BRIEF INTRODUCTION TO FOREX AND APPLICATION OF FOREX SIGNALS

BY

PRYDETV FX SIGNALS
What if FOREX?

FOREX trading is basically another term for foreign exchange trading. The FOREX market like
any other market is a place where buying and selling of currencies is carried out. For instance, if
you were to trade the naira for the dollar in a bank you would have been said to have carried out
a FOREX transaction.

Who is a FOREX broker?

FOREX brokers are firms/companies that give you access to the FOREX market by providing a
trading account for you. They give traders leverage as well as provide support functions to
traders. There are a lot of brokers out there including but not limited to Hotforex, fxtm, fbs,
liteforex e.t.c.

For you to be able to trade forex, you must first be registered with a broker. Log on to their
website and fill the sign up form. If you’re a newbie, it is mostly advisable that you start with a
demo account. A demo account is an account much like the real account only that the money
being used to trade is not real money. Demo accounts cannot be funded and they are used to
practice. If you’ve got some experience, you can open a live account. Live accounts must be
funded before they can be used to trade. When opening an account with a broker, you’re always
asked if you want a real account or a demo account. Choose the one you would like to open.
Once you’ve opened your account your broker gives you a login ID and password for the
METATRADER platform (MT4).

METATRADER 4 (MT4) Platform.

Metatrader 4 (MT4) is an electronic trading platform used by traders like you and me. The
software is licensed to FOREX brokers who provide it to their clients. When you’ve registered
with a broker, you log into the broker server (platform) on Metatrader 4 and then you can begin
to trade.
Fig.1 The MT4 interface.

FOREX Signals.

A forex signal is a suggestion for entering a trade on a currency pair usually at a specific price
and time. What this simply means is that it is an instruction to either buy or sell a particular
currency pair at a particular time in order to make profits. Forex signals are usually generated by
experts. I’ll give an example of what signals look like and how they come.

SELL
AUDJPY 76.41
TP1: 75.80
TP2: 75.00
S.L: 76.93
If you look at the signal above, it is an instruction to see the AUDJPY pair at 76.41. The signal
gives a stop loss of 76.93 and an initial target profit of 75.80 with a final target profit of 75.00.

What is a STOP LOSS (S.L)?

Stop loss is an order to buy or sell a currency pair once it reaches a certain price. It is designed to
minimize your losses. Taking the example above, we want to sell AUDJPY at 76.41 meaning we
expect the price to drop further. What happens when price begins to rise instead of fall? Do we
loose all our money because the trade is going in an opposite direction? Do we loose all our
money? No. If price begins to rise and it gets to 76.93 from 76.41, our broker automatically
closes the trade for us so we don’t suffer further losses. That’s the benefit of a stop loss.

What is TARGET PROFIT (T.P)?

Target profit is the amount of profit you as a trader is expected to make at the end of your
session. In our signal above, the target profit was set at 75.80. What this means is that you’re
telling your broker to close your trade for you once it hits that price and you take your profits.
Additionally, target profit 2 is also an instruction to close your trade once it reaches 75.00. In
reality, you can choose to use any of the two given target profits. You can also use TP1 and
when you notice that price is almost there and you don’t want it to close trade yet because you
feel you could make more profit, you could then modify your trade to TP2.

Once you receive signals into the group, you can apply them accordingly ad begin to make
profits.

How to apply FOREX signals.

When you receive a FOREX signal, you go to your account on metatrader 4 and log into your
trading account. You go to your currency pair you want to trade and click on it. You select new
order from the menu that comes up as seen in Fig2. It takes you to the trade interface as seen in
Fig3. You input your stop loss and target profit at the appropriate place and click on BUY or
SELL.

FIG2. Creating new orders.

FIG3.

LOT SIZES.

One very important thing to take note of is the lot size of your trade. In forex, when using a lot
size of 1, for every one pip movement in your favor, you make $10. It also means that for every
one pip that goes against you, you loose $10. When using a lot size of 0.1, for every one pip
movement in your favor, you make $1. It also means that for every one pip that goes against you,
you loose $1. When using a lot size of 0.01, for every one pip movement in your favor, you
make $0.1. It also means that for every one pip that goes against you, you loose $0.1. referring
back to our signal, we wanted to sell AUDJPY at 76.41. If our account balance was $100 and we
price moved in our favour to just 76.40 (that’s just a 1-pip movement), we would make $10 and
our new balance would be $110. Good money moves right. The disadvantage is that if price were
to move against us, to say $76.42 (that’s just a 1-pip movement), we would lose $10 and in just
less than 5-secs our account balance could be $90. So, it goes both ways. For a beginner, you’re
advised to use no more than 0.05 as lot size when trading, while as one with experience, you’re
not advised to go more than 0.1 lotsize except you’re trading with a lot of money, like say,
$1,000.