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Trading Forex

with

TradeStation ®

Trading Forex with TradeStation ® michael burke and jesus nava

michael burke and jesus nava

Trading Forex

with

TradeStation ®

contents

The Forex Market

1

Who Trades Forex

1

Benefits of Trading Forex

2

Risks Associated with Forex Trading

3

Why TradeStation?

5

When Does Forex Trade?

6

Worldwide Forex Trading

6

Forex Trading Specifications

7

Forex Quotes

8

Available Forex Pairs and Historical Data in TradeStation

9

Bid-Ask Spread

10

Charting Bid and Ask

10

Costs of Trading Forex

11

Forex Margin Calculations

13

Carry Trade and Roll Over

14

Calculating Forex Trading Profit and Loss

15

TradeStation Platform

17

Trading Forex in TradeStation

17

Advanced Order Options

19

OCO and OSO Orders

19

Tracking Orders and Positions

20

Rollover Adjustments in TradeStation

22

Strategy Back-Testing and Automation

23

Forex Analysis in TradeStation

25

Chart Analysis

25

Analysis Techniques and Drawing Tools

26

Appendix

27

Charting Indicators

28

RadarScreen Indicators

30

Forex Risk Disclosure

OFF-EXCHANGE FOREIGN CURRENCY TRANSACTIONS INVOLVE THE LEVERAGED TRADING OF CONTRACTS DENOMINATED IN FOREIGN CURRENCY CONDUCTED WITH A FUTURES COMMISSION MERCHANT OR A RETAIL FOREIGN EXCHANGE DEALER AS YOUR COUNTERPARTY.

BECAUSE OF THE LEVERAGE AND THE OTHER RISKS DISCLOSED HERE, YOU CAN RAPIDLY LOSE ALL OF THE FUNDS YOU DEPOSIT FOR SUCH TRADING AND YOU MAY LOSE MORE THAN YOU DEPOSIT.

YOU SHOULD BE AWARE OF AND CAREFULLY CONSIDER THE FOLLOWING POINTS BEFORE DETERMINING WHETHER SUCH TRADING IS APPROPRIATE FOR YOU.

(1) TRADING IS NOT ON A REGULATED MARKET OR EXCHANGE—YOUR DEALER IS YOUR TRADING PARTNER WHICH IS A DIRECT CONFLICT OF INTEREST. BEFORE YOU ENGAGE IN ANY RETAIL FOREIGN EXCHANGE TRADING, YOU SHOULD CONFIRM THE REGISTRATION STATUS OF YOUR COUNTERPARTY.

THE OFF-EXCHANGE FOREIGN CURRENCY TRADING YOU ARE ENTERING INTO IS NOT CONDUCTED ON AN INTERBANK MARKET, NOR IS IT CONDUCTED ON A FUTURES EXCHANGE SUBjECT TO REGULATION AS

A DESIGNATED CONTRACT MARKET BY THE COMMODITY FUTURES

TRADING COMMISSION. THE FOREIGN CURRENCY TRADES YOU TRANSACT ARE TRADES WITH THE FUTURES COMMISSION MERCHANT OR RETAIL FOREIGN EXCHANGE DEALER AS YOUR COUNTERPARTY. WHEN YOU SELL,

THE DEALER IS THE BUYER. WHEN YOU BUY, THE DEALER IS THE SELLER.

AS A RESULT, WHEN YOU LOSE MONEY TRADING, YOUR DEALER IS MAKING

MONEY ON SUCH TRADES, IN ADDITION TO ANY FEES, COMMISSION, OR SPREADS THE DEALER MAY CHARGE.

(2) AN ELECTRONIC TRADING PLATFORM FOR RETAIL FOREIGN CURRENCY TRANSACTIONS IS NOT AN EXCHANGE. IT IS AN ELECTRONIC CONNECTION FOR ACCESSING YOUR DEALER. THE TERMS OF AVAILABILITY OF SUCH A PLATFORM ARE GOVERNED ONLY BY YOUR CONTRACT WITH YOUR DEALER.

Any trading platform that you may use to enter off-exchange foreign currency transactions is only connected to your futures commission merchant or retail foreign exchange dealer. You

are accessing that trading platform only to transact with your dealer. You are not trading with

any other entities or customers of the dealer by accessing such platform. The availability and operation of any such platform, including the consequences of the unavailability of the trading platform for any reason, is governed only by the terms of your account agreement with the dealer.

(3) YOUR DEPOSITS WITH THE DEALER HAVE NO REGULATORY PROTECTIONS. All of your rights associated with your retail forex trading, including the manner and denomination of any payments made to you, are governed by the contract terms established in your account agreement with the futures commission merchant or retail foreign exchange dealer.

