A lot of times, traders experience hindrances in terms of getting a desired or expected rate. It happens due to the vibrancy and frequency of the financial field, along with a lot of technical factors involved in it. This is quite a common phenomenon in the trading world.

Slippage represents the difference between the expected price of a trade and the price at which the trade is executed and happens when a trader places an order but gets it executed at a different price. Slippage can occur at any trading time but is most prevalent during periods of higher volatility. Traders can perform forex slippage control using Limit order or using Instant execution where the maximum deviation is 0 pips. The limit order defines the exact price where the trader wants to enter into trade and prevents slippage. However, there is no guarantee that the trade will be executed. On the other side, Instant execution where the maximum deviation is 0-1 pips allows the slippage to be brought to a minimum.

Slippage example: It can happen at any time (placing a buy order or a sell order.) There are various types of slippages, like forex slippage, stock slippage, etc. For example, suppose a stock you want to trade is having a bid-ask span of $22.10 to $22.11. You want to buy this stock, expecting it to get executed at $22.11, but the stock market doesn’t wait or stay still, so your order gets executed at $22.13; it can also be $22.09 if you get lucky. That is called slippage, and $22.13 or $22.09 is called the slippage price.

In small trades, slippage doesn’t impact that much, but when it comes to larger or institutional orders, a small slippage can cost in millions. Thus, according to the financial market, you are trading in, slippage controls, i.e., forex slippage control becomes vital and essential.

The Relationship Between Types of Order and Slippage

Typically, a slippage happens when a trader places an order using “Market Order.” A market order is the current market price at which a trader buys or sells stocks or currencies. It is used to enter or exit the market. To eliminate the unpredictability here, a trader can utilize the option called “Limit Order.”

A limit order provides a trader with the option to select his/her preferred trade price. It doesn’t get fulfilled on the market price and thus gives a good forex slippage control or stock slippage control to the trader. Though an important thing about limit order is the fact that it doesn’t get executed until the price you entered has triggered and sometimes it leads to missing out on trades.

For example, if you want to place a buy order for stock ABC at $10.25, it has the current market price of $10.30. So, you place a limit order to buy this stock at $10.25. It would save you from your order getting placed at a higher price than $10.25, but also it would only get executed if the price falls to the level of your limit price.

Entering and Exiting the Market

To enter the market (to buy) a stock or currency pairs, limit order and stop-limit orders are used. A stop-limit order is a combination of a limit order and a stop-loss; the loss is limited to the price of stop-loss here, but it is different from the traditional stop loss.

For example, now, if you want to sell the stock ABC, the current market price is $10.30; you want it to get sold at a higher price, but the financial market can change the game any time and thus, you want to save yourself from the downside risk. So, you put a stop-limit order at $10.10.

So, now, if the price of the stock ABC falls beyond $10.10, your stop-limit order would stop the selling execution below $10.10. But, if it had been a stop-loss order, it could have been sold at a price more slumped than $10.10. In falling stock condition, a stop-loss order becomes a market order.

Many times traders use a market order to get their position sold and book profit. In such cases, they lose the slippage control but save themselves from larger losses. For example, in the example given above, placing a stop-limit order would stop selling your stock at a price lower than $10.10, but what if the price continues to fall? Your losses would get wider and wider.

Whereas if it had been a stop-loss order, your losses would have been less than the stop-limit order as stop-loss becomes the market sell order if the price keeps on falling. It would have cost the slippage but would also have stopped the widening of losses.

Placing a market order lets you trade while placing a limit or stop-limit order ensures that you have the forex slippage control or stock slippage control over your market positions. It saves you from the slippage costs. Though stop-limit orders work better if the trade is in your favor. It can be learned eventually with practice as market movements are real-time and rapid.

How Significant Can the Slippage be?

When any huge events occur or news breaks, the chances of significant slippages are higher. Thus, it is recommended for traders not to trade when big news is expected to be announced. Big news can also reward with big profits, but that is not guaranteed as you can’t know in advance what is going to be announced, i.e., a company’s earnings call. As a day trader, you may expect the annual earning’s report to be great this year, you can predict a little, and it can come true, but what if along with that, the company announces an M& A. The price would witness a huge unpredictability, and you would face huge slippage costs.

