Each bar chart represents one day of trading and contains the opening price, highest price, lowest price, and closing price for a trade. A dash on the left is the day’s opening price, and a similar dash on the https://www.nexthardware.com/forum/members/quselail.html?tab=visitor_messaging#visitor_messaging right represents the closing price. Colors are sometimes used to indicate price movement, with green or white used for periods of rising prices and red or black for a period during which prices declined.

Forex

Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement. James Chen, CMT is an expert trader, investment adviser, and global market strategist. Simultaneously, sell a call option at a higher strike price that has the same expiration date as the first call option, and collect https://www.cnbc.com/money-in-motion/ the premium. Company X stock is trading at $50, and you expect it to increase in price but by no higher than $53. The strategy is basically designed to reduce the upfront costs of buying calls so that less capital investment is required, and it can also reduce the effect of time decay. However, advanced trading tools can eliminate execution risk entirely.

Leverage

A scalp trade consists of positions held for seconds or minutes at most, and the profit amounts are restricted in terms of the number of pips. Such trades are supposed to be cumulative, meaning that small profits made in each individual trade add up to a tidy amount at the end of a day or time period. They rely on the predictability of price swings and cannot handle much volatility. Therefore, traders tend to restrict such trades to the most liquid pairs and at the busiest times of trading during the day. The advantage for the trader is that futures contracts are standardized and cleared by a central authority.

Forex

Retail traders don't typically want to take delivery of the currencies they buy. They are only interested in profiting on the difference between their transaction prices. Because of this, most retail brokers will automatically "roll over" their currency positions at 5 p.m. This is obviously exchanging money on a larger scale than going to a bank to exchange $500 to take on a trip. When trading in the electronic forex market, trades take place in blocks of currency, and they can be traded in any volume desired, within the limits allowed by the individual trading account balance.

Retail Foreign Exchange Traders

Unlike a forward, the terms of a futures contract are non-negotiable. A profit is made on the difference between the prices the contract was bought and sold at. A great deal of trade exists to accommodate speculation on the direction of currency values.

He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Increase your knowledge and gain valuable insight with our complimentary suite of in-depth educational articles detailing all aspects of Forex trading.

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