What is STP?
Straight-through processing, or STP, is a fully automated and continuous system for information processing. While the input of raw data can be both automatic and manual, in later steps no external human interference is possible, neither at the level of information transfer nor processing. STP is based on standards of information exchange and full interaction between automated systems.
In a narrower sense, STP technology means that the broker becomes the intermediary between the clients and the market. Client orders to execute transactions on external markets are routed automatically.
What are the advantages of an ECN system for traders?
The ECN key advantage compared with other investments instruments is that a broker does not interfere with trading process and a client has direct access to liquidity suppliers. This enables to respond quickly to different situations and invest successfully.
ECN technology and its advantages compared with regular order execution:
|ECN technology||Standard Order Execution|
|Instant order execution||YES||NO|
|No trading against the client||YES||NO|
|Liquidity||Many providers||Broker is the sole provide|
|Trading inside the spread due to minimal difference between current price and pending orders||YES||NO|
|Trading without swaps||YES||NO|
What is ECN?
The Electronic Communication Network, or ECN, is an international communication network used by brokerage firms, banks, financial organizations, and private clients. The key function of this system is to publish orders to buy and sell assets. ECN’s main advantage is that brokers cannot interfere with the trading process. The client interacts directly with liquidity providers, allowing the client to quickly react to unexpected situations and make lucrative investments.
What is scalping?
Scalping, while a relatively recent method of trading on the Forex market, has already become a classic and popular trading strategy not just among experienced traders, but beginners as well. This method has been specifically developed for short-term trading. Profits are made on transactions with a relatively short time frame of a few seconds or a few minutes. The transaction closes after a movement of just a few pips, but the lot size can be very large. Traders who engage in scalping are called scalpers.
Forex scalping is one of the most profitable and effective methods of earning a profit on the foreign exchange market. However, in order to work within this system, a trader must possess a certain skill set, including: a fast reaction time, ability to concentrate completely, attentiveness, and stress tolerance.
What currencies are traded on the Forex market?
The Forex market is international. All the world’s major currencies are traded here, including:
- US dollar (USD);
- Euro (EUR);
- British pound sterling (GBP);
- Swiss franc (CHF);
- Japanese yen (JPY);
- Australian dollar (AUD);
- New Zealand dollar (NZD);
- Canadian dollar (CAD);
- Swedish krona (SEK);
- Norwegian krone (NOK);
- Danish krone (DKK);
- South African rand (ZAR).
I want to start trading Forex. What do I need to do?
To start trading on the Forex market, a beginner just needs a computer or mobile device and a stable internet connection. Download and install a trading program on your device, and you can start trading.
How much starting capital do I need to start trading Forex?
Margin trading allows you to trade sums that are significantly larger than your capital and, therefore, earn more. This makes it possible to trade with little capital – the broker will provide what is needed.
How does the Forex market operate?
The Forex market is open 24/5, excluding weekends and national holidays:
- From March to October (summer hours) — from 22:00 (GMT) Sunday to 22:00 (GMT) Friday;
- From October to March (winter hours) — from 21:00 (GMT) Sunday to 21:00 (GMT+3) Friday.
The open and close of trading sessions on the Forex market are approximate, as banks in different time zones open at different times. Generally, times are listed in GMT, EET (Eastern European Time) and local time.
QUESTIONS ON TRADING
How do I adjust the leverage on my account?
To change the leverage, sign in to your account, go to the Trading Accounts section, and select the card of the relevant trading account. The maximum leverage that a broker can provide is 1:1000.
How does rollover of open positions to the next day occur?
The rollover of an open position to the next day is called a swap. A swap can be both positive and negative – in the first case, commission is credited to your account. In the second case, it is debited from your account. A swap depends on many factors, including:
- interest rates of different countries
- exchange rate fluctuations of a particular currency pair
- state of the forward market
- dealer expectations
- the size of swap points of the broker’s counterparty
Let’s consider an example of calculating a swap on the Forex market. You are shorting 1 lot of the currency pair EURUSD. In other words, you are selling 100,000 EUR. At the moment of the transaction, the interest rate is 2.15% in the eurozone, and in the US it is 1.5%. Accordingly, you are borrowing 100,000 at 2.15% per annum. In selling euros, you are buying US dollars, which you deposit to your account at 1.5% per annum.
