Metatrader 4: Market Watch, Quotes And Prices

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All Forex/CFD quotes have two prices, the BID and the ASK price. The Bid is the price that you (as the trader) open a sell position. The Ask is the price that you open a buy position.

The difference between the bid and the ask price is known as the spread.

 

To see the latest prices, use “Market Watch” window (Pic.17). The “Market Watch” window gives you the ability to quickly view the latest Ask and Bid price of the symbols you can trade.

The “Market Watch” window can be activated by pressing the Ctrl+M key combination, or by using the View->Market Watch menu sequence or by clicking pic16-button the button from the “Standard” toolbar (Pic. 16):

pic16

Picture: Standard” toolbar

MT4-Market-watch

Picture – Market Watch

The “Market Watch” window gives you the ability to quickly view the latest Ask and Bid price of the symbols you can trade.

Right click the mouse button on the “Market Watch” window to produce the context menu:

New Order – enables the window to open/close a position or to place a new pending order;

Chart Window – enables the chart of a currency pair or CFD;

Tick Chart – shows the tick chart for the selected instrument;

Hide – deletes the specified symbol from the list in the “Market Watch” window;

Hide All – deletes all symbols from the list in the “Market Watch” window which are not used (if you have open positions or charts, its symbols will not be deleted);

Show All – displays all available symbols in the “Market Watch” window;

Symbols – enables the window where you can hide/show the selected instruments;

Sets – saves/adjusts/deletes the custom settings for the “Market Watch” window;

High/Low – shows/hides columns with the highest and lowest prices for each instrument;

Time – displays a column with the arrival time of the latest quote for each instrument;

Grid – hides/unhide grid lines in the “Market Watch” window;

Popup Prices – opens the popup window which contains real time quotes for your selected instruments.

Forex Market Analysis

There are three basic types of market analysis:

  1. Technical Analysis
  2. Fundamental Analysis
  3. Sentiment Analysis

There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know all three.

 

Fundamental Analysis

Fundamental Analysis is a way of looking at what’s happening with the currency from an economic point of view, mainly. As mentioned before, economic news is normally scheduled to be released at pre arranged times, as shown on the Forex Calendar. These announcements often move price.

Technical analysis

Technical analysis is the framework in which Forex traders study price movement.

The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement.

The main evidence for using technical analysis is that, theoretically, all current market information is reflected in price. If price reflects all the information that is out there, then price action is all one would really need to make a trade.

Sentiment analysis

Sentiment analysis is a type of forex analysis that focuses on identifying and measuring the overall psychological state of all participants in the market. Sentiment analysis attempts to quantify what percentage of market participants are bullish or bearish. Once the majority sentiment is identified, a sentiment analyst will often take up a position on the opposite side on the assumption that the crowd is wrong.

Benefits of Forex Trading

Benefits of Forex Trading

 

Market Liquidity and Volatility

  • The forex market is the largest and most liquid of the financial markets.
  • Daily activity often exceeds $4 trillion USD a day, with over $1.5 trillion of that conducted in the form of spot trading.
  • Forex spot trades consist of a contract to trade a given amount of a currency pair with a market-maker, at the advertised buy / sell price (the spot rate).
  • It is the existence of volatility within the forex market that enables trader’s to take advantage of exchange rate fluctuations for speculative purposes.
  • Traders must be aware that greater volatility also means greater risk potential.
  • nasdaq-nyse-dollar-value-595

Market Hours and Liquidity

  • Forex trading operates 24 hours a day, five days a week. The greatest liquidity occurs when operational hours in multiple time zones overlap.
  • It is important to understand the correlation between liquidity and market activity.

Low Cost of Forex Trading

  • The cost to trade with most forex brokers is the spread. This is the difference between the bid and the ask price.
  • Spreads in the forex market also tend to be much less (or tighter) than the spreads applied to other securities such as stocks. This makes OTC forex trading one of the most cost-effective means of investment trading.

Advantages of Margin-Based Trading

  • Most OTC forex brokers offer margin-based trading accounts.
  • Margin-based accounts differ from credit-based accounts in that when trading in a margin account, you must first open an account with your broker, and thenfund the account by depositing money into the account.
  • Once you have funded a margin account with your broker, you can engage in any trading activity you wish so long as you have sufficient margin remaining in your account.
  • Leverage makes it possible for you to trade larger positions than would otherwise be possible based on your actual account balance.
  • This means that leverage can provide greater potential for returns.
  • The downside of course is that there is also greater potential to lose money and you can incur significant losses in your account very quickly.