The same thing can happen in the forex market if a nation announces a rise/cut in its interest rate. Even after using forex slippage control tools, you would be prone to downside risk. Thus, it is always recommended for traders to have an eagle eye on the events happening across the globe.

Also, taking a position after the news break can give traders opportunities to make a profit. But during that time also, using forex slippage control or stock slippage control like stop loss is always recommended. It is like having the option to apply brakes while driving a car.

Though applying tools of slippage control, doesn’t mean you are saved from losses, as you won’t have the slippage costs, but you would have the downside selling risk if the situation gets out of control. Though, your losses would definitely be less extensive compared to not using slippage tools. Managing the risk is very crucial for traders after all.

Slippage is Nothing New

Slippages are not new and happen all the time. Though apart from using the slippage control tools, as a trader, you can save your trades in a few different methods as well.

For example, if you are trading in the stock market in the U.S, try to trade when the major U.S. markets are open. Also, if you are into forex, trade while the major forex markets like London or the U.S. are open. It would give you some forex slippage control as most trades would be highly liquid, and you can get your desired prices.

It is important to note that a trader cannot completely avoid slippages; it is the variable cost that a trader pays to conduct the trade, just like in a business. Thus, it is recommended to use slippage control tools like a limit order, stop loss, etc. Though, if the market is too volatile, a market order is recommended for easy entry and exit.

As a trader, you are your own savior, thus trade accordingly and with enough knowledge about what you are getting into. Keep yourself updated with the news around the world, and use your own prudence for trading. Also, remember that sometimes the best trading strategy and slippage control tool is not to trade at all. The market is a violent and fascinating place, so you have to be firm and emotion-free in your trades.

Financial markets are not limited to just the equity market; they have a border prospect. Many diverse sets of markets fall under financial markets. Depending upon the risk-taking appetite, requirements, and interest, a trader chooses a financial market to trade.

One such financial market is the foreign exchange market. A foreign exchange market is a place where traders buy/sell various currencies. The forex market remains open from various parts of the world 24 hours. It starts on Sunday at 5 pm EST and closes on Friday at 4 pm EST. On the closing day, that is Friday, the demand for currencies is always higher.

In the forex exchange market, various exchange rates of currencies with floating rates are fixed. An exchange rate in the Forex market is the rate at which one country’s currency can buy another country’s currency. There are mainly two types of currency markets: the interbank market and the retail market. The forex market is the largest financial market in the world, with a daily estimated turnover of $6.6 trillion. A trader’s profit in the forex market depends on the demand and supply of currency pairs (in the forex market, currencies are traded in pairs) he/she is trading in.

An interbank market is a place where the large bank’s trade and exchange currencies with one another. As its highly vibrant market, it is suitable only for a few members like investment banks, hedge funds, etc. The main currency exchange values are being determined in this market.

For the majority of the population like individual companies and traders, over the counter market is the forex market place. There are numerous companies that provide the trading option for currencies online through trading platforms. One thing that the novice forex traders need to keep in mind is the fact that the forex exchange market is not a highly regulated market, and thus traders have to be cautious about their money and investments.

The largest over the counter market (geography-wise) is located in London, the U.K. As a result, most currencies have London’s quoted market rates. The forex exchange trading of the U.K as of April 2019 amounted to be 43.1% of the total trading volume in the world. As a result, London is a prominent forex trading canter across the globe.

Types of Currency Trades

In the Forex exchange market, trading is described as a contract between a buyer and a seller. It involves three types of currency trades; spot market trade, forward market trade, and swap trades. A swap market allows both the stated types of trading. It lets a trader buy a currency pair at the spot market price (current market price) and sell it at an agreed price on a future date in the forward market. It helps swap traders to mitigate the risk involved in the foreign exchange market. Swap traders’ risk becomes limited to the forward price, whereas they take advantage by investing in the spot market.

What is the Interbank Market?

In the interbank market, banks network and trade currencies with one another. It functions with a dealing desk that looks after trading currencies. Banks in this set up are constantly in touch with each other. As a result, they make sure that various exchange rates remain uniform across the globe.