The swap will be positive – that is, an amount will be credited to your trading account following a rollover to the next day – if the interest rate of the country whose currency you are buying is greater than the interest rate of the country whose currency you are selling. In our example, the swap will be negative because the interest rate in the US (1.5%) is lower than the interest rate in Europe (2.15%). Therefore, commission will be debited from your trading account. The swap, furthermore, includes the broker’s markup. Let’s say it is 0.2%. In this case the swap, expressed in percentage terms, will be: (InterestRateDifferential) + (Markup) = (2.15 –1.5%) + 0.2% = 0.85% per annum. This sum must be converted into the deposit currency.
Example 1. Next-day rollover of open Sell position on the Forex market.
Calculation formula: SWAP = (Contract × (InterestRateDifferential + Markup) / 100) × Рrice / DaysPerYear, where:
- Contract = 100,000 EUR (1 lot);
- Рrice = 1.2268 – current market price of the currency pair EURUSD;
- InterestRateDifferential = 0.65% – difference between the interest rates of the two countries
- Markup = 0.2% – broker’s commission;
- DaysPerYear = 365 – number of days in a year.
SWAP = (100,000 × (0.65 + 0.2) / 100) × 1.2268 / 365 = 2.85 USD.
In our example, the deposit currency is USD. If it is expressed in another currency, you must convert the swap from USD to the respective currency based on the current exchange rate. Let’s say the deposit currency is the Canadian dollar (CAD). Then, SWAP = 2.85 USD × (USDCAD rate) = 2.85 × 1.2794 = 3.64 CAD
As a reminder, in our case the swap will be debited from the trading account because the interest rate in the US is lower than the interest rate in Europe. Therefore, when the open Sell position is rolled over to the next day for the currency pair EURUSD, 2.85 USD will be deducted from 1 lot on the trading account (or, if the deposit currency is CAD, the amount will be equal to 3.64 CAD).
Example 2. Next-day rollover of open Buy position on the Forex market.
Let’s say you have decided to play the long call [A2] for the same currency pair EURUSD. In this case, the swap will be positive, as you are buying euro with a higher interest rate and selling US dollars with a lower interest rate.
The calculation formula is as follows: SWAP = (Contract × (InterestRateDifferential — Markup) / 100) × Рrice / DaysPerYear.
- SWAP = (100,000 × (0.65 –0.2) / 100) × 1.2268 / 365 = 1.51 USD;
- SWAP = 1.51 USD × (USDCAD rate) = 1.51 × 1.2794 = 1.93 CAD.
Thus, when the open Buy position is rolled over to the next day for the currency pair EURUSD, 1.51 USD is credited from 1 lot. If the deposit currency is in Canadian dollars, 1.93 CAD is credited.
Swaps for any currency pairs, as well as gold spots, are calculated using the same formulas.
To view the current swap for your instrument, head to the Tools section.
Swaps can fluctuate. Stay updated on current rates under Contract Specifications. Data is updated at 21:00 Eastern European Time (EET).
If the Federal Reserve rate does not exceed the broker’s commission, the swap will be debited for both the Buy and Sell positions.
A spot held overnight from Wednesday to Thursday is debited or credited at triple the rate because banks are closed on Saturday and Sunday. This rule applies to both currency pairs as well as spot metals
What is GAP?
A price gap on a chart can occur in two situations:
- The Bid of the current quote is higher than the Ask of the previous quote.
- The Ask of the current quote is lower than the Bid of the previous quote.
There are two types of price gaps:
- When the price gap is seen on the 1-minute timeframe.
Example. In the image above, the Buy Stop order was placed at 1.4305.
The last quote before the price gap was 1.4300, and the next quote was 1.4331.
In this scenario, the pending Buy Stop order, placed at 1.4305, is in the price gap.
- When the price gap cannot be seen on the 1-minute timeframe.
Example. In the image above, the Sell Stop order was placed at 1.3625.
The last quote before the price gap was 1.3628, and the next quote was 1.3606.