 

Potentially Profit Regardless of Market Direction

  • A short-sale – or simply a short – is the selling of a currency pair before you buy it.
  • It is very easy to enter into a short-sale when trading in the forex market.
  • In order to make a profit on a short, you must buy the currency back for lessthan you received when you sold it. The difference represents your profit or loss.
  • The ability to engage in short-selling means that it is possible for you to profit no matter which way the market is trending.
  • When rates are increasing, you can earn a profit if you buy (go long) a currency pair, and then sell it later for more than you paid.
  • When rates are falling, you can earn a profit if you sell (go short) a currency pair, and then buy it later for less than you earned when you originally shorted the currency pair.

What is Currency Pair?

Currency Pair

Two currencies are always involved in a forex trade – one is being bought in exchange for the other. Together, those two currencies are called a currency pair, and are usually represented as two three-letter currency abbreviations. For example, consider the currency pair EUR/USD. In this example, the first currency, the Euro (EUR), is called the Base Currency and the second, the US Dollar (USD) is called the Quote Currency.

For most transactions, either the USD or EUR is used as the base currency. In the case of the example EUR/USD, the value of the USD (the quote currency) is considered in relation to 1 EUR. If the quoted price for this pair is 1.3553, this means that 1 Euro can buy 1.3533 US Dollars.

Here is how that information might be used. If a trader thinks that the value of the US Dollar will decrease in value relative to the Euro, he might buy the EURUSD, currency pair and then later sell the pair for a profit when the value of the pair increases (representing a decrease in the value of the USD, the quote currency) See below for a detailed example of a similar trade.

How much does it cost to trade?

How much does it cost to trade

Entering the Forex market can cost very little. The capital required is the amount required by the brokerage for deposit in a margin account. Some brokers allow a minimum account balance (for the margin account) as low as $1 . With leverage the amount of foreign currencies controlled by that minimum account balance can be large. In practical terms, trading with a minimum amount in the margin account can be risky. A small unfavorable change in currency rates can quickly deplete a margin account with a minimum balance.

In practice, the cost of each trade (before any profit or loss), is found in the spread. Since a Forex pair is purchased at the Ask price, and sold at the Bid price, there is a cost of trading that pair, which is the amount of the spread, multiplied by the amount of currency being traded. Normally, there is no commission charged for Forex trading. The cost is limited to the spread. A common spread for major currencies might be 0 pips to 3 pips . With that spread, there is a cost $30.00 for entering and exiting a trade of currencies valued at $100,000.

What is Margin

Margin

Margin refers to money actually deposited into a forex trading account. A trader must have a certain amount of money, the “margin” in their account before they can trade in the forex market. The amount required relates directly to the amount of leverage available. For example, if a margin account has a value of $1000 and leverage is 100:1, the trader can trade up to $100,000 in foreign currencies. Note that the amount of available margin will increase or decrease as the value of the forex currencies actively traded increase and decrease in value, through a process named “marked to market”, through which profits and losses are immediately credited to or deducted from the trader’s margin account.

Why Trade Forex?

Forex offers several advantages over speculative trading in futures, stocks and other equities. Eight major currency pairs dominate most currency trading, so it is a much simpler market to follow for most traders. The vast majority of trades involve the United States Dollar, while the Euro, British Pound and Japanese Yen are also widely traded.

Although most currency speculation occurs between a relatively small number of currencies, many brokerages offer trading in a much wider range of less commonly-traded currencies.

Some prospective traders looking to participate in speculation are attracted by the low account balances required to open a forex account with some brokerages.

Forex offers many advantages..

  • No commissions

  • No middlemen

  • No fixed lot size

  • Low transaction costs

  • A 24-hour market

  • No one can corner the market

  • Leverage

  • High Liquidity.

  • Low Barriers to Entry

  • Free Stuff Everywhere

How Does the Forex Market Work?

Until the 1970’s, and for the previous 100 years, the value of most currencies was tied in some way to the value of gold. In 1944 this “gold standard” was replaced by the Bretton Woods Agreement which valued the United States dollar against gold, and all other currencies against the US dollar. In 1975 that agreement fell apart and a system of floating exchange rates was widely adopted, leading to fluctuations in currency values in an open market-and laying the foundation for foreign exchange speculation.

Today, trading in foreign currencies by speculators usually takes place through a forex broker or dealer, who provides the trading platform to transact forex trades. Such trades occur in currency pairs, such as USD/JPY (United States Dollars/Japanese Yen). Note that two currencies are always involved in a forex trade, with one being purchased while the other is being sold.

The forex trader will generally hold the purchased currency (called a position) for a period of time, intending to profit when the prices of the two currencies change favorably. The transaction is completed, or the position is closed, when the opposite currency is bought and the other sold. Profit is calculated by the difference in the buying and selling price.

Different brokers offer different services, and traders need to be careful their broker is serving their best interests. Each broker provides demonstration or practice accounts, where a new trader can play with virtual money until they feel comfortable opening a real account. Analysis can be completed and orders are placed online, at the trader’s request.