Education
education
Deaching of the great explorer of the truth the builder
What is a LOT Size in Forex Trading
Forex is commonly traded in specific amounts called Lot Sizes, also referred to as Position Sizes, which are simply the number of currency units you want to buy or sell. Like buying 1kg of butter, or a dozen eggs from your local supermarket, anything you buy or sell is determined by a unit of measurement. Just like gold is traded in Kg. or Ounces, and oil in barrels. Trading a single unit of a currency pair isn’t viable; this is where Lots come in. To trade currency pairs, you need to understand the concept of a Lot in Currency Trading. To define it simply, a Lot is a unit measuring a transaction amount. In several of our blog posts, including our most recent, Currency Trading and its 7 Pairs, we make mention of Pips, which refers to the change in the value of one currency in relation to another. A pip is usually the 4th decimal place, and therefore a very minute measure. – To be able to benefit significantly from these minute changes in the value of currencies, you need to trade relatively large amounts of a particular currency pair. Pips enable you to trade these very tiny movements in relatively large volumes referred to as Lots. On your trading platform, when you place a Buy or Sell order, these orders are placed in Lot sizes. In forex trading, Lots are subdivided into 4: Standard, Mini, Micro, and even Nano Lot sizes. A Standard Lot translates into 100,000 units of a currency; a Mini Lot, 10,000 units; a Micro Lot, 1,000 units; and a Nano Lot, 100 units. (Each being a 10th of the former). Some brokers show the currency quantity in Lots, while others show them in the actual currency units. This is intended to give you more control over your risk exposure. So for example, you could choose to buy 100,000 Lots in base currency GBP/USD- That is a standard Lot. Or you could buy a Micro Lot of 1,000 GBP. LOT SIZE Standard Lot: 100,000 UNITS Mini Lot: 10,000 UNITS Micro Lot: 1,000 UNITS Nano Lot: 100 UNITS Lot Size Forex Calculator 1. Calculate Your Risk: It is necessary to calculate your risk in terms of percentages before you can establish the right Lot size to use. Normally, it is suggested that traders adopt the 1 percent rule. This means that in the event that a trade is closed out at a loss, no more than one percent of your overall account balance should be at risk. 2.Set A Stop Loss: With any open position, a Stop Loss should be established to indicate the point at which a trader desires to quit a trade in the event that the market doesn’t move in their favor. There are nearly limitless ways Stops can be put. When placing orders, traders would typically use major lines of Support and Resistance as guiding lines. You can use Set A Price Action, Pivots, Fibonacci Ratios, and other approaches to determine these values. 3. Calculate The Pip Cost: It is necessary to calculate the pip cost for your trade as the final step in choosing a Lot size. The cost of a pip is the amount of money you will gain or lose for each pip. As the size of your Lot grows, so does the value of your pip. On the other hand, if you trade with a smaller Lot size, your profit or loss per pip will be reduced as well. The EUR/USD Pair Will Be Used in Our Example Below: For context, if you buy EUR/USD, you’re speculating, per your analysis, that the Euro will strengthen against the dollar. If the price quoted is 1.3000, this means you’ll exchange €1 for $1.3000. To put it differently, you’ll need $1.3000 to buy €1. So, if you wanted to trade standard Lots, this means that at the current price, you’ll need 130,000 units of the quoted currency (USD) to buy 100,000 units of the base currency (EUR). A Mini Lot size is one-tenth the size of a Standard Lot, meaning that a Mini Lot is worth 10,000 units of currency in forex trading. The size of a Mini Lot also means both the profit and loss effects are lower than with standard Lots. In our EUR/USD exchange rate of 1.3000, one Mini Lot of the base currency (EUR), will be 13,000 units. Meaning you’ll need 13,000 units of the quoted currency (USD) to buy 10,000 units of EUR. A Micro Lot size is one-tenth the size of a Mini Lot, which is 1,000 units of currency. Pip movements result in cash swings of 1 currency unit, e.g., €1. Again, in our EUR/USD example of 1.3000, a Micro Lot will be 1,300 units; meaning you’ll need 1,300 units of the quote currency (USD) to buy 1,000 units of EUR. Micro Lots also require less leverage, so a swing won’t have as much of a financial impact as compared to larger Lot sizes. A Nano Lot size is, you guessed it- one-tenth the size of a Micro Lot, which is equal to 100 units of currency. In effect, 1 Nano Lot of the base currency EUR will be 130 units, so you’ll need 130 units of the quoted currency USD for 100 units of EUR. The good news is although it’s relatively easy to calculate Lot sizes, you normally won’t need to calculate the Lot size yourself. A good trading platform, like Geldex, will calculate and tell you what you need to know. It will also be clear on what Lot sizes are available when placing a trade- whether Standard, Mini, Micro, or Nano. How to choose the Best Lot Size in Forex Trading After your choice of Forex Broker, a very important individual decision you will have to make when you begin currency trading is finding the Lot size that best balances opportunity and risk. The Lot size you trade directly impacts how much a market or pip move affects your account; for instance, a 100-pip move on a small trade