In this scenario, the pending Sell Stop order, placed at 1.3625, is in the price gap.
A white candle is shown on the minute chart. The price gap in this scenario is inside the candle and cannot be seen.
The price gap can be seen only by analyzing tick history. You can request tick history in your account under the “Ask a Question” section.
How to calculate the lowest sum to open a deal?
To start trading Forex, you need to deposit a minimum margin. To calculate the margin in the base currency, use the following formula:
Margin = Contract / Leverage, where:
Margin – your margin deposit
Base currency – the first currency in the currency pair. For example:
- EURUSD – EUR is the base currency;
- USDJPY – USD is the base currency;
- GBPAUD – GBP is the base currency.
Contract – the size of the contract in the base currency. One lot is always equal to 100,000 base currency units. Therefore, 0.1 lot = 100,000 x 0.1 = 10,000 base currency units. The size of 0.01 lot = 1,000 base currency units.
Leverage – size of leverage. For example,
- leverage of 1:500 is denoted as “500”;
- leverage of 1:100 is denoted as “100”.
After you have calculated the margin in the base currency, you must convert it into the deposit currency (according to the exchange rate at the time the position is opened) of USD, EUR, or another currency.
Example 1. Calculating margin for currencies
- Trading instrument (currency pair): EUR/USD.
- Base currency: EUR (euro).
- Lot: 0.1.
- Contract: 10,000 EUR (100,000 × 0.1 lot).
- Leverage: 1:100 (100).
- EUR/USD rate at the time the position is opened: 1.23369.
- Deposit currency: USD (US dollar).
Margin = Contract / Leverage = 10,000 EUR / 100 = 100 EUR.
Convert to the deposit currency (USD). If USD is the base currency in the currency pair, then the price of a pip should be divided by the rate. In all other cases, multiply: Margin = 100 EUR × 1.23369 = 123.36 USD.
The margin is 123.36 USD.
Example 2. Calculating margin for spot metals.
- Trading instrument: XAUUSD.
- Lot: 0.1.
- Contract: 10 troy oz. (100 troy oz. × 0.1 lot).
- Margin (%): 1%.
- XAUUSD rate at the time the position is opened: 1,339.16.
- Deposit currency: USD.
Margin = (Contract × Рrice) / Leverage = (10 × 1,339.16) / 100 = 133.91 USD.
The margin is 133.91 USD.
How do I calculate the profit or loss of a trade?
The size of the profit/loss is calculated by the following formula:
- For the Buy position: Profit/Loss = (Contract × ClosePrice) - (Contract × OpenPrice).
- For the Sell position: Profit/Loss = (Contract × OpenPrice) - (Contract × ClosePrice), where:
- Profit/Loss – the size of the profit/loss in the quote currency
- Contract – the size of the contract in the base currency
- ClosePrice – the price at close of the currency pair
- OpenPrice – the price at open of the currency pair
Example. Calculating the profit/loss for a Sell position for the currency pair EURGBP on an account with deposit currency AUD.
- Lot: 0.22.
- Trading instrument (currency pair): EURGBP.
- OpenPrice EURGBP: 0.8747
- ClosePrice EURGBP: 0.8647 (100 pips = 0.8747 - 0.8647 = 0.0100).
- Contract: 22,000 EUR.
- GBPUSD rate: 1.4048 (necessary for converting profit/loss into USD).
- USDAUD rate: 1.2983 (necessary for converting profit/loss into deposit currency).
- Profit/Loss = (22,000 × 0.8747) - (22,000 × 0.8647) = 19,243.4 – 19,023.4 = 220 GBP.
- Convert the profit/loss into USD. If USD is the base currency of the currency pair in the calculation, the profit/loss must be divided by the rate. In all other cases, multiply: Profit/Loss = 220 GBP × 1.4048 = 309.05 USD.
- Convert the profit/loss into deposit currency AUD. Profit/Loss = 309.05 × 1.2983 = 401.23 AUD.
Thus, the profit/loss for the currency pair EURGBP is equal to 309.05 USD or 401.23 AUD (depending on the deposit currency).
Calculations of profit/loss for gold spots and other currency pairs on the Forex market are carried out in the same way.
