Thursday, April 28, 2016

What is Triangular Arbitrage in Forex

Ever encountered a situation wherein there is an inconsistency in the prices of the different currency pairs? Do you know that this kind of situation is actually profitable for you if you know how to act on it? If you don’t, then this is the right time for you to learn about arbitrage in forex trading.

Forex arbitrage is a trading strategy used by forex traders to earn profit with no open currency exposure. This kind of trading strategy requires the trader to act fast on pricing inefficiencies between different currencies, while the opportunity is still present. It involves buying and selling different currency pairs to take advantage of the inconsistencies of their pricing. 

This trading strategy is called triangular arbitrage for a reason. Refer to the illustration below so you could further understand what I am trying to say.


Triangular strategy is the process of trading a currency for another currency, then converting it again to another currency, and finally, converting it back to the original currency within a short time frame. Traders do this to take advantage of the inconsistencies in the prices of the currency pairs.

For example, the current exchange rate of EUR/USD, EUR/GBP and USD/GBP are 0.8631, 1.4600 and 1.6939 respectively. If, for example, the trader initially has 100,000 US dollars, he can trade it for €86,310, then he can sell the euros for 59,110 GBP before finally trading it back to dollars at an amount of $100,120. 

From these transactions, assuming that there are no transaction fees or taxes involved, the trader would earn a total of $120 worth of profit just by taking advantage of the inconsistencies in the pricing of the currency pairs.

Learn more about the forex market and further understand what is forex by reading our forex-related articles. See who the best forex brokers are, visit Wibestbroker.com to find out.

Friday, April 22, 2016

What is Scalping in Forex Trading

We’ve previously discussed about the different types of forex orders in our past articles. This time, we will talk about the different types of trading strategies, and we will start with what most traders call as “scalping”.


First of all, what is scalping? Scalping is a trading strategy used by traders to make many small profits in a short amount of time. The purpose of this strategy is to place as many orders as you can and reap a small profit from each of it. Basically, a scalp trader would place a buy (or sell) order for a certain currency pair and then quickly sell (or buy) them even at a small price change for a profit. These small profits can accumulate into large gains if a strict “exit strategy is implemented to avoid large losses.

Scalping might be the best trading strategy for you if:
  • You prefer fast trading
  • You’re okay with focusing on your technical analysis for several hours at a time
  • You are impatient and you don’t like waiting for a long time to see some profit
  • You can think and decide quickly
  • You love instant profits (or losses)
  • You’re a risk taker

However, if:
  • You easily get confused in fast moving situations
  • You can’t focus for hours to your trading charts
  • You prefer to make bigger profits through fewer amount of trades
  • You want to take your time to fully examine what’s going on in the market

Then this trading strategy might not work for you. It is best to assess yourself first and determine what type of trading are you most comfortable with. That is why it is important to hone your trading strategies on a demo account first before going for the real thing to avoid unnecessary losses.

Learn more about the forex market and further understand what is forex by reading our educational forex blogs. See who the best forex brokers are, visit Wibestbroker.com to find out!



Tuesday, April 19, 2016

What is a Stop Order in Forex

We’ve previously talked about the first two forex order types, namely the market order and the limit order. We’ve discussed their advantages and their disadvantages to guide you in choosing the correct type of order to use in every situation. Today, we’ll talk about another type of forex order, the “Stop Order”.

First of all, what is a “stop order” in forex? A stop order is an order that is used by the trader when he only wants his/her order to get filled once the market reaches a certain level. Once the market reaches the desired level, the stop order will become a market order.
Basically, a stop-loss order works by closing out the trader’s position as soon as the market starts moving against them. It works that way with the intention of minimizing the traders’ losses.

For example, if you are long EUR/USD at 1.09, you could set a stop-loss order at 1.07, and when it happens that the price falls drops to this level, then the trade will automatically be closed, preventing further losses.

However, you should remember that this type of order doesn’t prevent you from accumulating any losses, it can only minimize the amount of losses. Your order is closed at the current market price. In a very fast moving market such as the forex market, there is a high possibility to have a gap between the price you set for your stop-loss and the current price in the market.


Despite this fact, you should always consider putting a stop-loss instruction to your open positions. They can act as a very basic form of account insurance.

Learn more about the forex market and further understand what is forex by reading our educational forex articles. Visit our website, Wibestbroker.com to find out who the best forex brokers are!

Wednesday, April 13, 2016

What is A Market Order in Forex

We have previously discussed the different kinds of forex order and acquired a little knowledge about them. Today, we will further discuss the first and the most common order type in forex trading – the market order.

