which an asset, in this caseforeign currency can be converted to cash. There are threeprimary measures of liquidity for a market, these are:

The asset can be bought or sold promptly.

The asset can be bought or sold with a minimal loss of value.

The asset can be bought and sold anytime during markethours.



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A definition of liquidity I like is this one: “Liquidity is the

probability that the next trade is executed at a price equal to thelast one”. Another common measure of liquidity is volume,which is how often a security is bought and sold.



5. The Big Three inForex: Leverage, Margin& Equity

5.1. Introduction

Leverage, Equity and Margin are three concepts, which theunderstanding of is crucial. Leverage is one of the factors thatmakes Forex trading so attractive and also makes trading of Forex fraught with danger. In most other financial markets youcannot lose more than your initial deposit, however in Forexdependent on your broker you can lose much more than yourinitial deposit. The Forex market is often referred to as the

“Wild West” of the finance industry as there are littleregulations and so many rouge operators.

5.2. Leverage

Leverage can be defined in many different ways however weare only interested in the financial definition of leverage. Insimple terms leverage in the Forex market allows you to buy astandard lot without requiring you to have $100, 000 of the basecurrency. You are only required to have a pre-definedpercentage of the full amount in your trading account. The mosteloquent definition I have come across is that by the NationalFutures Association:

“[Leverage is] the ability to control large dollar amounts of a

commodity with a com paratively small amount of capital.”

The amount of leverage offered is usually broker dependent andcan also depend on the lot size in which you are trading.



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Generally brokers will offer leverage at rates of either 50:1,100:1 or 200:1, if however you have a restricted mini account

some brokers will offer up to 400:1 leverage.

If we look at 50:1 leverage this means that the initial marginrequired to trade one lot is $2000. Effectively for every dollarthat we invest our broker will loan fifty more. We can see whyleverage is so attractive and dangerous, in the equity marketsleverage is usually 2:1.

5.3. Margin

Margin is basically collateral or security that a broker requiresyou to keep in your account. This collateral allows you to tradeleveraged positions.

A simple way to calculate margin is shown below:

Margin = contract size / leverage

Using the previous example of buying one lot at leverage of 50:1:

Margin = 100, 000 / 50Margin = $2000In essence when you undertake a leveraged trade the margin is

subtracted from your trading account and you are left with whatis called usable margin. Your usable margin will fluctuate withprice movements.

It should be noted that your broker will require a minimumuseable margin level. If your usable margin drops below thispredefined level your broker will either issue a margin call orliquidate your account, this is of course dependent on your

broker agreement.



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It cannot be stressed enough the importance of knowing youruseable margin requirements and margin call policy before you

open an account.

5.4. Equity

Equity In pure financial terms is the difference between anindividual or company’s assets and liabilities. In Forex whilewe have open trades the account equity is simply the marginplus the free or useable margin. Generally equity should always

be above margin. When we have no trades in progress:

Account Balance = Equity = Free Margin

5.5. Final Word on Margin

Trading on a margin can accelerate both profit and loss so it isvery important to balance the risk/reward of differing amounts

of leverage and to choose an amount you are comfortable with.The best way to understand these differing terms is throughusing the demo features of MetaTrader.



6. The Best TradingTimes in the 24 HourMarket

6.1. Introduction

In the Forex market as with other markets there are things thatyou can control and things that you cannot. The Forex marketprovides the opportunity to choose what currency you wish totrade in. It enables you to choose:

What to trade.

How much to trade.

When to trade.

These are all key considerations that you have control of andneed to consider before trading.

6.2. When Can I Trade Forex?

The Forex market is very different to futures and equitymarkets. The Forex market is open 24 hours a day 5.5 days of the week, however as I live in Australia there is no real volumeon Saturdays and there are no open markets on Sundays.

The reason the Forex market is a 24 hour market is that as soonas trading ceases in one geographical location it has generallyalready begun in another. Therefore if markets in your region

are closed usually you can trade somewhere else.

The Forex market opens in New Zealand followed shortly afterby Australia then Asia, Europe and America. It is very



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important to be aware of the times major trading countries areopen.

6.3. Best Times to Trade Forex

I think that it is important that you know the time markets openand close. Due to the globally dispersed nature of the Forexmarket the best way to do this is in GMT time. GMT time isused by default in MetaTrader. Below is a MetaTrader screencapture that highlights the open and close time in GMT.