In an interbank market, trades are gigantic; even a minimum trade deal is worth at least $1 million. Though most trades amount between $10 million to $100 million. That’s the reason why exchange rates are fixed in the interbank market.

In the interbank market, as mentioned above, trading takes place in three ways – the spot market, the forward market, and swap trading. In addition to that, banks also trade in the SWIFT (Society for World-Wide Interbank Financial Telecommunications) market. SWIFT market helps banks to transfer the trading transactions related data in a safe, secured, and reliable manner.

In the interbank market, the main reasons why a bank indulges are either for themselves, which is known as proprietary trading or either for their customers or clients. The purpose is to gain profit. It is noted that the customers here refer to governments, large corporations, sovereign wealth funds, hedge funds, and wealthy individuals. Retail investors are not included as it is quite expensive compared to individual foreign exchange trading.

According to Euromoney’s Forex Survey of 2018, below are the top 10 mammoth players of the foreign exchange market.

Here, Overall Market Share Captured caters to various forms in which a bank indulges in the foreign exchange market like “Non-Financial Corporation”, “Real Money Asset Managers”, “Leveraged Funds”, “FX Trading Platforms”, and “Banks.”

What is Retail Market?

The forex trading market that is open to retail/individual traders that cannot trade in the interbank market is known as the retail market for forex. The first retail market for currency trading was The Chicago Mercantile Exchange which launched the International Monetary Market back in 1971. Apart from this, there are various retail markets for forex trading, like Forex Capital Markets LLC, OANDA, and Forex.com.

Compared to the interbank market, the retail market has more participants, but again, the amount being traded remains higher for the interbank market. Retail market participants are price takers as the currency exchange rates are decided by the interbank participants. Thus, they do not influence the Forex market that much.

Do Central Banks Trade in the Foreign Exchange Market?

Well, unlike the investment/commercial banks, central banks have the responsibility of a nation’s financial health as in many nations, they are responsible for setting the monetary policies and printing money. Thus, central banks are not regular participants of the forex market, but they do influence it magnificently.

The reason behind this influential persona is the fact that central banks across the globe are the largest holders of foreign exchange reserves. For example, the Japanese central bank holds $1.2 trillion, out of which the majority is U.S. dollars. For exports, Japanese businesses get paid in dollars so if the central bank of Japan wants these businesses to reduce their exports; they can sell off these dollars in the forex market which would slump the price of the dollar. It will eventually make exports cheap resulting in lesser profits. Such a procedure would not be this direct though.

Another way a central bank can affect various types of the currency market is through changes in interest rates. One such examples is when the Federal Reserve in 2014 announced that interest rates would be increased in 2015. It led to the value of the dollar hike by 15%. So, in such ways, central banks across the globe have a massive influence on various types of currency markets.

The Forex Manipulation Scandal

Biggest investment banks like JPMorgan Chase, Citigroup, Barclays, and the Royal Bank of Scotland were found guilty for illegally manipulating currency rates in 2014. The process of this manipulation came out and shocked the world.

For the forex market, the WM/Reuters fix price is set at 4 pm London Time every day. So, traders of the stated investment banks used to gather up in online chat rooms and would decide to unload a huge currency position at the same time around. It is noted that the WM/Reuters fixed price is set based on trades taking place in the last minute. By selling the currencies just before a minute of setting price would ensure a lower fixed price. WM/Reuters is also the rate that is used to calculate benchmarks in mutual funds; thus, traders of these banks, as well as other banks, used to benefit as they already were aware of the prices.

Want to Know How the Forex Market Started?

Foreign exchange markets have been in existence for the past 300 years in one form or another. In the beginning, in the U.S, only multinational corporations used to trade in currency markets. It was more to save themselves from the risk involved in trading with other nations. They used to use the forex market to hedge the currency of another country. It was easier to do so as to back than the U.S dollar rate was fixed with gold prices.

The next phase of the foreign exchange market started in 1973 when President Richard Nixon fixed the prices of U.S. dollars with an ounce of gold. It helped in keeping the dollar rates stable at 1/35 of an ounce of gold. When this gold standard was dropped, it led to a fall in the value of the dollar.

Though, in the third phase, the U.S. Dollar Index was established. The purpose was to give businesses the opportunity to hedge their risks, but soon it turned out to be a profit-making instrument for various banks, traders and hedge funds like it is today.