QUESTIONS ON METATRADER 5
I’m a beginner. What terminology and concepts of the MT5 trading report should I be familiar with to work with the platform?
While trading on the market, you will need to analyze results and carefully review the operations on your account. To do this, use the report generation function on the MetaTrader 5 terminal:
- In the MetaTrader 5 terminal, go into “Account History”;
- Right-click to bring up the context menu;
- In the context menu, select “Save as Report.”
You can generate reports of various time periods. Specify the necessary time period under the “Account History” tab in the “Select Period” box.
Remember that the generated trading reports for the day (Confirmation) and the month (Statement) are sent to the account holder’s email that you entered during registration of the trading account.
What you will find in a standard report:
- Deposit/Withdrawal – an amount showing the total sum of funds that have been credited to or withdrawn from the deposit account over the selected reporting period. If Deposit/Withdrawal is equal to 0, this means that no deposits or withdrawals were made.
- Credit Facility – available credit.
- Closed Trade P/L – total profit or loss across closed trades over the selected reporting period.
- Floating P/L – floating profits and losses across all open trades on the client’s account at the time the report is generated.
- Margin – collateral requirements necessary to maintain all open trades at the time the report is generated.
- Balance – overall financial result of all fully executed transactions and non-trade operations on the trading account at the time the report is generated.
- Equity – state of the account at the time the report is generated. The calculation is made by the formula: Equity = Balance + Credit + Floating profit - Floating loss.
- Free Margin – funds on the trading account that you can use to open new positions at the time the report is generated. The calculation is made by the formula: Free margin = Equity - Margin.
You can also generate detailed reports in the MetaTrader 5 terminal. In addition to the main account data available in the standard report, you will receive additional indicators that will allow you to perform a more in-depth performance analysis.
To generate a detailed report, complete the following steps:
- In the MetaTrader 5 terminal, go into the “Account History” tab;
- Right-click to bring up the context menu;
- In the context menu, select “Save as Detailed Report.”
Additional indicators you will find in the detailed report:
- Gross Profit – total profit across trades with positive outcomes over the reporting period.
- Gross Loss – total loss across trades with negative outcomes over the reporting period.
- Total Net Profit – the difference between Gross Profit and Gross Loss.
- Profit Factor – coefficient showing the ratio of Gross Profit to Gross Loss.
- Expected Payoff – expected profit, calculated by dividing Net Profit by the number of trades
- Absolute Drawdown – shows how much the balance has decreased relative to the original amount.
- Maximal Drawdown – shows the difference between the last maximum and the current minimum. It can exceed Absolute Drawdown, which indicates a possible loss even if trading is profitable.
- Relative Drawdown – shows Maximal Drawdown as a percentage of the initial deposit
- Total Trades – total number of trades made on the trading account
- Short Positions (won%) – total number of closed short positions (percentage of profitable short positions out of the total number of positions is indicated in parentheses).
- Long Positions (won%) – total number of closed long positions (percentage of profitable long positions out of the total number of positions is indicated in parentheses).
- Profit Trades (% of total) – total number of profitable trades (percentage out of the total number of trades is indicated in parentheses).
- Loss Trades (% of total) – total number of loss-making trades (percentage out of the total number of trades is indicated in parentheses)
- Largest Profit Trade: trade with the greatest profit.
- Largest Loss Trade: trade with the greatest loss.
- Average Profit Trade: average profit on a trade (Gross Profit/Profit Trades).
- Average Loss Trade: average loss on a trade (Gross Loss/Loss Trades).
- Maximum Consecutive Wins ($): number of trades in the longest streak of consecutive profitable trades (the total profit from these trades in the deposit currency is indicated in parentheses)
- Maximum Consecutive Losses ($): number of trades in the longest streak of consecutive loss-making trades (the total loss from these trades in the deposit currency is indicated in parentheses)
- Maximal Consecutive Profit (count): maximum profit in a consecutive streak of profitable trades (the number of trades in this streak is indicated in parentheses)
- Maximal Consecutive Loss (count): maximum loss in a consecutive streak of loss-making trades (the number of trades in this streak is indicated in parentheses)
- Average Consecutive Wins: average number of trades in a consecutive streak of profitable trades
- Average Consecutive Losses: average number of trades in a consecutive streak of loss-making trades
Why do i recieve a message “TRADE IS PROHIBITED” or “MARKET IS CLOSED” when i try to create or change METATRADER5 order?
