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Before you begin trying to trade the Forex, you should be familiar with the main terminology and ideas used in this market.

Pip

Pip stands for “percentage in point”. This is the basic unit of price in the Forex market. This is similar to stocks, for example, which use dollars and cents to as the base numbers. Pips can refer to the number of ticks or units a currency pair has moved. For example, assume you are trading the EUR/USD (the Euro Dollar and US Dollar) pairing. If the price has moved up from 1.5480 to 1.5485, that is a 5 pip movement.

A pip is also a unit of money you are trading. A standard lot is based on a 100,000 units and each pip is valued at approximately $10.00. Typically, to trade a standard lot, you will need approximately $1,000 per lot (or unit).

Using the same example, that 5-pip move up would have been equal to a $50 move. There are also mini accounts that allow you to trade with much less capital, while also reducing the pip value. Typically, most brokers with mini accounts will base their mini lots on 10,000 units per lot, with a pip value of approximately $1.00 per pip. With mini accounts, you will need approximately $100 per lot/unit you want to trade.

Leverage

Leverage trading, or trading on margin, means you do not have to put up the full value of the position. As mentioned above, a standard lot is worth approximately $100,000. If there were no leverage involved (or a leverage of 1:1), you would need to deposit the full amount to trade one lot. However, all brokers will offer you leverage of 50:1 to 400:1.

While more leverage makes it much easier to trade more lots, there is a danger with it as well. Think of leverage as a double-edged sword. Yes, it can help you control more money, but if you have a loss, you can also lose more of your own money.

Here is an example: assume you have $5000 in your account. Your broker offers you 100:1 leverage. This means that you can trade up to 5 lots and control $500,000 worth of currency. This also means that for every 1 pip in price movement, you will gain or lose $50. Remember, typically for every $1000 in available margin at 100:1 leverage will control $100,000 in currency and that every pip (i.e. price movement) will be worth $10.

Using the same information: if a broker were to offer you 400:1 leverage, then your $5000 would be able to control $2,000,000 in currency. This gives you the ability to trade 20 lots at a time, which means each pip movement would be approximately $200 — so that 5-pip movement from above would equal to a gain or loss of $1000!

So, you can see that while a higher leverage can help you control more currency and give you the ability to make more money, if you are wrong, you will lose more. Take the use of leverage seriously and with respect and you are already ahead of the game.

Margin Call

You never want to get one of these. Basically, you will be contacted if your account falls below a certain level (you will know that level that is when you open your account with your broker.) Here is a simple example: You open an account with $2000. You open a position with one lot. You have now have only $1000 in usable margin to either open another lot or to buffer any losses you had on your first open lot. Let’s say that you use that remaining $1000 to open another lot. You now have $2000 of USED margin, with ZERO remaining usable margin. Your trade goes against you by 10 pips (which with 2 lots is $200). Depending on your broker, they will either automatically close the trade and you will have nothing left in your account or you will be contacted via phone or other means saying you must deposit additional capital to cover the deficit. Fortunately with most Forex brokers, your risk is limited to the funds you had on deposit.

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I’m watching the news right now and the stock exchange is dropping. They’re talking like it’s a serious issue and we’re about to drop into a recession. I know nothing about stocks but is this terrible? Am I watching history in the making?

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Background: Fundamentals, with an investing strategy out of the Graham playbook (by distressed, unloved or otherwise underpriced securities). Risk is minimized by having a margin of safety, higher upside than down, and by buying into companies that can be understood and predicted down the line.

However, finding a good opportunity tends to leave at least some cash floating around. Aside from dumping it into a placeholder stock like BRK.B, moneymarket, etc. I am interested in utilizing, to some small degree, daytrading.

Basically:
(1) How is risk managed in security day trading? Forex trading?

(2) Do the few successful traders operate by intuition or determinism?

(3) How wide of a scope to most traders take? Ten stocks? One hundred? All of them? Similarly, how wide of a scope do forex’ers employ?

(4) Is there a way to get a hold of raw market data, outside of the wacky software like eSignal, etc?

Please do not try and pitch a trading system. Thanks.

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The stock market was all over the map for much of the day, but in the end a late rally lifted stocks to a hefty gain. Alexis Christoforous reports.

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What company is on a stock exchange and is seasonal stock ?

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Duncan starts a fight with a Flower Nerd and tries to find out what is up with all his Stocks due to the Stock Market falling!

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This is it, the stock market is down to bail outs and rumors of bail outs. The economy is down to it’s last few months. The markets will collapse, probably in several weeks.

The temporary ban of short selling on 799 financials will artificially inflate stocks possibly setting up the crash.

http://www.reuters.com/article/usDollarRpt/idUSPEK2402720080917

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I’ve done stocks and options and stuff like that. I was curious if it is worth my time to learn it.

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The websites that their news affects on prices in stocks and forex.
name 2 or 3.

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Ideally, you buy stock or currencies at its lowest price and sell at its highest.

Practically speaking, you do the best you can between these unpredictable extremes.