It is noted that the U.S. Dollar Index is used for measuring the dollar’s value in terms of 6 major currencies namely Euro, Japanese Yen, the Canadian Dollar, the British Pound, the Swiss Franc, and the Swedish Krona.

The Last Words

The foreign exchange market is the place where the price of a currency is getting fixed through demand and supply of that currency. There are two types of currency markets in the forex market- the interbank market and the retail market. The interbank market rules the forex market with its large volume chunk traded by the big investment banks.

If you are just starting in this field of currency, you are advised to apply your cautious thinking and start trading with a relatively small amount. You can also try an online dummy account for practicing forex trading, so you can get your hands on forex trading and don’t lose real money. Also, do not fall for the “Get Your Money Doubled in a Month” kind of schemes; money would definitely get double, but theirs, not yours! So be careful and remember, with practice, persistence, and dedication, everything is possible.

Have you heard about the Forex home study course? Wondering what benefits you can obtain from this course? If yes, then please look no further as you have landed on the right page. Please keep reading and you will disclose all the details about this study course below.

First of all, this study course is ideal for those people who do not have time to attend on-location classes. They can utilize this opportunity to easily learn the right Forex trading techniques. Using these Forex trading techniques, they can even develop various trading plans as well.

Forex home study course is a free or paid online course that any trader can find on youtube or video-sharing platforms. Today there are around 5 billion videos on youtube and 300 hours of video are uploaded to YouTube every minute, hundreds of forex trading courses every month. Forex traders can find excellent several hours long trading online courses and webinars on youtube and watch for free.

Note, you can complete the Forex home study course at your convenience. For example, you can complete it in a day, in a week, or in a few months. Rest assured that once you complete the training, you will be a master on the following five topics…

* You will know how to identify the right trading opportunities
* How to time market
* When it’s the right time to enter the market and make profits
* When you should close a losing trade
* And, all other important aspects of Forex trading

Free forex home study course example:

For example, Dukascopy has an excellent youtube channel. Traders can search for top forex brokers webinars and find channels where they can learn from hundreds of videos from simple to advanced trading strategies.

Also, note that the Forex home study course is indeed a self-study course and that’s why it must be detailed and comprehensive. It should provide you all the details of Forex basics. These Forex basics are definitely important for all irrespective of whether you are a beginner or a professional trader. In addition to it, you will also learn various trading techniques that are used by expert traders including entry points in the long and short market, right and wrong buying/selling momentum, current market trends, and how to exit trades simply by using tested strategies.

Expert traders often recommend to opt for such a home-based Forex study course that should include/cover the following topics, such as the psychology of trading, why you should trade Forex, trading in single and multiple lots, moving average convergence and divergence, foreign currencies and tools, spot market explanation, Forex versus Futures and Stocks. These are some of the basic topics that should be covered by the home study courses of Forex.

There are a few more comprehensive courses that cover some critical topics including money management, tactical trading, balancing both risks and rewards, how to create trading plans, modern approaches of Forex trading, and more.

In addition to the above-mentioned topics, some home-based Forex study courses will even offer you access to demo trading platforms and free charting software. These tools are extremely important and essential for beginner-level traders. These tools will allow you to evaluate your Forex knowledge by applying the newly learned Forex techniques through a live demo trading platform. Well, there is a difference between these demo trading platforms and the real Forex market. Whether you lose or win in these demo platforms, you won’t risk your money. Plus, you will even gain strong knowledge and understanding of Forex.

The home-based Forex study course also has one significant benefit i.e. it teaches you about the essence of discipline trading. With the solid knowledge and idea about discipline trading, everything that you’ve learned will be completely useless. For example, if you start to trade with emotion, it will increase the chances and probabilities of losses. You won’t be able to avoid the pitfalls of Forex trading if you do not have any idea of discipline Forex training.

Home-based Forex study courses also have one important benefit. These study courses are available at an extremely affordable and reasonable price or they are 100% free. For instance, if you consider opting for a mentor-based Forex study program, it may cost you thousands of dollars.

