Trading Platform: Features You Cannot Afford To Ignore

A trading platform is proprietary software, usually offered free on maintaining a funded account with stock brokers or forex dealers. It provides traders the ability to initiate buy and sell trades and manage their positions. Most platforms also include market analysis software that allows traders to chart the markets. Software associated with trading platforms is easy to operate and extremely user friendly. Most of the times, the broker or the dealer will guide beginners how to use its various features. This is often accomplished by offering traders to try their hands on a demo account before opening a funded account.

Regardless of whether it is a trading platform for forex or stock trading, primarily it is a channel for communicating and exchanging information between you and your broker. It may either be an online trading platform or it may be installed or made available for download on your computer. In either case, an internet connection is necessary for getting live feed required for placing orders and monitoring accounts. A web-based trading platform has a distinct advantage as it allows traders access to markets from anywhere through any computer connected with the Internet.

However, there are certain features that need to be checked. Availability of real time and historical data is a absolutely necessary. Another feature is the ability of placing all types of orders that you need for managing risks associated with trading in financial markets. If you are one of those who trade in the forex market during your spare time, the trading platform you need should allow strategy automation. This allows you to create an automated trading system so as to execute trades at precise entry and exit points and adhere to time tested money management rules.

FX Singapore: Different Types of Orders

There are two ways that you can trade. One is simple buying and selling of currency pairs that the FX Singapore dealer offers. You go long (buy) one currency and short (sell) in the other currency in the pair. The second way is to trade in derivatives that have a specific currency pair as the underlying asset. Both these techniques are similar to what stock traders use on daily basis in stock markets.

However, the simple buying and selling of currency pairs is more common; most new traders are relatively unfamiliar with the way derivatives are traded in FX Singapore. One buys or sells a currency pair in the hope that the exchange rate of the currencies in the pair will move favourably to the position taken in the trade. For example, a long position in AUD/USD pairs yields profits when the exchange rate of the Australian dollar goes up in relation to the US dollar and a loss if it goes down. The exchange rate will rise when the value of the AUD dollar increases against the US dollar, which means that the bet is on the Australian dollar.

Here again, while initiating a trade in a FX Singapore account a trader may place a market order or a limit order. A market order is executed at the current prevailing price quoted on the FX Singapore trading platform. A limit order on the other hand signifies a specific price at which the order should be executed.

You also have the option of placing a take-profit order with the FX Singapore dealer. This means that your open position will be automatically closed once the price moves up to the specified level. Similarly, you can place a stop loss order to protect yourself against sharp downward movement in price.

The Uniqueness of FX Trading

In the FX market you are not really buying or selling anything even if on the face of it appears that you are buying one currency and selling another. It is basically a speculative market and there is no transfer of ownership of any currency in any case. Trades are simply accounting entries and profit or loss is netted or calculated on the basis of market price. A trader’s account is credited or debited in the currency in which it has been denominated. For example, even if the exchange rate of EUR/USD is quoted in US dollars, an Australian dollar denominated FX account will be credited in AUD.

The existence of FX market is basically for the purpose of facilitating exchange of currencies for exporters, importers and other trade related international transactions including payroll and mergers and acquisitions. However, trade related needs for foreign currencies amounts to only about 20-25 percent of the daily turnover in the FX market. Such transactions are in the domain of large banks that buy or sell foreign currencies on behalf of their clients. The rest is all speculative trades initiated by multinational banks, large financial institutions, hedge funds and even high net worth individuals. In fact, the FX market opened for the small individual investor only recently, thanks to the Internet.

In essence, when a trader initiates a trade, he is actually buying one currency and selling another because currencies are traded in pairs. If a trader buys a standard lot (equivalent to a hundred thousand units) of AUD/USD, he is essentially exchanging USD for AUD. It is almost similar to exchanging cash for, say, a laptop except that no transfer of ownership is involved in FX trading. However, the transactions may only be accounting entries the effects are as real as any other trading activity.

Using Tools for Predicting Foreign Exchange Rates

Traders in futures and options are familiar with concepts like implied volatility and open interest. The same tools can be used for placing profitable trades in foreign exchange markets as well.

In foreign exchange trading, implied volatility is used to measure the expected price change in a currency’s price over a given period of time. Calculation of implied volatility is based on the study of historical fluctuations and annual standard deviation of daily changes in foreign exchange rates. This is slightly different from option volatility that is a measure of the rate and extent of changes in the price of a currency. For effective prediction of future movement in the foreign exchange rates, a comparison of implied and actual volatility has to be made.

Since availability actual data is limited, a comparison of historical implied volatility (usually one-month and three-month) is considered to be a reasonably effective comparison for prediction of future of movements in currency prices. In general, implied volatility increases when the foreign exchange market is in a bearish phase and decreases in a bullish market.

Open interest, on the other hand is the total number of pending futures and options contracts or the number of buy orders before the market opens. This is different from traded volumes because open interest refers only to the number of contracts that have not been closed on a particular day. Monitoring of open interest in foreign exchange pairs at the end of each day helps in drawing conclusions of market behaviour. For example, increase in open interest indicates flow of new money in the market. Similarly, levelling of open interest after a sustained upward movement indicates the end of the upward trend.

