Trading Forex CFDs with TRUMarkets

Click here for basic prerequisite Forex CFD knowledge.

TRUMarkets offers trade suggestions on Forex CFDs providing an entry, stop loss and exit level via SMS and email.

The following is a typical trade suggestion that you would receive as a Subscriber to TRUMarkets:

Trade Example

Entry:

On the 20th January, the EURUSD was quoted at 1.3012 and our Forex Analyst from our trading desk attained an “Entry” signal.

An email and sms will be sent when a new trade has been identified and for this example, would read as follows:

• TRUMarkets: Entry signal - Position Size $200 - Sell EURUSD @ $1.3012/Target 1.2720/Stop Loss 1.3177.

The subscriber either:

1. logs in to their trading platform and enters the relevant details (Currency Pair - in this case the Euro (EUR) to the United States Dollar (USD), the entry price, the profit target and the stop loss) or
2. telephones their CFD Provider with the trade suggestion data - and that is it.

You are in the trade and will be exited automatically by the system unless TRUMarkets sends out a following SMS text message to exit or raise the profit target. 

To seek a deeper analysis on why TRUMarkets has suggested this Forex trade suggestion, simply log on to the TRUMarkets web site and hit the FX tab. A list of the latest Forex suggestions will be there to view, complete with chart and a bullet-point break down for the trade suggestion as below.

Reason for Trade suggestion

• The EURUSD has over recent sessions slipped back beneath the critical 50-day MA line on the daily chart.
• Moreover, it has now fallen beneath the final Fibonacci retracement level, which was the last potential support region of the Oct - Dec rally.
• The present down trend provides a downside target back to at least 1.2440- 50.
• Looking at the 30 mins chart, there was an overnight low of 1.3026, we are therefore at a breakdown point presently.
• Sell on stop @ 1.3012, Initial Stop level 1.3177, Initial Target 1.2720.
• As the European economic outlook worsens, the prospect of further cuts in interest rates by the European Central Bank will continue to cut the interest rate differential between the Euro vs the US dollar.
• Over the past week, investors and traders have resumed a risk aversion bias and the paring back of carry trades will continue to weigh on the EURUSD.
• Concerns surrounding the Royal Bank of Scotland, which plummeted overnight, is reigniting concerns of on-going tight credit conditions that will stifle confidence in the European region.
• A poor showing on the US overnight futures also suggests unsettling conditions for equity markets tonight, leading to USD safe haven buying against the EUR.

Exit

On the 23rd January the EURUSD had slipped 1.2830. This was above our target level however the trade was becoming sluggish so we chose to lock in profits. This delivered a 182-pip profit.

TRUMarkets CFD Forex trade email/SMS read:

"TRUMarkets: Exit signal - Buy back Short EURUSD - buy @ 1.2830 to take profit ahead of our original target"

Profit Calculations:

Trading platforms provide different leverage levels in relation to Forex (FX) trading, though the majority of them deliver 100 X leverage on your investment on a 'standard account'.

Entry

Based upon 100 X leverage and the trader trading €10,000 position size, the margin required to enter the trade is just 1% or  €100 (€ = Euros). The conversion rate to Aussie dollars at the time was €1 X 1.988.

So €100  X 1.988 = $A198.80 (Aussie dollars) in the trade. The FX trading platform does all this for the trader.

Exit

Upon exiting the trade the funds are converted back from EUR (Euros) to AUD (Aussie dollars) at a rate 1.983 (the going rate at the time, which would actually have added around $A 1.80 to the overall profit), delivering an overall profit of $A834 on a $A 280 outlay.
 

On those assumptions, this trade suggestion would have delivered the trader a gain of 140% return on an outlay of $A200.

Given the high leverage provided on FX trades by CFD and FX platform providers, TRUMarkets encourages good money management and trade size disciplines. i.e. controlled stop-loss exit points coupled with a sensible number of lots traded that won't break the trading bank.