Plus, you will learn the same detailed level of knowledge, hands-on guides, and time-tested techniques (as similar to mentor-based Forex study program) without burning a hole in your pocket. What’s more, it gives the convenience to learn the course at your own convenience without visiting any on-location classes. Thus, you can easily save your money, time, and effort by opting for a Home-based Forex study course.

So, what are you waiting for? Search youtube for excellent courses.

Foreign exchange is abbreviated as forex, and currencies of different countries are traded in the forex market. Every time foreign currency is traded a forex transaction takes place. For example, a person who goes overseas and exchanges US dollars for the local currency in the country is making a forex transaction. Since extremely sophisticated software for forex trading is now available, it is easier for individual traders to compete with larger firms and win forex every time.

When an overseas traveler purchases the local currency he is not interested in making a profit from this transaction, he only wishes to have enough money for spending on his trip. Usually, if there is any money left over at the end of the trip, it will be converted back to dollars at the booth for foreign exchange at the airport. This is a complete forex transaction.

In a very similar manner, forex traders would like to purchase a particular currency using dollars. Then within a short time period, they would convert it back to dollars, hopefully making a profit in the short term. A trader who is bearish about a particular currency may decide that he will short the currency. The trader will bet that the currency that he is targeting will decline in value compared to the main currency usually US dollars. Thus, forex trading is exciting and can also be extremely profitable.

Win forex every time is not possible. The top-performing winning rates, using equal stop loss and take profit targets, are around 55% in prop trading companies. Because spreads, these profits are even smaller (several percent traders lose because of spreads).

Beginners traders often think that trading is easy and if they have “perfect strategy” they can double account every month. This is not true. There is no perfect strategy or system that can bring fortune or a high sharp ratio, profit factor, or winning rate. Thousands of quantitative experts looking every day for new systems, test systems, create models, use machine learning, and various tools to develop a good system as they can.

Drawdown

On the other hand, smart retail traders risk 1% per trade or even less. Drawdown can blow the live trading account very easily.

As we can see in Table if the trader loses 1% he can recover easily with 1% next time. But if the trader loses 50%, he needs 100% to recover the portfolio.

Lifestyle

Additionally, there are many lifestyle-related benefits for forex trading. Many people are interested in working at home since they do not have to waste time traveling to their workplace. Unfortunately for them a majority of these work at home programs require large investments and offer low income. Forex traders are free to work from their home or any other place they wish. Many of the largest forex markets have existed for centuries. The different forex markets in various countries are legitimate since some of the most reputed institutional investors like banks and retail traders are using them. Proof of the massive profits generated by some of the traders is available for those who wish to check.

Timings

Since the forex trader can trade in all the forex markets worldwide, he can trade all 24 hours of the day. Traders who prefer to trade at night can do so till early in the morning. Early birds can start their forex trading early in the morning much before stock markets in their country will open. Thus the forex traders are free to finalize a schedule that is convenient for them. They can easily trade from any place with internet access. So if a forex trader is successful, he usually has a lifestyle that most people envy.

Forex traders can have even more free time by using automated software incorporating the latest technology. The software programs will help in the automated execution of forex trades. The trader only has to define the right trading strategy and risk levels acceptable, after which the trading robots will complete the trades. The trader does not have to sit in front of the computer monitor for many hours daily.

Mistakes of forex traders

Many new forex traders make the mistake of trying to randomly predict the fluctuations in the value of different currencies without taking help from the forex software available. They are usually not aware that in the forex market, the value of currencies will fluctuate rapidly and these fluctuations depend on a large number of factors. Traders who try to predict the variations manually often find that they made a mistake. Luckily for these traders, there are trading programs that are automated and sophisticated which they can use to compete with other forex traders.

But automated software, expert advisors can not bring high profit as well. Expert advisors make losses as well as humans but emotions do not affect the robot’s decisions.

Many forex traders are making mistakes and taking incorrect decisions, resulting in losses because they let their emotions affect their decisions. This is a major problem for new forex traders since they are inexperienced. Hence, increasingly traders are preferring to use robots since emotions do not affect the robot’s forex trades. The automated robots for forex trading will execute their trades based on the logic programmed into them and the forex market numbers which are input. Traders who are trying to make a profit by trading in forex using a combination of their guesswork and intuition usually make a much lower profit or a loss.