When it comes to averaging down, traders must not add to positions, but rather sell losers quickly with a pre-planned exit strategy. Additionally, traders should sit back and watch news announcements until their resulting volatility has subsided. Risk must also be kept in check at all times, with no single trade or day losing more than what can be easily made back on another.
From a historical standpoint, foreign exchange was once a concept for governments, large companies, and hedge funds. But in today's world, trading currencies is as easy as a click of a mouse—accessibility is not an issue, which means anyone can do it. In fact, many investment firms offer the chance for individuals to open accounts and to trade currencies however and whenever they choose.
These currency pairs, in addition to a variety of other combinations, account for over 95% of all speculative trading in the forex market. However, you will probably have noticed the US dollar is prevalent in the major currency pairings. This is because it’s the world’s leading reserve currency, playing a part in approximately 88% of currency trades.
Breakout trading refers to heavy and volatile price movement through support and resistance levels. Breakout trading is also a form of scalping, when trades are typically closed randomly or around the next pivot point. The previous day's high and low are two very important pivot points, for this is the definitive point wherein buyers or sellers come in the day before. Watch the market to either test and reverse off these points, or push through and show signs of continuation.
The spread, in Forex, is the difference between the bid and ask price of a currency pair. For example, if the Bid price of the EUR/USD is 1.16668, and the sell price is 1.16669, the spread will be 0.0001, or 1 pip. In any Forex trade, the value of a currency pair will need to cross the spread before it becomes profitable. To continue with the previous example, if a trader entered a long EUR/USD trade at 1.16668, the trade wouldn't become profitable until the value of the pair was higher than 1.16669.
More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.