Generally ,there are two execution types offered by forex brokers namely instant execution and market execution.
- Trader expects his order to be fulfilled instantly.
- If the price has changed then trader will receive new rate and order will not be executed without approval of the trader.
- There isn’t any type of slippage.
- This type is usually used by market maker brokers.
- Trader expects his order to be fulfilled at the requested rate.
- Rate of execution can be same,higher or lower.
- There can either be positive slippage or negative slippage.
- Broker doesn’t reject order in case of price change.
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- An expert advisor is a program written either to execute/cancel trades or to facilitate the trader in making his trade decisions.
- There are two types of expert advisors.
- They remove the psychological factors involved in making trade or trading decisions.
- They help new traders in making trade decisions.
- Expert advisors may not perform as expected in unforeseen circumstances.
- Therefore, EAs are monitored on continuous basis.
- Hedging is a trading strategy which enables the to insure themselves against the negative event.
- Hedging is done by investing in two different negatively correlated pairs.
- Another way to hedge is to open buy and sell position on the same currency pair but it will not eliminate the risk because of floating spreads.
- Forex brokers that are regulated by National Futures Association (NFA) do not allow hedging.
- Leverage is a loan provided to a Forex trader from a broker.
- Without leverage traders will not be able to trade large volumes.
- It is expressed in ratios.
- Leverage can significantly increase your gains but can also lead to huge losses if trades go against the trader.
- An increased leverage increases financial risk.
- Social Trading is a platform that connects traders and followers together.
- Followers can copy trades of the trader.
- If a trader is unsure or new t the forex world ,he can simply copy the trades of experienced trader.
- Forex is open 24 hour a day and fundamental news and data is published on daily basis.
- Some traders prefer to trade during news release time because there is a lot of volatility in market during that period.
- Traders must also be aware of the fact that news analyzed wrongly can be detrimental to the account.
- If you are a news trader then you must find a broker that allows news trading.
- Traders must also know if a broker offers variable or floating spreads then spread will widen during trade release and it will not be suitable to place trade at that time.
- Positions already opened might close at worse rate than the stop loss.
- If you are trading with fixed spread broker than you might experience delay in order execution.
- There are also a number of brokers that do not allow to trade during news release.
- Scalping is a trading strategy in which traders try to catch small pips per trade.
- Scalping involves opening trades for a very small amount of time ,sometimes in seconds.
- A scalper has a high trading volume.
- As scalping is a full time job ,trades have developed Expert Advisors to make trades all day.
- Scalpers prefers broker that has less than 1 pip spread.
- Some brokers do not allow extreme scalping strategies because it sends many order request which crashes the broker’s server.
- There are two types of spread offered by forex brokers; fixed spread and variable spread.
- As the name suggests , spread remains constant no matter the market movements and news releases.
- Many traders look for fixed spread brokers because it enables them to execute a specific trading strategy easily.
- Some Expert Advisors perform better in fixed spread environment.
- Traders prefer fixed spread brokers to avoid the risk of spread widening.
- Spread widening may cause a Stop Loss activation.
- Fixed spreads are more likely working in a Market Making model.
- Brokers that offer variable spread tend to offer better spread as compared to fixed spread brokers.
- However, they can easily increase the spread during news time.
- Floating spread brokers are preferred by scalping traders.
- Muslim traders wants swap free trading environment or no roll or interest as it is against the Islamic principles.
- Some brokers offer swap free accounts to Muslim traders only while some brokers offer accounts irrespective of trader’s religion or belief.
- Trading with swap free accounts can be misleading sometimes because their are some hidden fees associated with it.
- Some brokers close the overnight trades and open them again.
- In this case traders have to pay spread two times.
- Some brokers charge swaps with new names so that they can claim to be swap free brokers.
- Brokers offer better services to high volume traders or high worth individuals.
- VIP trading is divided into two categories.
- First service includes lower spreads and commissions.
- Second service includes in depth market analysis, VPS and dedicated VIP account manager.
- In order to open VIP account trader must invest substantial amount of money.
- Traders prefer VIP account because of added tools and benefits will be able to improve their trading decisions.