As you can see the image above shows the AUD/USD currencypair on September 4th, 2007(A Tuesday). The range for the day

was approximately 73 pips. Below highlights the range duringeach period:



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Australian/Asian 71 pipsEuropean 43 pipsLondon/New York 39 pips

New York 38 pips

Generally in the middle of the week (Tuesday and Wednesday)there is more movement in the major currencies. An importantoccurrence happens on Wednesday on positions held overnight,it is called triple swap, however I will leave this for futurediscussion.

6.4. Simple Time Zone Conversion

Knowing the times in which currency markets are open forbusiness is a very important factor in deciding to enter a trade.When I first started out I drew up a table of the opening andclosing times of these markets in GMT and then wrote in thelocal times. This is shown below:

Download 24 Hour Forex Trading Times Table here.Istrongly recommend you download this chart and fill it in foryour local time zone. This will help reinforce your knowledgeand in no time at all you will be able to calculate in your head

the times overseas markets open and close.

http://www.traineetrader.com/Forex-Trading-Articles/Timezone.pdf





7. Putting it Into Practice

7.1. Setting up a Demo Account

We are now ready to build on the fundamental skills presentedand open a demo Forex account. MetaTrader is a widely usedplatform in the retail FOREX market.

The first thing you will need to do is download the latest copyof MetaTrader.Go to MetaQuotes and download the freeclient terminal. After download is complete install the program.

The first screen you will see after you have installedMetaTrader is the one below. It is completely your choice if you enter correct details in here or not. I usually just fill the

fields with random characters.

Make sure you change the initial deposit to the required amountyou eventually plan on investing. Click through to finish yourinstall and you will be presented with a somewhat busy window

shown on the next page.

http://www.metatrader4.com/






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7.2. MetaTrader Client Terminal

Area AShows the market watch window this window contains a list of symbols. These symbols represent a security or currency pair. Itcontains three columns Symbol, Bid and Ask. This window willgenerally be used for placing orders. An order can be placed bydouble clicking on a symbol. This will launch an order window

where an order can be executed. This window also has anothersub window called a tick chart that can be activated by clickingthe bottom tab. This chart displays per tick bid price for a givensymbol.

Keyboard shortcut to open/close market watch:CTRL + M.

Area B

Shows the navigator window this window allows quick accessto features of the terminal. These are structured in a tree basedstructure that means they can be expanded by clicking on the



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plus sign. There are five groups listed these are Accounts,Indicators, Expert Advisors, Custom Indicators and Scripts.

The account node allows for adding of new accounts (demoaccounts only, not live). The indicators node includes the builtin technical indicators that can be added to charts. The expertadvisors node allows for the use of automated trading programsto be used on different currency pairs. Custom indicators allowfor the modifying of the built in technical indicators. The scriptsnode contains programs. These programs are similar to expert

advisors however they are only run once. This window also hasa sub window called favourites this can be activated by clickingthe bottom tab. The favourite’s window stores indicators scriptsand experts that are used regularly.

Keyboard shortcut to open/close Navigator: CTRL + N

Area C

Shows the Terminal window, this window is a multipurposewindow that allows access to several features. From thiswindow trading activities can be controlled account history canbe accessed news can be read, alerts can be setup, mail can beread, expert advisor logs can be accessed and finally a system journal can be accessed showing terminal events.

The Trade Tab

In the Trade tab you can view what is occurring with openpositions and pending orders. It contains the following fields:

Time security was bought.

Type of order either Buy and Sell orders or pendingorders Buy Limit, Sell Limit, Buy Stop and Sell Stoporders.

The number of Lots for each order type.

Symbol of the security.

The price the security was bought for.

The stop loss.

The take profit.



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The current price.

The commission charged.

The swap paid or received. The current profit.

It also contains balance, equity, margin, free margin and marginlevel.

The Account History TabThe account history tab shows all previous transactionsundertaken and can be used to generate reports. Under the news

tab financial news service offered by your broker will arrivehere and can be read.

The Alerts TabUnder the alerts tab you can modify or create alerts for differentevents. Under the email tab all messages sent and received fromthe terminal are displayed here.

The Experts TabUnder the Experts tab all the output for the currently loadedexpert advisor are displayed.

The Journal TabUnder the Journal tab all operations the terminal undertakes aredisplayed here.

Keyboard shortcut to open\close Terminal: CTRL + T

Area DShows the charting area. The charting area is made up of usually one or more charts, which graphically depict the priceof a currency at any given point in time. By default MetaTraderopens up with four chart windows as shown. Expert advisorsand indicators can be applied to this chart area. The timeperiods and size can all be modified.



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Area EShows the toolbar area. In this area there are four built-in

toolbars separated by vertical lines. The first toolbar is knownas the standard toolbar. This toolbar is used for general terminalmanagement. The second toolbar is known as the chartingtoolbar this toolbar is used for managing charts. The thirdtoolbar is called the line studies toolbar. This toolbar is used formanaging objects drawn on charts. Finally the periodicitytoolbar manages chart timeframes.