To assist the trader, TRUMarkets encourages subscribers to make us of the TRUMarkets Position Size and Margin Calculator by clicking here.

NOTE: Currency trading is offered by CFD Providers on a margin basis, normally at 100:1 leverage basis, but some CFD providers offer leverage as high as 500:1. It is therefore imperative to keep position sizing at a manageable level to ensure drawdowns on any consecutive losses can be sustained by a trading account. Part of this money management strategy involves implementation of a strict stop loss discipline.

Overview of Forex

Forex (foreign exchange, or currency exchange) trading is the most traded market in the world; hence its enormous appeal for all traders. The vast forex market moves the global economy and is easily the dominant trading market in Australia and around the globe. It is an essential part of any trader's portfolio. The depth of volume on any of the major currency pairs far exceeds any Australian share's trading volume. Forex trading is simply the simultaneous buying of one currency and selling of another, in one easy transaction.

Click here for a more in-depth appreciation of Forex CFD trading.

Types of FX trade suggestion TRUMarkets offers:

1. Position size of $A800, (based on 100 x leverage for FX and Index CFDs). The short-term time frame is envisaged, so a tight stop is used.The trade will generally have a tight stop loss and will be closed during the same session that the trade is opened.
2. Position size of $A600, (based on 100 x leverage for FX and Index CFDs). A medium-term time frame is envisaged, it allows for a trade with a wider stop level.
3. Position size of $A400, (based on 100 x leverage for FX and Index CFDs). A longer-time frame is envisaged and a lower $ value is chosen.
4. Position size of $A200, (based on 100 x leverage for FX and Index CFDs). A 'position trade' time frame is envisaged, with the longest perceived time frame. The $ value risk exposure enables the widest stop level.

Mechanics

Live Trades:
All triggered trades, amendments to stop levels and set exit limits will be sent via SMS messaging between 8:00am up to 7:30 pm. AEDT. This will cover all live trades overnight for profit-taking or stop-loss levels.

Pending Trades:
These are trades we are suggesting as likely possibilities that have not triggered into a live trade. Some pending trades never 'trigger' to become live trades and are removed from the TRUMarkets "pending' list of potential trades. All changes and amendments will be updated via email between 8.00 am 7:30 pm. AEDT This includes any trade suggestions, which are removed and are no longer valid.

A pending trade may trigger into a live trade (overnight). In this instance any conditions stated in the suggestion at the beginning will be valid until otherwise notified. Subsequently, it will then be treated in the same way as other 'live' trades.
 

Note: trades (entries and exits may occur) during the night session and sms's will not be sent to notify when these prices are hit (since they can be entered into the system with your CFD provider beforehand). These may be covered the next day in our morning summary.

In foreign currency trading, it is important to set the exit points. When making foreign currency trades, you need to set two trading orders that will be used as exit points, one for selling your currency when you reach a certain profit, and the other to sell in order to cut your losses down.

Obviously, Limit (profit exit) and Stop trading (stop-loss exit) orders should be set correctly, otherwise the trade will not be executed.  Once you have chosen the foreign currency quote you wish to trade from the TRUMarkets daily charts or from TRUMarkets simple SMS text message trade suggestions, you can elect to take different exit points to TRUMarkets. Every trader's risk profile (risk they are willing to take) is different. If you do choose to take different exit points, make sure you follow the rules for placing limit and stop trading orders as detailed  in the following table.

Examples of Correct Stop and Limit Trading Orders 

• If you are buying foreign currency, it means you are investing in a long position. In this case, you will set a sell limit above the current currency price, so if the currency rises, you will collect the profit you've accumulated. You will also select sell stops in the long position, so if the currency drops you will cut your losses short.
• In short position, when you are selling currency, you will set buy limit trading orders below the currency price, so you can take profits if the currency keeps dropping. Buy stop trading orders will prevent you from taking more losses, also for the short position.