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FOREX Trading > IP Lesson 5 > Flashcards

IP Lesson 5 Flashcards

1
Q

With regards to FXCM, why are it’s low transaction costs preferable to other discount brokers?

A

Discount brokers may actually trade against their clients.

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2
Q

Why might discount brokers trade against their clients?

A

They must make money somewhere to support their business.

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3
Q

Regardless of which broker you choose, what is absolutely necessary on your part?

A

Good record keeping!

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4
Q

Why are good records needed with respect to your broker?

A

It allows me to launch a dispute if necessary.

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5
Q

Do most professional traders use charting software linked to their broker, or independent software?

A

Independent.

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6
Q

Why do most professional traders use independent charting software?

A

It ensures the integrity of the data.

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7
Q

With regard to currency pairs, are some pairs “more profitable” than others?

A

No.

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8
Q

If certain currency pairs are not more profitable than others, where does profit come from in pair selection?

A

The ability to stick with a currency list.

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9
Q

Why is the ability to stick with a currency list a key factor in profitability?

A

Because consistency over time determines profitability.

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10
Q

When should you swap your currency list around?

A

Never! Don’t do it!

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11
Q

When will a good strategy bear fruit?

A

Over time ;)

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12
Q

What in regards to Forex, is your broker?

A

A company that executes my trades.

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13
Q

What should you do if other currency pairs appear to be performing better than those on your list?

A

Remain consistent and stick to my pairs.

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14
Q

Where are the currency pairs you subscribe to found?

A

In the dealing rates window.

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15
Q

Where on your platform is the dealing rates window found?

A

Top left.

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16
Q

Are advanced or simple dealing rates most commonly used?

A

Simple.

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17
Q

When choosing a currency list, what is the most important consideration, apart from keeping to the major 8?

A

Deciding how many pairs to trade.

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18
Q

What is the biggest factor in deciding how many pairs to trade?

A

Appetite for risk.

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19
Q

Why is one’s appetite for risk the most important consideration in choosing the number of currency pairs for your list?

A

Because the currency pair correlation affects risk.

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20
Q

What will happen as a result of currency pair correlation when there is a big fall or a huge win?

A

Any pairs that involve that currency will be affected.

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21
Q

What does currency pair correlation mean for other pairs with the common currencies?

A

They will tend to move in the same direction.

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22
Q

What effect will currency pair correlation have upon account equity?

A

It will move in the same cycle as the dominant currency in my portfolio

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23
Q

What is the best decision regarding a currency list for beginners?

A

A balanced portfolio

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24
Q

What is the definition of a balanced portfolio?

A

and equal distribution of 4 pairs of 8 total currencies

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25
Q

How does aggression and tolerance for drawdown affect the number of sets you can trade?

A

It maximizes them ;)

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26
Q

What is a good starting point in terms of number of trading sets?

A

3-4

27
Q

What does the IP list creator program do?

A

It creates a balanced set.

28
Q

Why use the IP list creator program when generating your own sets?

A

It is a good way to check currency pair correlation.

29
Q

How many instances of a given currency will you have in each balanced set?

A

1.

30
Q

How do you change the pairs you are subscribed to?

A

By using the “s” key to edit.

31
Q

How are pairs quoted in the platform?

A

With 2 figures / numbers.

32
Q

What are the two numbers listed when a currency pair is quoted?

A

The bid and ask.

33
Q

What is the bid price?

A

The price at which I sell into the market.

34
Q

What is the ask price?

A

The price at which I can buy into the market.

35
Q

What is the difference between the bid and the ask?

A

The spread.

36
Q

What is the characteristic of the spreads of major currencies?

A

Relatively low.

37
Q

What is the advantage of the lower spreads found with the major currencies?

A

lower transaction costs.

38
Q

When is the advanced dealing rates window used?

A

When entering the market live!

39
Q

What type of entry is required for many day trading strategies?

A

Live entry!

40
Q

What is the best entry window for swing trading?

A

The simple dealing rates window.

41
Q

What do you pay per trade in lieu of a fixed commission?

A

I pay the spread.

42
Q

What is your cost on a $2 / pip trade, with a 3 pip spread?

A

$6.

43
Q

How do you open a chart?

Click: ? / ? / ?

A

Click : Charts, Open chart, D1.

44
Q

What does each candle on your daily chart represent?

A

One day of price action.

45
Q

When are daily charts most often used?

A

For swing trading.

46
Q

What is the timeframe indicated by : M1?

A

1 minute.

47
Q

What is the timeframe indicated by : M5?

A

5 minute.

48
Q

What is the timeframe indicated by : M30?

A

30 minute.

49
Q

What is the timeframe indicated by : H1?

A

1 hour.

50
Q

What is the timeframe indicated by : H4?

A

4 hour.

51
Q

What is the timeframe indicated by : H6?

A

6 hour.

52
Q

What is the timeframe indicated by : H8?

A

8 hour.

53
Q

What is the timeframe indicated by : D1?

A

Daily.

54
Q

What is the timeframe indicated by : W1?

A

Weekly.

55
Q

What is the timeframe indicated by : M1 - this needs checking against the 1 minute frame…

A

Monthly

56
Q

What do bid charts represent?

A

Price action calculated from the bid price of a given pair.

57
Q

What do the ask charts represent?

A

The price action calculated from the ask price of a given pair.

58
Q

Should bid / ask charts be alternated when swing trading?

A

No. Pick one and stick to it.

59
Q

What is a dynamic trailing stop?

A

My broker trails my stop behind price.

60
Q

When is a dynamic trailing stop initiated?

A

Once my trade is live.

61
Q

What is the advantage of manually trailing your stops over dynamic trailing stops?

A

Manual trailing gives the trade “room to breathe”

62
Q

What is the risk presented by the use of dynamically trailing stops when swing trading?

A

Minor fluctuations during the day could stop out the trade early.

63
Q

Why does manual trailing of stops allow more “room to breathe” than dynamically trailing stops when swing trading?

A

It allows daily fluctuations to occur, so the trade can remain live as needed.

64
Q

Why is it important to keep accurate records of your trading history?

A

To monitor progress and performance.

FOREX Trading (8 decks)

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