Tag: Ask

Categories
Crypto Guides

What Is Crypto Arbitrage Trading?

Introduction Arbitrage is known as ARB, and this trading technique is used to facilitate the purchase and sale of similar assets simultaneously. This offers traders the opportunity to gain profits from different price levels. This form of trade acquires profit by leverage market inefficiencies. So if there is a price difference between identical securities in various […]

Introduction Arbitrage is known as ARB, and this trading technique is used to facilitate the purchase and sale of similar assets simultaneously. This offers traders the opportunity to gain profits from different price levels. This form of trade acquires profit by leverage market inefficiencies. So if there is a price difference between identical securities in various […]

Introduction

Arbitrage is known as ARB, and this trading technique is used to facilitate the purchase and sale of similar assets simultaneously. This offers traders the opportunity to gain profits from different price levels. This form of trade acquires profit by leverage market inefficiencies. So if there is a price difference between identical securities in various markets, we get winning opportunities. This is a great method to gain risk-free profit from discrepancies in prices. While this method comes to determining the ideal arbitrage opportunities and implementing it efficiently is quite challenging.

There are two types of crypto arbitrage:

Regular Arbitrage

It refers to purchasing and buying the same digital assets on various exchanges with considerable price differences.

Triangular Arbitrage

It encompasses price differences between three currencies on the same exchange. Traders to leverage the price difference through various conversions.

Although both approaches can be highly profitable, there are more challenges to identify opportunities for triangular arbitrage. Moreover, a large volume of trading on a similar exchange may qualify the trader for competitive fees, resulting in a positive impact on the profits.

Arbitrage Trading in the Crypto Market

While the concept remains the same, it involves different assets. There are hundreds of exchanges operating across the globe that allow people to purchase cryptocurrencies. Cryptocurrency prices are constantly changing across different exchanges. There are many social, political, and economic reasons that contribute to these changes. Arbitrage trading in this landscape is quite straightforward and depends on determining profitable paths.

Identifying the Right Path in Arbitrage Trading Paths

Arbitrage trading is extremely sensitive to time. Variations in the prices are temporary in nature. Potential trading profits generally stand between 1% and 6% per transaction. Therefore, traders need to leverage the right arbitrage software and tools to scan and monitor the market in real-time.

The opportunity for the cryptocurrency is calculated by determining the overlap between the lowest ask prices and the highest bid prices. So when the price of the bid is higher in one exchange than the asking price on another crypto exchange, this is designed as an arbitrage opportunity. Similar to any other method of crypto trading, there are certain risks associated with it. But people have created different strategies to mitigate the risks as much as possible.

Advantages of Crypto Arbitrage Trading

💰 With the right profit, it is a credible way to boost the capital. Similarly, it is all about speed, and you will make money quicker with regular trades.

💰 Most exchanges do not share and operate on their own. Typically, cryptocurrencies experience many rapid rises and sudden falls, resulting in price disparities and profitable arbitrage potentials.

💰 There are over 200 exchanges where you can purchase and sell cryptocurrencies. This means there are tons of profitable arbitrage opportunities.

Contrary to the market speculations, crypto arbitrage has witnessed massive success. It has proven a way to make some extra money without putting much effort. Considering that digital money is not subjected to social influences, and no-one controls them, people are highly inclined towards their potentials to increase in value in the near future.

Categories
Forex Assets

Asset Analysis – EUR/NZD Forex Currency Pair

Introduction

Introduction

Introduction

EURNZD is the abbreviation for the Euro area’s euro and the New Zealand dollar. It is classified under the minor/cross currency pairs. In EURNZD, EUR is the base currency pair, and NZD is the quote currency. As a matter of fact, in all currency pairs with euro in it, EUR is the base currency.

Understanding EUR/NZD

The value of this pair defines the New Zealand dollars required to purchase one euro. It is quoted as 1 EUR per X NZD. For example, if the value of value in the market is 1.6650, it implies that to buy one euro, the trader has to pay 1.6650 New Zealand dollars for it.

EUR/NZD Specification

Spread

Spread is a very popular term in the forex industry. This is the way through which the broker makes revenue. Spread is simply the difference between the bid price and the ask price. It differs from the type of account model. The spread on ECN and STP is given below.