Market volatility and how to handle it in forex trading
You’ll often hear it said that the forex market is the most liquid financial market in the world, and indeed, it is. Liquidity refers to how active a market is, which in Online Forex Trading, is determined by the number of active traders and the volumes they are trading. We discussed this at length in our article – “The Benefits of Online Forex Trading”. As financial centers around the world open and close throughout the day, liquidity fluctuates, having a direct and major effect on Market volatility. Periods of volatility are inevitable in any market, and forex is no exception, which can tend to frustrate new traders; for this reason, understanding market volatility in forex, as you begin to trade, is very necessary. You might see a currency pair’s price as high or low as it can get before buying or selling, but the very nature of volatility means that it could go up or down even further, and when you’re dealing with prices that change by the minute, timing is critical. In this article, we discuss the ways by which one can determine market volatility, as well as the five strategies that can be used both to preserve your capital, and hopefully profit from rising and falling market volatility. Market volatility, in simple terms, refers to the price fluctuations of assets. In Forex Trading, it refers to the frequency and extent of currency price changes- either up or down. When the price of a currency pair fluctuates rapidly, widely up or down, it is said to have high volatility. On the other hand, low volatility refers to relatively stable currency pair prices, with slow or small changes in value over time. It is therefore essential to take note of how volatile a currency pair is before entering a trade. Value fluctuation of assets over time is a normal feature of every market; be it stocks or currency pairs. However, often in Online Forex Trading, price fluctuations can become a lot wilder than usual, varying greatly from its mean position, as many Traders buy and sell at different prices. Market volatility in Forex Trading, as indicated above, is characterized by wide ranges in price, high volumes, and more trading in a particular direction. A deeper analysis of volatility – both Historical Volatility and Implied Volatility – using the most common market volatility formulae – Bollinger Bands; The VIX; Average True Range (ATR); Relative Strength Index (RSI); and established Support and Resistance Levels – further suggests that there is a higher probability of a falling market when volatility is high, while lower volatility is more common in rising markets. Experienced Traders who Invest in Forex Trading over the long term, know that given the interconnected nature of the online forex market, volatility can be experienced at any time; Smooth-Trending or Range-Bound Markets can be interrupted by sharp shocks and unwanted or unexpected periods of volatility. Warren Buffet is quoted as having once said “Look at market fluctuations (Volatility) as your friend, rather than your enemy”. There are numerous factors that cause volatility in markets; these include sudden announcements from Central Banks, Country-Specific Economic News, Company news, unexpected production/earning results, and general market sentiments. HOW TO HANDLE VOLATILITY IN FOREX TRADING 1- Educate Yourself and Get Knowledge of Market Sentiments The importance of Education in Forex can never be overemphasized. With Online Forex Trading, there’s ALWAYS room to improve on your knowledge. You need to do your research and constantly review your trades, both when it appears difficult and when trading seems easy. In one of our earlier blog posts- Why Education and Training in Online Trading is A Must Before Trading Forex – we discussed at length the importance of acquiring and mastering the skill set needed for online forex trading, and how to make use of Fundamental and Technical Analyses. It’s an essential skill to master and requires a Trader to look into Market Volatility News in forex, including the various releases put out by governments, central banks, and other major players of the Forex Market. To get a head start in the market, you should keep up with market volatility news and your forex calendar, and educate yourself on how the market responds before and after news releases. 