Introduction For Forex Trading in Marketiva

Posted on August 19, 2008. Filed under: Asiativa | Tags: , , , |

Introduction For Trading Forex in Marketiva

Buying and Selling Mechanism

Financial market is a mechanism that allows people to easily buy and sell (trade) market instruments at low transaction costs and at prices that reflect efficient markets. Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.

If you believe value of a market instrument is going to increase, then you would buy the instrument and at one point in the future you would sell it for a higher price. This is the basic motivation for trading on financial markets.

Orders and Positons

When you want to open a position you need to place an “entry” order. If and when the entry order executes, the position becomes “open” and starts its life on the market. At some point in the future, you will place an “exit” order to “close” the position. A position can be “long” (entry order is to buy and exit order is to sell an instrument) or “short” (entry order is to sell and exit order is to buy an instrument).

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At the point when you place your entry order, you need to define price level at which you want to buy or sell certain instrument. You also need to specify type of the order and quantity of the instrument you want to trade. There are 3 order types:

  • Market Order
  • Stop Order
  • Limit Order

Market Order

Placing a market order means that you will buy at the current “ask” (or “offer”) price, or sell at the current “bid” price, whatever that price currently is. For example, suppose you are buying a market instrument and its current market price is 129.34 / 129.38. This means a participant in the market is willing to buy the instrument from you at 129.34 and / or sell it to you at 129.38.

Stop Order

Initiating a trade with a stop order means that you will only open a position if the market moves in the direction you are anticipating. For example, if an instrument is trading at 129.34 / 129.38 and you believe it will move higher, you could place a stop order to buy at 129.48. This means that the order will only be executed if ask price in the market moves up to 129.48. The advantage is that if you are wrong and the market moves straight down, you will not have bought (because 129.48 will never have been reached). The disadvantage is that 129.48 is clearly a less attractive rate at which to buy than 129.38. Opening a position with a stop order is usually appropriate if you wish to trade only with strong market momentum in a particular direction.

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Limit Order

A limit order is an order to buy below the current price, or sell above the current price. For example, if an instrument is trading at 129.34 / 129.38 and you believe the market will rise, you could place a limit order to buy at 129.28. If executed, this will give you a long position at 129.28, which is 10 pips better than if you had just used a market order. The disadvantage of the limit order is that if the instrument moves straight up from 129.34 / 129.38 your limit at 129.28 will never be filled and you will miss out on the profit opportunity even though your view on the direction was correct. Opening a position with a limit order is usually appropriate if you believe that the market will remain in a range before moving in your anticipated direction, allowing the order to be filled first.

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5 Responses to “Introduction For Forex Trading in Marketiva”

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Nice writing style. Looking forward to reading more from you.

Chris Moran

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WOW! Great information on buying and selling mechanism, I gathered lot of information from this article. Thanks for the post.

Nice. I also used marketiva as 1 of my platform to execute position.


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