IP Lesson 5 Flashcards
With regards to FXCM, why are it’s low transaction costs preferable to other discount brokers?
Discount brokers may actually trade against their clients.
Why might discount brokers trade against their clients?
They must make money somewhere to support their business.
Regardless of which broker you choose, what is absolutely necessary on your part?
Good record keeping!
Why are good records needed with respect to your broker?
It allows me to launch a dispute if necessary.
Do most professional traders use charting software linked to their broker, or independent software?
Independent.
Why do most professional traders use independent charting software?
It ensures the integrity of the data.
With regard to currency pairs, are some pairs “more profitable” than others?
No.
If certain currency pairs are not more profitable than others, where does profit come from in pair selection?
The ability to stick with a currency list.
Why is the ability to stick with a currency list a key factor in profitability?
Because consistency over time determines profitability.
When should you swap your currency list around?
Never! Don’t do it!
When will a good strategy bear fruit?
Over time ;)
What in regards to Forex, is your broker?
A company that executes my trades.
What should you do if other currency pairs appear to be performing better than those on your list?
Remain consistent and stick to my pairs.
Where are the currency pairs you subscribe to found?
In the dealing rates window.
Where on your platform is the dealing rates window found?
Top left.
Are advanced or simple dealing rates most commonly used?
Simple.
When choosing a currency list, what is the most important consideration, apart from keeping to the major 8?
Deciding how many pairs to trade.
What is the biggest factor in deciding how many pairs to trade?
Appetite for risk.
Why is one’s appetite for risk the most important consideration in choosing the number of currency pairs for your list?
Because the currency pair correlation affects risk.
What will happen as a result of currency pair correlation when there is a big fall or a huge win?
Any pairs that involve that currency will be affected.
What does currency pair correlation mean for other pairs with the common currencies?
They will tend to move in the same direction.
What effect will currency pair correlation have upon account equity?
It will move in the same cycle as the dominant currency in my portfolio
What is the best decision regarding a currency list for beginners?
A balanced portfolio
What is the definition of a balanced portfolio?
and equal distribution of 4 pairs of 8 total currencies
How does aggression and tolerance for drawdown affect the number of sets you can trade?
It maximizes them ;)
What is a good starting point in terms of number of trading sets?
3-4
What does the IP list creator program do?
It creates a balanced set.
Why use the IP list creator program when generating your own sets?
It is a good way to check currency pair correlation.
How many instances of a given currency will you have in each balanced set?
1.
How do you change the pairs you are subscribed to?
By using the “s” key to edit.
How are pairs quoted in the platform?
With 2 figures / numbers.
What are the two numbers listed when a currency pair is quoted?
The bid and ask.
What is the bid price?
The price at which I sell into the market.
What is the ask price?
The price at which I can buy into the market.
What is the difference between the bid and the ask?
The spread.
What is the characteristic of the spreads of major currencies?
Relatively low.
What is the advantage of the lower spreads found with the major currencies?
lower transaction costs.
When is the advanced dealing rates window used?
When entering the market live!
What type of entry is required for many day trading strategies?
Live entry!
What is the best entry window for swing trading?
The simple dealing rates window.
What do you pay per trade in lieu of a fixed commission?
I pay the spread.
What is your cost on a $2 / pip trade, with a 3 pip spread?
$6.
How do you open a chart?
Click: ? / ? / ?
Click : Charts, Open chart, D1.
What does each candle on your daily chart represent?
One day of price action.
When are daily charts most often used?
For swing trading.
What is the timeframe indicated by : M1?
1 minute.
What is the timeframe indicated by : M5?
5 minute.
What is the timeframe indicated by : M30?
30 minute.
What is the timeframe indicated by : H1?
1 hour.
What is the timeframe indicated by : H4?
4 hour.
What is the timeframe indicated by : H6?
6 hour.
What is the timeframe indicated by : H8?
8 hour.
What is the timeframe indicated by : D1?
Daily.
What is the timeframe indicated by : W1?
Weekly.
What is the timeframe indicated by : M1 - this needs checking against the 1 minute frame…
Monthly
What do bid charts represent?
Price action calculated from the bid price of a given pair.
What do the ask charts represent?
The price action calculated from the ask price of a given pair.
Should bid / ask charts be alternated when swing trading?
No. Pick one and stick to it.
What is a dynamic trailing stop?
My broker trails my stop behind price.
When is a dynamic trailing stop initiated?
Once my trade is live.
What is the advantage of manually trailing your stops over dynamic trailing stops?
Manual trailing gives the trade “room to breathe”
What is the risk presented by the use of dynamically trailing stops when swing trading?
Minor fluctuations during the day could stop out the trade early.
Why does manual trailing of stops allow more “room to breathe” than dynamically trailing stops when swing trading?
It allows daily fluctuations to occur, so the trade can remain live as needed.
Why is it important to keep accurate records of your trading history?
To monitor progress and performance.