2- Learn to Manage your Risk and Focus on Small Trades It’s of absolute necessity that you understand the risk involved with every trade you take. Knowing the potential returns on each trade by having a good idea of all the possible Entries and Exits, forces you to systemically visualize and compare your trades. As a Trader, you should constantly uphold certainty over risk; When market volatility is high, it is advised to reduce your leverage and position sizes. During volatile markets, you could also place smaller trades, thus committing less capital per trade. You can also repeat trades that work for you; picking one side to trade, and trading on that side until it stops working for you. Low volatility markets, in particular, may not offer the most ideal or most profitable trading conditions, as it’s not certain which direction the market is moving in. The best thing you could do in a low-volatility market is to consider taking a pause from trading until a clear direction is seen, or until you can determine clear Range-bound conditions to utilize your range-bound strategy. 3- Apply Volatility Risk Measures to Your Orders in Advance In one of our previous articles – Facts to Know About the Most Successful Traders in Africa– we talked about how important it is to use a Stop Loss, as this is an indication of the exact amount of risk you are willing to take on a trade even before you enter it. You can also consider using Long-Term Averages to reduce the chances of a price spike when volatility is high, instead of using Moving Averages to set levels. With low-volatility markets do not expect to make huge orders; Instead, focus on small order sizes with
Geldex Marks 1st Anniversary with Digital Finance Training for over 300 Tertiary Students
Geldex Invest, a multi-regulated broker entity, as part of its 1st anniversary commemoration, has embarked on a campaign to train over 300 undergraduates from selected universities in ‘Digital Finance’. The four selected universities to benefit from the initiative are the Koforidua Technical University, Valley View, Ghana Telecommunication University, and the University of Ghana, with some students already enjoying the hands-on training. Geldex believes that it is important the youth are included in decision-making and given appreciative opportunities for work, training, and to innovate. It intends to train these 300 undergraduates on the capital market, and the need to indulge and explore career and financial paths in forex trading. The capital market, especially the foreign exchange market, is the most liquid market on earth. Global Gross Domestic Product (GDP) of the forex market in 2019 amounted to roughly US$142trillion, with the entire worth of the market standing at US$2.4quadrillion, and with over 170 currencies being traded. This was reported by the Bank of International Settlement. The population of sub-Saharan Africa is projected to double by 2050, as indicated by the United Nations and currently, 60 percent of the population is under the age of 25, making Africa the world’s youngest continent. The burgeoning youth population is both an opportunity and a challenge for the continent. Internet, digital penetration, and engagements of African youth increased from 24.4 percent in 2018 to 90 percent in 2020 indicated by ITU Digital world (Child Online Protection Organisation). But most of the activities online by the youth are not very productive even though great career and financial opportunities abound online. Such a high number of young people is an opportunity for the continent’s growth, but only if these new generations are fully empowered and trained to realise their best potential. The United Nations estimates that 16 million young Africans are facing unemployment. On average, 11 million young people join the African labour market each year, yet the continent generates only 3.7 million jobs annually, a gap too wide to be ignored. It is to this effect that Geldex Invest, a multi-regulated broker, as part of its 1st commemoration is embarking on this Digital Finance programme for the youth. The International Market Analysis Research and Consulting (IMARC) group predicts a compound annual growth rate of six percent for the forex industry in the next five years. The industry is green in Africa, especially in Ghana – the more reason why there is need to study and train to bridge the educational and capacity gap in the hope of future opportunities. Geldex Invest has made its mark in the African Financial industry with its operations in this short time. The official sponsor of the African Financial Traders awards 2021, in collaboration with Women in Forex Ghana, under her initiative ‘The Elevate Ghana Forex Project’, has trained over 400 youths in forex education across four regions since the beginning of the year, 2022, and continues to impart financial literacy into the youth. The goal is to adequately equip the youth with the skill set that is relevant in this pandemic era for a better livelihood, gear the youth toward productive online engagements, and reduce cybercrime while helping government’s policy to reduce unemployment.
