1. What is forex trading?
Forex trading is the buying and selling of currency pairs on-line. The major
• Eur/USD Price is quoted as the value of 1 Euro to 1 Dollar
• USD/Yen Price is quoted as the value of 1 Dollar to 1 Yen
• Euro/GBP Price is quoted as the value of 1 Euro to 1 Pound
• GBP/USD Price is quoted as the value of 1 Pound to 1 Dollar.
2. What is the difference between the buy and sell rates?
The difference between the buy and sell rates - known as the pip spread, is
the amount you pay to the dealer for laying and administering your trade.
e.g. If the quoted prices for the Euro/USD are: buy 1.1796 and sell 1.1799 -
there is a spread of 3 pips or 3 one hundreds of a cent. Thus you pay 3 hundreds
of a cent for every Euro or Dollar you buy or sell in this currency pairing. For
each 10k you buy or sell, you pay the dealer $3 for laying and administering the
Note: for many of the cross currencies the pip spread may rise to 10 or
3. Am I also charged commission?
TodayFx does not charge any commission on forex trades placed. Today’s forex
market is very competitive and you should not pay any commissions. TodayFx and its primary brokerage firm are compensated through the bid/ask price spread. You should
also be looking at the value of the service you are getting from your broker or
intermediary, and not settle for anything less than a comprehensive value-added
4. What is a stop loss and when should I place one?
A stop loss is a loss floor or ceiling a trader places on their order. A
trader should always place a stop loss on every order. If the market moves
against the trader, at least with a stop loss a trader can limit the damage and
balance slippage on their account.
Example of stop loss:
A trader buys 100k Euro/USD at a price of 1.1796 believing that the market
will favour the Euro and that we will see an appreciation in the value of the
Euro. He places a stop loss at 1.1780. This stop loss means that the maximum he
can lose is a total of 18pips – or $180 dollars for a 100k lot. If he failed to
place a stop loss and the market moved against him to say 1.1750, this means
that he is carrying an equity loss of 46 pips - or $460 for a 100k trade on his
5. What is a limit order?
A limit order is a cash-out point on a trade. If our trader makes an order
believing the market is going to move in his direction, he may place a limit -
which is the point at which he wishes to exit the position and cash in. No
trader knows exactly where any market is going to finish and it is optimistic to
the extreme to believe that one can earn 100% of market movement. Markets
fluctuate all the time, so at least with a limit placed on a position, the
trader cashes in before the market reverses and erodes his gains.
Example of limit order:
Let’s assume this is the same trade as under number 4 above. Our trader buys
100k Euro/USD at 1.1796. He believes the price may move all the way to 1.1900
before it might reverse, but he are not sure. Therefore he places a limit order
at 1.1870. If he is correct and the market moves up as far as 1.1890, then his
position will automatically close at 1.1870, for a gain of 74 pips – or $740. If
he failed to place a limit order and the market were to reverse at 1.1890 and
move down to 1.1820, our trader is sitting with only a gain of 24 pips or $240
in his equity balance. This is what his total gain will be if he were close the
position manually at this point.
Alternatively, a trailing stop could be used to track the market, if the
market moves in our favour. A trailing stop of 50 pips will move a stop loss 50
pips, every time the market moves a total of 50 pips in our favour. So for the
same Euro/USD trade, if a trailing stop has been entered at the market entry
point of 1.1796, with a stop loss of 1.1780, it means that when the market
reaches 1.1846, the stop loss will automatically move to 1.1830. The trader is
guaranteed to gain on the trade, for if the market were to now reverse
downwards, his position would automatically close at 1.1830 and he would have
made 34 pips or $340.
6) What if the price is not at the trader’s desired market entry level?
We can create an entry order in advance and thus only enter the market when
the price is at our desired level.
As an extension of the above example, let us assume that Euro/USD was in an
upward momentum and was currently at 1.1860. The trader may believe that it will
not go higher than 1.1890 before the market will reverse, but that 1.1860 is too
early to enter. As our trader will not be at the computer to watch the market,
he places a ‘create order entry’ to sell Euro/USD at 1.1883 (remember when the
buy price is at 1.1880 the sell price will be 1.1883, in a 3 pip spread trading
environment). The trader places a stop loss at 1.1900 and a limit order at
1.1833. If the trader is right, his position will automatically open at 1.1883
and if the market reverses as per previous examples, then he stands to gain 50
pips or $500, as the transaction will automatically close at 1.1833.
Note: When using a create order entry, ensure that in the event of it not
been activated when you desire, you delete the order entry so that it may not be
activated at a later time, when the market and your view of the market movement
7) Should I trade?
If you have no experience trading, then you should spend plenty of time
learning about it and operate a Demo account to apply what you have learned. A
Demo account plugs you into the real market - while the money is not real,
everything else is. TodayFx offers a Demo account and you can use it for up to
30 days for free.
You should also follow the chat and discussion forums and learn from fellow
beginners and more experienced traders.
Different traders trade different strategies and sharing of strategies, no
matter how brilliant one believes their strategy may be is not going to fool or
bust the market – believe us!
• If you don’t know what you are doing - don’t trade!
• If you believe this is a get-rich-fast system – don’t
• If you think you were right and the market was wrong
– stop trading!
• If you can’t take losses – stop trading!