7.3. Creating a Chart in MetaTrader

In MetaTrader there are two ways to open a chart. The first isby left clicking on the new chart icon in the toolbar andselecting the chart you wish. Secondly you can right click asymbol in the market watch window and then select “Chart

Window”. This is outlined in the figure on page 30.

7.4. Chart Time Frames

The quickest way to change the timeframe for a chart is via theperiodicity toolbar. This is the toolbar shown below:

On this toolbar it adjusts the period of the chart. The periodrepresents the difference between closing and opening times.M1 represents one minute, M5 represents two minutes, M30represents 30 minutes, H1 represents 60 minutes or one hour,H4 represents four hours, D1 represents a day, W1 represents aweek and MN represents a month.

The greyed out area in the toolbar lets you know what timeperiod the chart is currently displaying.



30


7.5. Charts Toolbar

By clicking this icon the currently selected chart will be

displayed as a bar chart.

Keyboard shortcut ALT + 1.



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By clicking this icon the currently selected chart will be

displayed as a candlestick chart.


By clicking this icon the currently selected chart will bedisplayed as a line chart.


By clicking these icons you can zoom in or out of the currently selected chart.

Keyboard shortcuts zoom in: + and Zoom out: -

By clicking this icon AutoScroll will be enabled meaningthe latest bar is always displayed.

These groups of icons allow for theadding of technical indicators to a chart, changing the timeperiod of a chart and the final button allows for managing of templates.

7.6. Line Drawing Tools

The line drawing toolbar allows you to add various geometricshapes to a chart window. This can be helpful for technicalanalysis and for highlighting different features on a chart.

By clicking this icon the crosshair will be enabled in thechart window. The crosshair will graphically highlight the priceand time at any given point on the chart. Shown Below:



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By clicking on this icon a vertical line is placed on thechart window at the given point in which it has been drawn.

By clicking on this icon a horizontal line is placed on thechart window at the given point in which it has been drawn.

By clicking on this icon a trend line can be drawn in thechart window between two points. This is shown on next thepage:



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By clicking on this icon an equidistant channel is drawnon the chart from one point to another. This is shown below:



34


By clicking on this icon a corresponding Fibonacci

retracement lines can be added. Shown Below:

By clicking these icons text and arrow objects canbe added to charts at a given area.

7.7. Placing an Order

Placing an order in MetaTrader is very simple. You simplyneed to double click (in the market watch window) on the

symbol of the security you wish to buy and the order windowwill be displayed. Or if you have a chart open for the securityyou wish to buy you can simply press F9 or go to MenuTools -> “New Order”. The order window will pop-up asshown below.



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As you can see a tick chart is displayed on the right that showsboth the Bid and Ask prices. The Bid price is shown in red andthe Ask price is shown in blue.

In this window you can change the security you wish to buy or

sell. You can also change the volume of the order with one lotbeing the default. The order window also allows you to specifyhard stop loss and take profit levels. The next field is thecomment field, this allows for comments to be attached to anorder.

The type field allows for the specification of the type of order.The default is instant execution or a market order. The second

type of order that can be specified is a pending order. If apending order is selected you can select a Buy Limit, SellLimit, Buy Stop and Sell Stop type the price and expiry canalso be set. The price set must differ from the market price by atleast five pips.

Returning to a standard market order we can choose to buy orsell the given security. The final property we can change is

enabling a maximum deviation from a quoted price. This meansin times of extreme volatility you can guarantee your order getsfilled at a given price, similar to a pending order.



36


7.8. Modifying or Closing an Order

MetaTrader allows for orders to be modified after they haveinitially been sent to the broker. This allows for stop losses tobe set or changed, orders to be closed and trailing stops to beset. This functionality is provided via the terminal. In theterminal the trade tab needs to be activated. To activate thetrade tab you simply need to click on it.

You can now right click on the order you wish to change and acontextual menu will pop-up like the one shown below.




This ends our whirlwind tour of the very basics of MetaTrader.You should now be able to place orders, modify orders andunderstand the basics of the User Interface.

7.9. Moving Forward

We have covered the basics in this book to help give you abetter understanding of the Forex market. It is important thatyou continue your education. Some books that you may finduseful include:

Day Trading the Currency Market Currency Trading and Intermarket Analysis Technical Analysis of the Currency Market 7 Winning Strategies for Trading Forex

I wish you every success. Be sure to join the community atTraineeTrader.com.

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