Why consider forex trading as your next investment move
A hard reality of our current situation is that at the time of writing this article, if you did a dollar conversion of your salary in Ghana as of January 2022, it’s safe to say you’ve been hit with a 50% salary cut, if not more; and it won’t stop there. Troubled? You should be. If you’re reading this article, you’re most likely particularly interested in Online Forex Trading, or are simply like many looking for an alternative investment. As the world teeters on the brink of economic catastrophe, with economists anticipating another global economic recession a little over 10 years after we came out of one, institutional investors, businesses, households and everyday people are frantically searching for alternative investments. Forex investment has a lot to offer all kinds of traders, from beginners to professional traders; and in this article Geldex explores the five most compelling reasons why you must consider Online Forex Trading as your next investment move. Global Economic Hedge With Global economic activity experiencing a broad-based and sharper-than-expected slowdown, inflation has been higher than expected in the aftermath of lingering effects from the COVID-19 pandemic, Russia’s invasion of Ukraine, the rising cost of living, and tightening financial situations. These are all weighing heavily, especially in the face of global growth being projected to slow from 6.0% in 2021 to 2.7% in 2023 – a record low since 2001. This comes with attendant inflation – forecast to rise from 4.7% in 2021 to 8.8% by the end of 2022. The IMF has warned: “The worst is yet to come, and for many people 2023 will feel like a recession”. As Ghana engages in Debt Restructuring with the International Monetary Fund, government securities, including Treasury bills and bonds – previously regarded as an all-safe, risk-free investments – are most likely to lose a large aspect of that safety and protection from risk. Now more than ever, in the present economic situation Forex Investment has become an absolute necessity to guard against financial shocks, missing out on high-potential opportunities, and to hedge against inflation. The currency market allows you to invest in Forex by trading currencies based on how you perceive their relative values will change over a period of time. Depending on which direction you believe a particular currency is headed, you can speculate or project both ways; either long or short. After having gained enough experience, you can allocate your risk across the currencies of several countries; allowing you to profit from changing global macroeconomic conditions. A level playing field Online Forex Trading was previously reserved for multi-national corporations, banks, financial institutions, and very wealthy investors. With prevalence of the Internet and technological advancements, Forex trading companies and proprietary currency trading platforms, this investment opportunity is now open to everyone willing to invest. The same technologies that have made online forex trading possible are the same ones that have made information freely available. In addition, unlike other capital markets, the news that drives currency prices is available to everyone on a real-time basis. Unlike stocks, bonds and even commodities which can many times be influenced by proprietary information held by insiders and key stakeholders of those assets, control of the currency market is much less centralized – and thus far less influenced by insider information, if ever. This aspect of online forex trading makes it one of the most transparent markets for trading. Knowledge is indeed power, and today’s information technology provides it in abundance. The speed at which technological advancements have ensured news travels across the globe means that someone investing in Forex can monitor their open positions from anywhere on the globe, and can react just as swiftly as a professional trading from the very centre of it in New York, London or Tokyo. Resources previously available only to large financial institutions are now open to all who may be interested in Forex investment. This means you can do your own analysis of events that influence a country’s economic health and actual monetary flow, which are the elements driving and impacting currency valuations. Thus, the online forex trading market cannot be controlled by one person or a few individuals and institutions. Considering how incredibly complex the online forex market can be, coupled with the myriad of influences (both macro and micro) they are subject to, everyday people investing in Forex are now better-positioned than they have ever been to take advantage of information and use it to manage their capital profitably. Volatility In simple terms, volatility refers to the price fluctuations of assets. It measures the difference between the opening and closing prices over a period of time. When looking to invest, many people tend to gravitate toward more stable options – such as the Real estate market, which is largely viewed as a solid investment market. But who says volatility has to be a bad thing? In actual fact, when a market moves frequently it creates an avenue for many opportunities to make strong gains within a relatively short period of time. Warren Buffet was once quoted as saying: “Look at market fluctuations (volatility) as a friend, rather than an enemy”. The volatility of currencies is influenced by a number of factors, including but not limited to: The economic stability of a particular country Global economic happenings as a whole Political news, events and policies (e.g., interest rate fluctuations, currency revaluations, political upheavals, trading sanctions, monetary policy changes, trade deficits, tax changes, import restrictions, etc.) Trade deals, etc. On any given day, Forex markets can move between 50-100 pips on a major currency pairing, allowing investors to cash-in on poor-performing assets or seize upon potential opportunities that present themselves. Regulation Forex Market regulations refer to the rules, laws and guidelines that Forex Trading Companies or brokers operating within the Online FX Trading space must abide by. They extend to the continuous oversight and enforcement of these rules. Forex Investment is well regulated by several bodies across the globe – including CYSEC (Cyprus Securities and