A market order is an order that is executed at the current market price. When a trader places a market order, he/she is basically allowing his broker to buy a share at the current market price.

Placing a market order guarantees that your order will be executed. However, this type of order entails some risk, as the trader will not be able to determine at what price would his order be transacted at. 

Depending on the movement of the market, the final price of the his/her transaction might end up higher or lower than the trader’s expected price. This event is what traders call as “slippage”.


Basically, the reason for this event is because the market is dynamic. Prices are changing on a regular basis and on an unexpected timing, so the prices could go higher or lower even before your order gets executed.

For example, the trader places a market order at the time that the EUR trades at a rate of 1.13 USD. However, just a few moments before his order was filled, the EUR suddenly rose against the dollar, and the new exchange rate became 1.15 USD. Because of that, the trader would have to pay 0.02 more dollars per euro, giving him a negative slippage. 

However, should the price movement go the other way, and the EUR became weaker against the dollar, then the trader would have to pay less than what he actually expected, giving him a positive slippage.

These kinds of incidents can actually be avoided by placing other kinds of forex orders, but we will discuss this in our other articles. For now, I hope you already understand how market orders work in the forex market.

Further understand how the forex market works and be a better trader by reading our educational articles. Do you want to know who the best forex brokers are? Then you should go and visit Wibestbroker.com!

Friday, April 8, 2016

What Causes Slippage?

In the preceding article, we have talked about what slippage actually means in forex trading. Today, we will discuss what are the factors that triggers slippage so we could determine why it occurs and how can we avoid it. 

So why does it happen? Why can’t our orders be executed at our specified price? To answer your question, let’s go back to the basics of economics. Basically, the true market is composed of two types of people: the buyers and the sellers. For every buyer who has a specific demand, there must be an equal amount of sellers who can supply their demands. 

The imbalance between the number of buyers and sellers is what causes fluctuation in prices. If the number of buyers exceeds the number of sellers, the price will move higher. On the other hand, if there are more sellers than buyers, then the price will probably go lower.


That is also exactly how things work in the forex market. For example, if the trader places a trade in an attempt to buy 10K USD at an exchange rate of 1.37 EUR, but there are not enough people who want to sell their USD at the specified price rate, then the broker will have to find the next best available price, causing the trader to buy USD at a higher price – giving the trader a negative slippage.

But of course, the opposite could also happen. If there are a lot of sellers who are willing to sell their USD at the time the trader places his trade, then he might find a seller that’s willing to sell their USD for a price lower than his specified price – giving him a positive slippage.

In a very volatile market such as the forex market, the occurrence of slippage is a very common and normal event. However, if you want to know if these kind of occurrences can be avoided, read our article about: “Can Slippage Be Avoided?”.

Learn more about the forex market and further understand what is forex by reading our informative articles. See who the best forex brokers are, visit Wibestbroker.com and find out!

Tuesday, April 5, 2016

What is Slippage in Forex Trading

In our previous article, we’ve discussed about how does a forex order get executed in online trading. Some types of forex orders are also briefly mentioned in that article. Today, we’ll discuss about what slippage is and how does it work in forex trading.

First of all, what is slippage? Slippage is the difference between the specified price and the actual transaction price. It is the difference between the price you want a security to be traded at versus the price your broker actually executed it at.


Slippage commonly occurs in forex trading, especially every time the trader places a “market order”. That is because, every time the trader places a “market order”, he entitles the broker to buy or sell a security based on the current “market price”. If, for example, the Euro is currently trading at $1.20 dollars and the trader thinks this is an acceptable price to purchase Euro, then he can place a market buy order.

Say for example, the trader wants to buy 100 EUR and places the market order at the current market price of $1.20, the trader might think that the transaction will only cost him $120. However, since the market order authorizes the broker to buy the currency at the current market price, there is always a chance that the market price will fluctuate before the order gets executed.

If, for example, the current price moves to $1.21 at the time the trade gets executed, then the total transaction cost will become $121 instead of $120, making the trader pay $1 more than the expected total transaction price. The extra $1 here is what traders call as “slippage”.


Whenever the traders hear the word “slippage”, oftentimes they talk about it in a negative light. However, slippage isn’t always against you, and it might even turn the tide in your favor.

Let’s say that the price movement turned the other way, and the price went lower to $1.15 per euro instead of $1.20, then the total transaction price will now become $115 instead of $120, saving you a total of $5! Sounds cool, right?

Learn more about how the forex market works and fully understand what is forex by reading our educational articles. See who the best forex brokers are, visit Wibestbroker.com to find out!