Ebook indd

© 1st Forex Trading Academy 2004
20
Introduction
Volume
The trading volume measures how much “money” is being traded. During some types of news 
breaks and when the New York’s exchange is open, the volume is obviously higher. The volume 
indicates us that more things can change. There no real strong correlation for volume, good trades 
is being developed even when the Forex volume is relatively low.
Buying and Selling short
Buying = term to use when buying a currency pair to open a trade.
Selling short = term to use when selling a currency pair to open a trade.
Both terms, refer to things we do to open a trade. 
On the other hand, to exit a trade, you will have to use the terms “selling” and “buying-back”. 
The term “selling” refers to what we do to exit a trade that initially started by “buying”. The term 
“buying-back” refers to what we do to exit a trade that initially started by “selling-short”.
Basically the term, “selling-short” can be referred to the futures and commodities market. For 
instance the mentality of buying a field to plant vegetables that will grow in the future is the same 
thing than buying a currency and to predict that it will eventually go short.
Bid/Ask Spread
A spread is the difference between the bid and the ask price. The bid price is the price at which you 
may sell your currency pair for. The ask price is the price at which you must buy the currency pair. 
The ask price is always higher then the bid price. Profits in the market are made from charging the 
ask price for a currency pair and buying it from someone else at the bid price.
The bid/ask spread increases when there is uncertainty about what is going to happen in the 
market.
Technical Definitions
Trading Platform
A trading platform is, along with the charts, one of the most important tools that a trader will be 
using while trading on the Forex market. By definition, a trading platform is an exchange account 
where you can buy and sell a currency.
Entry Stop
An entry stop is executed when the exchange rate breaks through a specific level. The client placing 
a stop entry order believes that when the market’s momentum breaks through a specified level, the 
rate will continue in that direction. The execution of a stop entry order may involve a limited degree 
of slippage, usually two pips or less.

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© 1st Forex Trading Academy 2004
21
Introduction
Entry Limit
An entry limit is executed when the exchange rate touches (not breaks) a specific level. The client 
placing a limit entry order believes that after touching a specific level, the rate will bounce in 
the opposite direction of its previous momentum. Limit entry orders are always executed at the 
specified level.
Types of Forex Orders
Market Order
– An order where you can buy or sell a currency pair at the market price the moment 
that the order is processed. 
Example: If you are looking to place an order for JPY when the dealing price is 104.00/05, a 
market order will request to buy JPY at 104.00 or will request to sell JPY at 104.05.
Entry order
– An order where you can buy or sell a currency pair when it reaches a certain price 
target. In theory, this can be any price. You can set an entry order for the low price of a time period 
or the high price of a time period. 
“I want to buy this currency pair at a certain price, if it never reaches that price, I don’t want to 
purchase the pair”.
The entry order allows you to choose a price and place an order to buy at that price.
Stop Order
- An order that becomes a market order when a particular price level is reached and 
broken. A stop order is placed below the current market value of that currency. 
Example: If you have an open buy JPY position, which you bought at 104.00 and you want to set 
a stop order in case JPY’s value starts to depreciate (to stop your loss). Since the JPY’s currency 
appreciates when the dealing rate moves from 104.00 closer to parity with the USD (102 JPY/
1USD), a movement in the opposite direction would necessitate a stop order. For instance, you 
could set a stop order rate to sell JPY at 103.50, thus closing your position at a 50-pip loss. 
Limit Order
- An order that becomes a market order when a particular price level is reached. A 
limit order is placed above the current market value of that currency. 
Example: If you have an open buy JPY position, which you bought at 104.00, and you want to set a 
limit order to protect your profit, you would set a limit order at a number, which indicates that JPY 
has appreciated, such as 104.5. When the market reaches 104.5, your position will automatically 
be closed, resulting in a 50-pip gain. 

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