Funds deposited by you with a futures commission or retail foreign exchange dealer for trading off-exchange foreign currency transactions are not subject to the customer funds protections provided to customers trading on a contract market that is designated by the Commodity Futures Trading Commission. Your dealer may commingle your funds with its own operating funds or use them for other purposes. In the event your dealer becomes bankrupt, any funds

the dealer is holding for you in addition to any amounts owed to you resulting from trading,

whether or not any assets are maintained in separate deposit accounts by the dealer, may be treated as an unsecured creditor’s claim.

(4) YOU ARE LIMITED TO YOUR DEALER TO OFFSET OR LIQUIDATE ANY TRADING POSITIONS SINCE THE TRANSACTIONS ARE NOT MADE ON AN EXCHANGE OR MARKET AND, AND YOUR DEALER MAY SET ITS OWN PRICES. Your ability to close your transactions or offset positions is limited to what your dealer will offer to you, as there is no other market for these transactions. Your dealer may offer any prices it wishes, and it may offer prices derived from outside sources or not in its discretion. Your dealer may establish its prices by offering spreads from third party prices, but it is under no obligation to do so or to continue to do so. Your dealer may offer different prices to different customers at any point in time on its own terms. The terms of your account agreement alone govern the obligations your dealer has to you to offer prices and offer offset or liquidating transactions in your account and make any payments to you. The prices offered by your dealer may or may not reflect prices available elsewhere at any exchange, interbank, or other market for foreign currency.

(5) PAID SOLICITORS MAY HAVE UNDISCLOSED CONFLICTS The futures commission merchant or retail foreign exchange dealer may compensate introducing brokers for introducing your account in ways which are not disclosed to you. Such paid solicitors are not required to have, and may not have, any special expertise in trading, and may have conflicts of interest based on the method by which they are compensated. Solicitors working on behalf of futures commission merchants and retail foreign exchange dealers are required to register. You should confirm that they are, in fact registered. You should thoroughly investigate the manner in which all such solicitors are compensated and be very cautious in granting any person or entity authority to trade on your behalf. You should always consider obtaining dated written confirmation of any information you are relying on from your dealer or a solicitor in making any trading or account decisions.

FINALLY, YOU SHOULDTHOROUGHLY INVESTIGATE ANY STATEMENTS BY ANY DEALERS OR SALES REPRESENTATIVES WHICH MINIMIZE THE IMPORTANCE OF, OR CONTRADICT, ANY OF THE TERMS OF THIS RISK DISCLOSURE. SUCH STATEMENTS MAY INDICATE POTENTIAL SALES FRAUD.

THIS BRIEF STATEMENT CANNOT, OF COURSE, DISCLOSE ALL THE RISKS AND OTHER ASPECTS OF TRADING OFF-EXCHANGE FOREIGN CURRENCY TRANSACTIONS WITH A FUTURES COMMISSION MERCHANT OR RETAIL FOREIGN EXCHANGE DEALER.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Important Information and Disclosure

TradeStation Forex, Inc. seeks to serve institutional and active traders. Please be advised that active trading is generally not appropriate for someone of limited resources, limited investment or trading experience, or low risk tolerance, or who is not willing to risk at least $50,000 of capital.

This book may discuss in detail how TradeStation is designed to help you develop, test and implement trading strategies. However, TradeStation Forex does not provide or suggest trading strategies. We offer you unique tools to help you design your own strategies and look at how they could have performed in the past. While we believe this is very valuable information, we caution you that simulated past performance of a trading strategy is no guarantee of its future performance or success. We also do not recommend or solicit the purchase or sale of any particular foreign currencies, commodities, securities or derivative products. Any symbols referenced in this book are used only for the purposes of demonstration, as an example, not a recommendation.

Finally, this book may discuss automated buy and sell alerts and/or electronic order placement and execution. Please note that even though TradeStation has been designed to automate your trading strategies and deliver timely order placement, routing and execution, these things, as well as access to the system itself, may at times be delayed or even fail due to market volatility, quote delays, system and software errors, Internet traffic, outages and other factors.

All proprietary technology in TradeStation is owned by TradeStation Technologies, Inc., an affiliate of TradeStation Forex, Inc. The order execution services accessible from within TradeStation are provided by TradeStation Forex, Inc. pursuant to a technology license from its affiliate and its authority as a registered broker-dealer and introducing broker. All other features and functions of TradeStation are provided directly by TradeStation Technologies. TradeStation® and EasyLanguage® are registered trademarks of TradeStation Technologies, Inc. “TradeStation,” as used in this document, should be understood in the foregoing context.

The price charts presented in this book are for demonstration purposes only and are not a recommendation or endorsement of the symbols or analysis displayed within the charts.

the forex market

Forex, or FX, is an abbreviation for foreign exchange. It is the mechanism of exchanging one currency for another. This exchange rate is the basis of Forex trading and you can take a position in expectation of the exchange rate increasing or decreasing.