How to Increase the Number of Profitable Trades While Trading CFDs

Irrespective of the instrument, trading in financial markets is associated with a high level of risk. Trading in CFDs is no exception. A trader’s skill lies in increasing the number of profitable trades and restricting losing trades. Besides skill, it involves discipline and patience.

CFDs refer to contracts for difference, a system of trading in financial instruments without actually owning them. A buyer and seller enter into an agreement to settle on the basis of difference between the opening and closing prices. Like any other financial instrument, it is imperative that traders in CFDs employ the same strategic tools for managing risks associated with the markets.

Regardless of the profit potential in CFDs, you need to have a system based on stop loss and trailing stop loss orders to restrict losses. Markets have a mind of their own and no matter how experienced a trader may be, there is no way one can predict market movements and be correct all the time.

A stop loss order is a pre-defined level at which you must exit the trade. Once the price reaches that stop loss price, the broker’s trading platform automatically triggers closure of the trade. If the markets are moving favourable to your position, you need to place a trailing stop loss. It is basically about increasing (or decreasing if you are in a short position) the stop loss price. This prevents profitable trades in CFDs to turn into losing trades. It is a method of locking the profit and remaining in the trade as long as the market keeps moving favourably.

While trading CFDs it is essential that a stop loss is placed in every trade if you want to increase the number of profitable trades and limit losing ones.

CFD trading Singapore: Three Essential Features of Trading Systems

As CFD trading in Singapore gains popularity many people want to know about the best CFD trading system.

However, before we get into CFD trading Singapore, it is necessary to understand what it actually means. CFD trading Singapore basically refers to a derivative product based on an underlying asset where a buyer and seller agree to pay or receive on the basis of difference between the closing and the opening price. No physical ownership is involved and a trader may sell or go short without prior ownership.

Just like any other trading system, a system for CFD trading Singapore is basically a set of criteria for determining entry and exit levels. It may be a mechanical process or discretionary or both. A fully mechanical CFD trading Singapore system means that you adhere to pre-defined rules and you are relieved of having to take decisions.

A discretionary system means that you have to spend a lot of time to learn how to trade and practice trading. You could do that under the tutelage of an experienced trader who can teach you how to use the system’s rules for increasing the number of profitable trades.

Regardless, any CFD trading Singapore system must include the three essential features.

- Stop loss feature. This allows you to exit a trade the as soon as the market starts going against you.
- Trailing stop loss feature. This allows you to lock in the profit when the market goes your way and lets you remain in a profitable position as long as the market keeps moving favourably.
- Acceptable risk-to-reward ratio. This refers to the ratio between how much you stand to gain if the market moves favourable and lose if it moves adverse to your position.

Why a CFD Singapore Broker Allows Trades on Margins without Checking Credit Scores

CFDs can be traded on margin money, which means that a CFD Singapore broker will allow you to place trades of a much larger value than the amount in your account. The balance amount is financed by your CFD Singapore broker.

The question to be asked here is do you need to have a good credit score for margin trading. The simple answer is no. However, a CFD Singapore broker would be more than eager to give you the required margin for trading. The question that crops up to mind is why a broker would lend you money. The answer to this is not that simple and needs to be understood.

A loan means taking a risk. Even a fully secured home loan has an element of risk as it is not easy for the loan provider to sell the mortgaged property. In the case of a margin trading loan there is no collateral but still there is not risk attached to it. It works like this.

Suppose you have 100 dollars in your account with the CFD Singapore broker and you buy a CFD of the value of 4,000 dollar. On the face of it, the broker has loaned you a sum of 3,900 dollars. The reality however is that the loan is at risk only if you happen to lose more than 100 dollars in the trade.

It is this aspect of margin trading that the CFD Singapore is worried about. The moment the loss amount reaches 90 dollars, the automated trading software alerts the broker and you will be asked to deposit more money in the account or the trade will be automatically closed. It is because of this that a CFD Singapore broker has bigger margins for CFDs based on highly volatile assets.

Definition of CFD and It Compares With Trading In Futures

Financial markets have traditionally been associated with buying and selling of shares, a trading activity carried on in stock exchanges. However, the advent of the Internet and online trading platforms has been instrumental in the emergence of new products in the financial markets. The most recent trading instrument to make an appearance in the Australian financial market is CFD.

CFD is short for contract for difference. It is a contract wherein two parties agree to pay or receive on the basis of the difference between the opening and closing values of the contract. For example, let us suppose that a trader were to go long (buy) in the benchmark index of the Australian Securities Exchange, the S&P/ASX 200 at 4,335 and the trade at 4,348. The trader stands to receive 13 AUD from the trader who made the opposite short trade or sold the index.

It is an unlisted market, which means that trades are not routed through an exchange. Instead, CFD is an over-the-counter market just like the retail forex market. All trades are directly between the traders involved rather than being processed by a central clearing agency or an exchange. Just like the forex and futures markets, trading in CFD market is done using leverages. This allows traders to place trade of much higher value than the money in their trading account.

The margin requirements in CFD trading are often lower than the futures market of the underlying asset. For example, the margin requirement in ASX 200 in the futures market is AUD 430 as compared to AUD 13,750 in the futures market. Even after allowing for the difference in tick size and value of both, margin in CFD is still lower by AUD 3,000.