For, as you will see, the low does not become apparent until your stock begins to rise above it, the high is not established until your stock begins to drop away.

Although all of us could wish it otherwise, no bells, no flashing lights, no 21-gun salutes ever mark the bottom or the top.

Timing your stock transactions, therefore, is perhaps the most delicate element of investment, the decision requiring the keenest judgment and the surest touch. Experience helps, although success is not necessarily proportional to it. Veterans of the market, men who have been buying and selling for 30 or 40 years, sometimes seem to have a sixth sense about turning points, up or down, for individual stocks, or industrial groups, or the market as a whole.

On what seems to be no discernible evidence, they will mutter, “Well, I think the market’s going to fall out of bed,” and, sure enough, within a week there is a 9 or 10 point reaction. Yet newcomers may also acquire this skill with surprising speed.

Since judgment is a subjective quality, there are no firm rules for applying it. But there are generalities that can begin to define objectives and delimit areas of choice. And there are a number of techniques which attempt, more or less successfully, to better the average results obtained from trying to calculate timing arbitrarily.

Most professionals will tell you, right off, not to try for the extremes. The surest way to miss tops or bottoms is to wait for that last extra point of gain, that one more point of drop. Usually, an investor is considered to have done very well if he buys or sells within 5 points of the limit on a moderate-to-wide swing, within a point or two over a narrow range.

Another way of looking at the ideal objective is to reverse it: try to avoid selling at the low or buying at the top. This may seem to be superfluous advice, but both have happened many times when emotion entered heavily into judgment. Buying near or at the top is a temptation when a stock has been rising swiftly and steadily and the investor is eager to get aboard. The top, after all, is only relative.

New tops may be within reach which will make the current one seem a reasonable buying level. Selling near or at a low is tempting when a stock has slid downward and the holder has become disenchanted with it. The impulse is to sell out, take the loss, avoid further trouble, and be well rid of the dog.

The correctness of these decisions cannot be judged in the abstract. They depend, first, on your objectives (See Chapter 3) and on how closely or satisfactorily you have realized them. And they depend on your analysis of the several dimensions of highness and lowness involved.

Buying for income is relatively easy. The indicated dividend divided by the current price will give the yield in percentage terms. If the yield suits you, and investigation suggests that it is likely to be maintained, the price is right, whether it is in the high, middle, or low range for the year.

The problem of the buyer-for-income in recent years, of course, has been the fact that a rising market has reduced yields to some very uninspiring levels. The average yield of 10 big oils in the first quarter of 1959 was 3 per cent. For five chemicals it was 2.24 per cent. For seven steels it was 3.85 per cent. Only the better railroads were around 5 per cent, as a group.

Strictly on an income basis, the investor would do better at the savings bank than in oils and chemicals, and might be considered to have missed his market in these categories. The choice then is whether to argue himself into accepting 3 or 3.5 per cent (or 2.2 if he wants G.E., 1.5 if he wants Dow) in a sought-after category, whether to switch categories, or whether to ignore the market until conditions are more to his liking. There may also be a temptation to jump into a stock that for some reason is still yielding 5 or 6 per cent, although it would be foolish to do so without determining why it has maintained a high price/dividend relationship when everything else is low.

If the objective is capital gain, timing becomes more crucial. Somehow you must determine how many more points above the current price your stock is likely to go, and whether this will be a satisfactory profit, considering that possibly 25 per cent of it will go for taxes.

All rises must be predicated on earnings, or the expectation of earnings. Take, for instance, a stock selling at 50 and paying $2. This is a 4 per cent yield, which, we’ll say, is about average for this market this year.

Now, news gets out that it is possible that the company will earn $6 per share by year’s end. Since a 50-per cent payout is the general practice, a dividend rise to $3 is indicated.

Naturally, there will be a small rush toward the stock and a rise in the market price, probably to 75, or the new equivalent of 4 per cent.

This is the simplest sort of cause-and-effect relationship, so simple, in fact, that it practically never happens just this way. If prices reacted exclusively on good or bad dividend news or expectations, the market would be far more static than it is. Still, earnings and the benefits there from that shower down on the stockholder are the basic premise of stock activity.

The biggest complicating factor is the general absence of hard information. It’s rare that a jump in earnings can be positively pin-pointed, or pin-pointed before a market rise has taken effect. As a result, most investors have to contend with a vast range of other investors’ hopes, guesses, anticipations, and facts.

Furthermore, the stocks believed to have the greatest potential for growth usually vary the general pattern. The Dows, Minneapolis Honeywells, Owens-Cornings, and Minnesota Minings have long since been pushed to levels where their dividend returns are virtually meaningless, and where perhaps even their growth potential has been completely discounted.

Still, these extremities were more marked when stocks generally were yielding 5 and 6 per cent. Now that so many yield 3 and under, the growth specials do not seem so unreasonable at less than 2.

If you are trading shares or Forex you can also benefit from software that can help you time your purchases and sales for maximum profit.

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