ECN: 0.9 | STP: 1.7

Fees

For every position that a trader opens, there is some fee associated with it. And it depends on the type of account model. It is seen that there is no fee on STP accounts and a few pips on ECN accounts.

Slippage

Slippage is the difference between the price the trader had demanded and the actual price the trade was executed. Slippage happens when trades are taken using market orders. Slippage has a significant load on the total cost of the trade. More on this shall be discussed towards the end of this article.

Trading Range in EUR/NZD

A part of the analysis in trading is knowing the volatility of the market. Volatiltiy will give an close idea on the number of pips the currency pair will move in a given timeframe. The trading range depicts the minimum, average, and maximum pip movement in a specified time frame. Below are the values for EUNZD.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

EUR/NZD Cost as a Percent of the Trading Range

Cost as a percent of the trading range represents the cost percentage that a trader is bearable for each trade they take. The percentage is obtained by finding the ratio between the total cost and volatility. With these percentage values, we come into the conclusion of the best time to enter and exit the market with minimal costs.

ECN Model Account 

Spread = 0.9 | Slippage = 2 | Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.9 + 1 = 3.9

STP Model Account

Spread = 1.7 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.7 + 0 = 3.7

The Ideal way to trade the EUR/NZD

By analyzing the percentages obtained above, we can find ways to reduce risk and cost on every trade of EURNZD. Firstly, the percentage tells the cost variation for different volatilities in different timeframes. The values are large in the first (Min) column. Meaning, the costs are high in the min column. Also, since this column represents low volatility, it implies that costs are high when the volatility is low and vice versa. In the average column, the costs are neither too high nor too low. And the volatility is under balance as well. Hence, this turns out to be the ideal time to trade in the market.

Moreover, another feasible technique to reduce cost is by placing limit orders. By the use of limit orders, a trader will eradicate the existence of slippage on the trade, and, in turn, reduce the total cost on the trade considerably. An example of the same is given below.

Comparing this table with the previous table, it is evident that the percentages have almost halved. Hence, entering and exiting trades using limit orders can prove to be very advantageous to reduce costs on trade.

Categories
Forex Market

The Basics of Spread & Slippage

Spread
Did you know that each time you place a trade, you pay a fee to the broker for providing the opportunity & platform to trade? Spreads act as a

Spread
Did you know that each time you place a trade, you pay a fee to the broker for providing the opportunity & platform to trade? Spreads act as a

Spread

Did you know that each time you place a trade, you pay a fee to the broker for providing the opportunity & platform to trade? Spreads act as a fee on zero-commission accounts (STP accounts). A spread is simply the price difference between the purchase price and selling price of an asset. The broker always shows two quotes of currency – one at which they sell the underlying asset to you and another at which they buy the underlying asset from you. The spread between these two prices makes the broker’s revenue from the foreign exchange transactions they perform for their clients.

Bid-Ask spread

There are two types of forex rates, the Bid and the Ask.

The price you pay to buy the forex pair is called Ask. It is always slightly higher than the market price.

The price at which you sell the forex pair is called Bid. It is always slightly lower than the market price.

The price that you see on the chart is always a Bid price. The ‘Ask’ price is always higher than the ‘Bid’ price by a few pips. Spread is essentially the difference between these two rates.

Spread = Ask – Bid

For example, when you see EUR/USD rates quoted as 1.1290/1.1291, you buy the pair at the highest Ask price of 1.1291 and sell it lower Bid price of 1.1290. This particular quote shows a spread of 1 pip.

Types of spreads

The kinds of spread depend on the rules of the broker. Spreads can either be fixed or floating.

Fixed spreads remain fixed no matter what the market conditions are at any given point of time. The advantage of this type of spread is that the broker will not be able to widen the spreads during volatility.

Floating, also known as variable spreads, are continually changing. They widen or tighten depending on the supply and demand of currencies and market volatility.

Slippage

Slippage is a phenomenon in the forex market where currency prices change while an order is being placed, thus causing traders to enter or exit trades at prices higher or lower than they desire. Slippage happens because of the imbalance of buyers, sellers, and trade volumes. It also occurs when the market is less active with lower liquidity.

For instance, a trader wants to buy a currency pair at $1.0015 (Current Market Price) with a broker of his choice. Once he submits the buy order, the best-offered price suddenly changes to $1.0020. It is considered as a negative slippage of 5 pips. In the same example, if the best-offered buy price suddenly changes to $1.0005, it is regarded as a positive slippage of 10 pips.