Trading can be forbidden for the following reasons:
- It is the weekend, or a national or international holiday.
- The nuances of the trading session schedule of the chosen instrument. You can view the schedule on the “Contract Specifications” page. Click on “Select Parameters”, select the check boxes “Trading Open” and “Trading Close”, then click “Done”. After this, you will see a column in the table of specifications where the opening and closing times of trading instrument sessions will be displayed.
- A force majeure (in accordance with Capital Markets regulatory documents).
- A daily or monthly trade report is being generated at this moment. The process begins at 23:59:59 Eastern European Time (EET) and lasts several seconds. To ensure there are no discrepancies in the trade reports, trading is forbidden during this short time period.
Why doesn’t Market Watch display all trading instruments from the specification list?
To display all trading instruments, right-click on any instrument in the “Market Watch” window (MetaTrader 5 / “View” menu / “Market Watch”) and select “Show all symbols” in the menu.
My entire transaction history in the terminal has disappeared. How can I recover it?
If your transaction history has disappeared, you can request it. Open the “Terminal” window, go to the “Account History” tab, right-click on the context menu and select “All History”.
How do I install MT5 for Mac OS?
The MetaTrader 5 Trading Terminal can be installed on Mac OS in two steps:
- Install a free software that allows applications like Metatrader, designed for Windows, to run on the Mac operating system.
- Install MetaTrader 5 on Mac OS using this software.
Please note: products available free of charge are not guaranteed to work correctly. Therefore, an application downloaded through Wine could experience malfunctions.
To run MetaTrader on Mac we recommend using PlayOnMac software, based on Wine.
How to install PlayOnMac:
- Download the latest version of PlayOnMac on the software’s official site from the Downloads section.
- Head to Downloads on your computer and click on the PlayOnMac icon to launch the distribution package.
- A pop-up window for PlayOnMac will appear. Click “Next” to launch the verification and installation of components necessary for the program to work.
- You will be prompted to install the XQuartz component. This software allows you to use the X Window System on Mac OS. If this component has already been installed on your computer, select “I’ve downloaded the file by myself.” If you prefer to install it later yourself, select “Don’t install XQuartz for the moment.”
- Do not forget to review the important information about the software (“Read Me”) when you install XQuartz.
- To start the XQuartz installation, enter your login and password.
- Wait for the installation process to complete and restart your computer.
- After restart, launch PlayOnMac and install MS Windows fonts, which are needed for the application to run correctly. The prompt will appear in a dialog box.
- Accept the license agreement. Then wait for the installation to finish. The appearance of the PlayOnMac main window means the program is ready for use.
How to install MetaTrader 5 on Mac OS:
- Go into your account and download distribution package mt5setup.exe. Launch the distribution package once the download is complete. PlayOnMac will automatically open it and start the installation process for the terminal.
- To install the terminal, all steps of the installation process must be completed.
- When the installation is complete, use PlayOnMac to create shortcuts for all the needed terminal components, namely the actual client terminal and the code editor MetaEditor.
- In order to start working in the MetaTrader terminal for Mac, double click on the shortcut in the PlayOnMac window.
Terminal Data Directory
A separate virtual logical drive and the necessary software environment are created for each program that is installed on Mac OS through PlayOnMac. The terminal data directory can be found by the following path:
Library\PlayOnMac\WinePrefix\Client_Terminal_\Drive C\Program Files\Client Terminal
How to update Wine
During the installation of PlayOnMac, Wine is automatically installed and periodically needs to be updated to the latest version. To do this, open the upper menu on PlayOnMac and select “Manage Wine Versions.” A window will open, where you need to select the latest version of Wine. To start the download, move the latest version of Wine to the right side of the window. Once the installation is complete, the new version of Wine will be accessible on the left side of the “PlayOnMac Wine Versions Manager” window.