A chart, or more precisely a price chart, is the first tool that any trader who uses technical analysis should master. A chart is basically a visual depiction of the price of a currency pair over a certain time period.
Fundamental Analysis (FA) includes poring over financial information reports and news headlines, whereas Technical Analysis (TA) includes poring over charts to identify patterns or trends.
Sentiment analysis is used to evaluate the sentiment of other traders, whether in the general currency market or in a specific currency pair.
While technical analysis involves studying the charts to identify patterns or trends, examining economic data reports and news headlines is what Traders do for Fundamental Analysis. (And also irregularly and occasionally a random tweet from a specific world pioneer before he was restricted.)
Technical Analysis is a strategy traders use in order to study price movement. A person that uses technical analysis is known as technical analyst. Traders that uses technical analysis are called technical traders.
Suit up and say goodbye to your friends because at this moment, is where your journey as a Forex Trader begins.
However, having fair and accurate pricing on your trading platform is useless if your trades rarely execute at the price displayed.
When you trade forex, you're betting on the future direction of currencies, taking a long ("buy") or short ("sell") position based on your speculation of rising or falling of a currency pair. You try to profit from exchange rate fluctuations of currency by betting on whether the value of one currency, example the Japanese yen, will rise or fall in respect to another, example the Australian dollar.
The method by which a forex broker decreases market risk exposure by entering into a parallel transaction with another business (a "liquidity provider") is referred to as "hedging."
You may come across the word "C-Book" in addition to forex brokers who "A-Book" or "B-Book." The term "C-Book" is used to represent "risk management procedures" used by forex brokers and CFD providers that are allegedly different from A-Book and B-Book.
We discussed why forex brokers prefer B-Book execution over A-Book execution in the last lesson, despite the fact that it is riskier because the broker can go bankrupt if risk management is bad.
When you open a trade with the B-Book forex broker, that broker executes the other side of your trade and does not hedge. The broker keeps the trade "in-house".
With A-Book (or STP) execution, the broker manages the risk of each individual trade. But what if one trader opens a long position in GBP/USD and another trader opens a short position in GBP/USD at or at the same time?
A-Book brokers are also sometimes marketed as “STP brokers”. While both are similar in that they transfer market risk, they are actually two different ways of executing an order.
The A-Book implementation model comes with its own unique challenges. An A-Book forex broker can only earn profits from markups IF the rates at which it trades with the LP are better than the prices at which the broker trades with its customers.
Unlike a B-Book broker, an A-Book broker does NOT make money when its customers’ trades lose. But an A-Book broker is not a charity. It’s a business and needs to generate revenue
While your forex broker will always be your counterparty and take the other side of your trade, it does not imply it has to bear the risk of being on the losing end of the trade and losing money. If the broker does not want to "B-Book" or bear the market risk, a third party can be found and the risk can be transferred to them.
When a retail forex broker takes the opposite of a customer's deal it has the option of either ACCEPTING or TRANSFERRING the market risk to another market participant. When a broker agrees to accept market risk when a trade is been carried out is referred to as “B-Book execution”. The act of taking the opposite of your transaction is called B-Booked execution. Your line of work is often known as "B-Booked."
A lot of retail traders have no idea of how an order is processed or how forex brokers or CFD providers really operate. It is aimed at forex traders wishing to gain a practical understanding of how forex brokers manage their risk and make money.
If that’s the case, then WHERE are you actually trading? When you click “Buy” or “Sell” on your forex broker’s trading platform, where do your orders go?