Stop Loss and Take Profit

This article will provide an explanation of what is a stop loss and a take profit when trading forex.

Stop loss and take profit forms two important elements of trade management and is just as important as the analysis one would do before.

It is profitable to make long-term trades on the Forex market. You can close trades or you can use Stop Loss (SL) and Take Profit (TP).

Take Profit defined as target price is an order that you tell or send to your broker informing them to close your position when price which reaches a specified price level in profit.

The Take Profit setting closes the trade at the profit level you’ve set in advance. For example, when making a trade, you’ve set Take Profit 150 pips. If you reach this amount, the trade will close automatically.

That means that once the profit reaches 150 pips, the trade will automatically close. You will get the trade amount of $150 profit on your account (depend on pair of your trading).

Your Capital is at Risk

We need them to reduce risks, to fix the profit level and not to sit in front of the monitor 24/7.

The Stop Loss setting closes the trade at the loss level you have set. For example, when making a trade, you have set Stop Loss 100 pips. If you lose this amount, the trade will close automatically.

That means that if your forecast is not correct and the loss amount is 100 pips, the trade will automatically close. You will get the trade amount of $100 or over loss on your account.

Forex Equity

This entry particularly forex beginners. You should be to understood the text below about what’s forex equity and why it is important to your account.

In accounting equity is the difference between the value of the assets and the value of the liabilities.

An equity trade, can be placed by the owner of the shares, through a brokerage account or through an agent or broker.

Equity can indicate an ownership interest in a business, such as ‘stockholder’ s equity or owner’s equity.

For example, if you owns a home worth £100,000 as an asset, but owns £50,000 on a loan against that home (a liability), the represents £50,000 of equity.

Equity is an asset, so it’s a part of your total net worth. The value of an asset less the value of all liabilities on that asset.

In the accounting and corporate, lending world equity refers to the amount of capital contributed by the owners or a company’s total assets and it’s total liabilities.

Trading on equity which also referred to as financial leverage. It is occurs when a corporation uses bonds, other debts and preferred  stock to increase its for earnings.

Equity in forex trading is simply the total value of a forex- trader’s account. It’s actual amount of funds in the account currently including all open trades.

Equity refers to the amount of money a trader has in their trading account. Plus or minus any profit or loss from open positions.

Equity means the combination of liabilities and owner’s equity. When you entry a position and it’s floating loss, the equity is decrease. But if you made profit in the trading, your equity increasing depend on the pips you’ve got.

Public and private keys vs public address

To Understand bitcoin and its intricate structure, you need to know the difference between three terms whose definitions are often, easily (and mistakenly), interchanged.

Private keys:

In their purest form, private keys are 256 bit numbers that are generated randomly and used to authorise the spending of bitcoin. ‘Bit’ is short for binary figures : a0 or  a 1.

Since the number of possible 256 bit combination is extremely large, a simpler system has been created to represent the private key.

A 64 character hexadecimal system using letters a-f and numbers 1-9 like so: (digital coin address).

Public keys:

Derived from the mathematical theory of elliptic curve multiplication, public keys are created from private keys. They are used to confirm that the data sent in the block chain is authentic, in other words that it comes from the owner of the specific private key.

Thanks to the public key, the private key takes the shape of a digital signature, without ever being publicly revealed.

The receiver, or any peer in the network, will only see the digital signature and public key. Example of a public key: (as a public key).

Public address:

Also known as the bitcoin address, the public address is also a major identifier for a transaction and it’s derived from the public key.

In fact, this is the information that people need to input it they wish to send you bitcoin.

Each bitcoin transaction carries with it a unique public address, generated by applying the public key into a cryptographic algorithm called Secure Hash Algorithm (SHA).

TRUST:

You’ve heard the term “trusted third party” before, right? Traditionally speaking, this third party is the mediator between any customer and any merchant.

Banks and financial institutions or online payment processors are conventional third parties that help facilitate transactions.

Naturally, any transactions that involve people’s money must be built on trust. After the 2008 financial crisis, this core principle was shaken as the concepts of fraud and disputes became more prominent.

Traditional trust constitutes good faith towards the middle man, should any disputes or claims of fraud arise, it is up to this intermediary to settle them.

The system works relatively  well, but merchants end up incurring costs, customers are asked for more information, and transactional fees increase.

Coupled with fact that the traditional trust system took a hit after 2008, Satoshi Nakamoto came up with the Bitcoin Network as a new kind of trust system, based on the P2P network.

Decentralisation & the peer to peer network

The core principle of decentralisation is the removal of a central, controlling body, whether that be an entity in the form of a financial institution (i. e. a bank), a trusted “third party” in the form of a payment provider, or an individual middle man between the sender and the receiver of a transaction.

One type of decentralised system like this has existed for many decades. Known as peer to peer. Or P2P for short.

This network consists of in its most simplified definition, two or more computers connected to one another and sharing all types of data.

Torrent file sharing, which is widespread and allows users to download music, movies, documents and other types of files is based on a P2P network.

P2P technology has a long history. As a fault tolerant network, P2P was initially designed for the purpose of transmitting military messages without any vulnerability to human fatality, natural phenomena or technical malfunction.

Its primary feature is its autonomy  in other words, its inherent decentralised nature.

P2P network has no centralised authority or regulatory entity that monitors, facilitates or controls any of the data that is shared between the two peers.

Satoshi Nakamoto

Emerging from the world of cryptography in the mid 2000s, the mysterious Satoshi Nakamoto is credited as the mastermind creator behind bitcoin the currency, and bitcoin the network.

Is that is real name? Is he Japanese? Or American? Is he or she, in fact, a lot of people merged under one pseudonym? To this day, no one knows.