How to avoid slippage?

Slippage cannot be entirely avoided if you trade using market orders, but it can be reduced. One way a trader can minimize slippage is to ensure that their broker has many liquidity providers. Another way is to avoid trading during periods of high volatility as prices move faster and at wider intervals. To check volatility, traders can make use of technical indicators such as Bollinger bands or Average True Range.

The only way to entirely avoid slippage is by using strategies that employ limit orders on entries and exits.

Categories
Forex Course

11. The Different Order Types In The Forex Market

Introduction
In the world of trading, the order types are identical, irrespective of the market you’re trading. The type of the ‘Order’ refers to how you wish to enter or

Introduction
In the world of trading, the order types are identical, irrespective of the market you’re trading. The type of the ‘Order’ refers to how you wish to enter or

Introduction

In the world of trading, the order types are identical, irrespective of the market you’re trading. The type of the ‘Order’ refers to how you wish to enter or exit a trade. If you’re new to the world of trading, you might only know two order types – Buy and Sell. But there are other order types that serve different purposes, and improve the way you trade. In this lesson, we will be discussing some of the most used orders in the forex market.

Types of Orders

There are about four order types widely used by traders. These are

  • Market Order
  • Limit Entry Order (Buy Limit, Sell Limit)
  • Stop Entry Order (Buy Stop, Sell Stop)
  • Stop Loss Order

Apart from the above, there are other orders that are exclusively offered by specific brokers like ‘Trailing Stop-Loss’ and ‘Profit Booking Order’ but in this article, we shall confine only to these four types.

Understanding the Bid and Ask prices

Let us first discuss these two terms as they form the base for understanding the order types.

Bid price

The bid price is the price at which the broker is willing to buy the currency pair from you. So, when you short sell a currency pair, you will be executed at the bid price.

Ask price

Ask price is the price at which the broker is willing to sell the currency pair to you. So, if you go long (buy) on a currency pair, you will be filled at the ask price.

With this under consideration, let us continue our discussion on different order types.

Market Order

This is the most basic form of order. In a market order, you get filled at the current market price. It is basically the best price available in the market to buy/sell a currency pair.

For example, let’s say the bid price of EURUSD is 1.2150, and the ask price is 1.2152. Now, if you execute a market buy order on this one, you will get filled at the ask price, i.e., at 1.2152. Similarly, if you go short on this pair, you will get filed at 1.2150.

Market orders are fast. A trader uses that order to enter a marker no matter what. That speed and fill guarantee comes at the cost of the slippage is the market has moved from the instant the trader pulls the trigger to when the order is filled.

Limit Entry Order

Limit entry order is an order where a buy order is placed less than the current market price, and a sell order is placed above the current market price.

For example, let’s say the current market price of AUDUSD is 0.6750. Now, if you want to buy it at 0.6725, you will have to place a Buy Limit order at this price. And if you want to short it at 0.6790, you will need to place a Sell Limit order at this price.

Limit orders can be used as entry or as exit orders.

As entry orders, you are applying the logic of buy low and sell high (on short-sell limit orders). A limit order is handy to spot a support area while the price moves back and get filled as the price approaches support.

As exit orders, they are handy to take profits. You place a limit to sell at your profit-taking level on long trades and you place a buy limit order at your profit target level on short trades.

Stop Entry Order

A stop entry order is the reverse of a limit entry order. Here, you can place a buy order above the current market price and a short sell order below the current market price.

For example, let’s say the current market price of GBPJPY 1.6570. Now, if you think the market will head up only if the price breaks above 1.6590, you must place a Buy Stop at the price you wish to buy. So, when the price goes up to 1.6590, your buy order will be executed.

Stop-Loss Order

A stop-loss order is special order for closing a trade. This order is placed against the price at which you bought/sold the currency pair. This is done to avoid further losses from trade. Since this order ‘stops’ the losses, it is called a ‘stop-loss’ order.

For example, let’s say you bought a currency pair at 1.1320. Now, for this trade, if you place a stop-loss at 1.1250, the positions will be closed when the market touches this price, hence, protecting you from further losses.

This completes the lesson on basic order types in the forex market. We will discuss the more premium broker specific orders in our future lessons. For now, take the below quiz and check what you have learned the concepts right.

[wp_quiz id=”45527″]