Trading Conditions

[permalink link=”” id=”3137″ type=”adfly” target=”_self” title=””]Execution Type Offered[/permalink]

Generally ,there are two execution types offered by forex brokers namely instant execution and market execution.

Instant 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.

Market execution

  • 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.

[permalink link=”” id=”3146″ type=”adfly” target=”_self” title=””]Expert Advisors[/permalink]

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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.

[permalink link=”” id=”3150″ type=”adfly” target=”_self” title=””]Hedging allowed[/permalink]

  • 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.

[permalink link=”” id=”3155″ type=”adfly” target=”_self” title=””]Leverage[/permalink]

  • 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.

[permalink link=”” id=”3158″ type=”adfly” target=”_self” title=””]Mirror/Social Trading[/permalink]

  • 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.

[permalink link=”” id=”3161″ type=”adfly” target=”_self” title=””]News Trading[/permalink]

  • 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.

[permalink link=”” id=”3165″ type=”adfly” target=”_self” title=””]Scalping[/permalink]

  • 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.

Spread Type

  • There are two types of spread offered by forex brokers; fixed spread and variable spread.

[permalink link=”” id=”3168″ type=”adfly” target=”_self” title=””]Fixed Spread [/permalink]

  • 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.

[permalink link=”” id=”3172″ type=”adfly” target=”_self” title=””]Variable Spread [/permalink]

  • 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.

[permalink link=”” id=”3175″ type=”adfly” target=”_self” title=””]Swap Free[/permalink]

  • 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.

[permalink link=”” id=”3177″ type=”adfly” target=”_self” title=””]VIP Trading[/permalink]

  • 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.