As a direct response to the financial crisis of 2008, Satoshi Nakamoto envisioned a new and decentralised digital currency system he called bitcoin.

In October 2008,Nakamoto published a paper entitled “Bitcoin” : A peer to peer Electronic Cash System” which detailed a payment system based on chains of data blocks (later to become knowns as block chain) and the removal of third parties between transactions.

I came at a perfect time, of course, because a lot of people had lost trust in traditional financial institutions due to the crisis.

Nakamoto’s proposal detailed how the new system would function without financial institutions, how a peer to peer network would resolve the issue of double spending and what this new system would mean for transactional.

Privacy

A few years after his proposal, Satoshi Nakamoto stopped being involved in the development of bitcoin and completely disappeared from all public forums.

Parabolic SAR indicator

Forex – Parabolic SAR indicator

The Parabolic SAR is an indicator that follows the trend and determines the reversal point in the price channel. SAR literally means “Stop And Reverse.”

Visually, it takes the form of a series of dots that are either above or below the price chart.

How to setting parabolic SAR indicator on the olymp trade android apps?

a) First, switch to the Japanese candlesticks chart.

b) You can set the period and the color of the indicator dots. For the period, we recommend leaving the standard value – 0.02.

c) If you increase it, the indicator will give more signals, but their accuracy will decrease. If you decrease it, the signals will be more accurate, but there will be fewer of them.

d) The longer the indicator’s period, the greater the expiration time must be.

e) The farther the Parabolic SAR dots from the chart, the more stable the trend. The closer the dots, the more likely the trend is to reverse.

f) The Parabolic SAR gives accurate signals only if the market trend is strong.

Trade on the direction of the trend?

1. You can use the Parabolic SAR to trade on the direction of price movement or when the trend reverses.

2. Observe the chart. If the dots do not change direction, this means that there is no trend reversal signal and you can open a trade on the trend.

3. The trend is ascending if the Parabolic SAR dots are beneath the chart and the parabola ( candlesticks chart ) is being built bottom up.

The trend is descending if the dots are above the chart and the parabola ( candlesticks chart ) is being built top down.

How to trade on a trend reversal?

If the first Parabolic SAR dot appears beneath a green candlestick, this is probably a signal of an upward price reversal as below image following.

If the first Parabolic SAR dot appears above a red candlestick, this is probably a signal of a downward price reversal as below.

Note that the appearance of a second confirming dot after the indicator has changed direction is a trend reversal signal.

The information above is puts from olymptrade.com

What is the Ichimoku Cloud?

The Ichimoku Cloud is an integrated trend indicator.

It allows to identify both the direction of a price and the strength of a trend.

The indicator consists of 5 lines similar in operation, but with different types of moving averages.

With this structure, it generates several types of signals at once to help find market entry points with high accuracy.

The first type of Ichimoku Cloud signals

The Ichimoku Cloud generates 3 types of signals. The first and basic is the intersection of the Tenkan Sen and Kijun Sen lines.

When the Tenkan Sen crosses the Kijun Sen upwards from below, it likely indicates a rise.
The shape that these lines form is called a “golden cross”.

If the Tenkan Sen crosses the Kijun Sen downwards from above, it likely indicates a fall.
The shape formed when the lines intersect this way is called a “dead cross”.

We recommend using standard periods and an offset.

As for style settings, the Tenkan Sen and Kijun Sen lines can be highlighted with brighter colors or their thickness can be increased.

In the majority of cases, a trade is opened when these lines intersect.

The more noticeable they are, the easier it is to read their signals.

The images and the points were put from olymptrade.com.

EMA signals

How do I read EMA signals?

We recommend leaving the standard settings. If you want, you can change the line thickness and color.

The basic principle of trading with the EMA is to trade on the direction of a trend.

The optimum time to open a trade is when the asset price reverses. This is indicated by a change in the direction of the EMA line and its intersection with the chart candlestick.

A reasonable sign of a price reversal downwards is when the indicator crosses the candlestick chart and the EMA line turns downwards.

When the EMA line reverses and heads upwards, crossing the candlestick chart, it likely signals a rise.

Momentum

Aroon or momentum is an oscillator. It helps determine the direction of the price and find trend reversal points.

Momentum takes the form of a line that moves and periodically crosses the 100 level.

What is SMA

The Simple Moving Average or SMA is often called the ordinary or simple moving average because it is calculated with the simplest formula in the class.

In this case, the average asset price for the selected period is used.

The SMA helps identify a trend and clearly shows when it will end.

How do I read SMA signals?

The SMA is used both in combination with other indicators and on its own.
If the SMA rise above its average, then the indicator’s ascending movement will continue.

When the chart crosses the indicator upwards from below, it likely signals a rise.

If the indicator falls below its average, this implies a descending trend.

When the chart crosses the SMA downwards from above, it likely signals a fall.

Secrets of SMA indicator

The simple moving average (SMA) is one of the most popular and simplest indicators.

The SMA averages price data and helps reveal trends. Visually, it is a line.

It reliably tracks the chart and, smoothing out random price fluctuations, it shows the direction in which the asset’s value is moving.

Trading on a trend reversal

The strategy is based on a combination of the MACD oscillator, the exponential moving average (EMA), and the Parabolic SAR.

Together, the signals that they generate help you efficiently analyze the current trend and see its reversal just in time.

Trading using RSI on the reversal of a trend

This is a counter trend strategy. It’s main principle, therefore, involves trading on a trend reversal.

As its name implies, the strategy is based on the RSI oscillator.

It generates 3 key signals – overbought, oversold, and divergence.

These are the ones that help find trend reversal points.