The off-exchange international cash Forex markets are the biggest trading markets in the world, with billions of dollars in transactions daily. These transactions are conducted from Sunday to Friday through various financial institutions around the world in a global 24- hour marketplace. The largest of these marketplaces include financial institutions in New York, London, Zurich, Frankfurt, Singapore, Hong Kong and Tokyo. Off-exchange foreign currency trading is not conducted of a futures exchange subject to regulation as a designated contract market by the CFTC.

Almost all international currencies are traded against the U.S. dollar (USD). The next-most- traded currencies are the euro (EUR), japanese yen (jPY), pound sterling (GBP) and Swiss franc (CHF). There are literally dozens of Forex currency-pair combinations that can be traded.

Many different factors affecting supply and demand can drive the price and volatility of a currency, including interest rates, domestic and international news, government actions, economic indicators, and monetary policy, just to name a few.

Market access through Internet technology makes it very easy to trade these dynamic currency markets online from anywhere in the world. But as with all trading, it is critical to fully understand the Forex markets, risks and procedures before starting to trade.

Who Trades Forex?

There are three primary groups that utilize and influence the Forex markets:

Speculators – This group accounts for the majority of all currency transactions; it includes small-, medium- and large-sized hedge funds, along with smaller individual traders from all around the world.

International Business – The transfer of goods from one country to another is paid in the local country’s currency. This type of trade occurs all around the world every day. Hedgers may need to safeguard an investment or business transaction against the potential depreciation of a currency.

Tourists – To a lesser extent, people that are traveling from one country to another may require an exchange of currency for the countries that they are visiting.

Trading off-exchange foreign currencies carries a high level of risk and may not be suitable for all investors. There is a possibility that you

Trading off-exchange foreign currencies carries a high level of risk and may not be suitable for all investors. There is a possibility that you

may sustain a loss equal to or greater than your investment, so you should not invest or risk money that you cannot afford to lose.

may sustain a loss equal to or greater than your investment, so you should not invest or risk money that you cannot afford to lose.

1
1

Benefits of Trading Forex

Cash Forex trading offers many unique advantages compared to trading other financial instruments:

24-Hour Market Action The Forex currency markets are a 24-hour marketplace, starting from 5 p.m. ET Sunday to 5 p.m. ET on Friday. This gives you the flexibility to trade the Forex markets full- time or part-time, whenever your schedule or lifestyle permits.

Liquidity As the largest markets in the world, the cash Forex markets offer excellent liquidity at all hours of the trading day, unlike many other 24-hour markets. This means you can trade large amounts of currency into and out of foreign currency markets with little market impact.

Leverage Cash Forex trading allows you to leverage up to 50 times your account value on most major forex pairs, minor pairs offer 20 to 1 margin. These leverage amounts may change or may not be available at all times. For example, with 50:1 leverage, you maycontrol100,000 units of the Euro quoted at $1.3000, using only $2,600. Remember that while leverage can help build profits quickly, it can also produce large catastrophic losses quickly.

Trading Opportunities In addition to technical trading, the Forex markets offer unique opportunities to trade foreign currency exchange rates to take advantage of international news, economic indicators, and interest rate changes and differentials.

Risks Associated with Forex Trading

As with all financial trading instruments, there are risks you must consider before trading cash Forex:

Leverage Risk

Leverage is the mechanism by which a trader can control a large market position with

a much smaller initial investment. TradeStation enables you to take positions of up

to 50 times greater than the value of the initial investment for major cash Forex pairs. However, professional traders will often recommend that your open Forex positions not exceed more than 10 times your total account value at any one time. In addition, sound money-management techniques suggest not risking any more than 2-3 percent of your total account value on any one trade.

Even when market conditions are relatively calm, leverage can create large gains or losses very quickly. This may cause your broker to take action to avoid a negative account balance or to avoid your account exceeding that maximum allowed margin. In either case, your broker, without prior notification, may close any or all open positions in the account to remedy the situation. You are responsible for the risks you take and the consequences of those risks, positive and negative, on every trade you make. Because of the highly leveraged risk inherent to cash Forex, Forex trading may not be suitable for all traders.

Price Risk Forex prices are quoted and charted using only the current bid price stream; there is no concept of a last price in Forex. TradeStation offers analysis and trading tools that allow you to visualize and measure the bid-ask spread.

Since the transactional cost of trading Forex is tied to the bid-ask spread, it is important to understand what the normal bid-ask spread is for any pair, and what that spread means in the actual cost per trade. The bid-ask spread can also fluctuate throughout the trading day and is often a function of the liquidity of the Forex pair; you may also see slightly wider bid-ask spreads in quiet market situations, especially on lightly traded Forex pairs. just like any trading market, Forex prices are driven by short- and long- term supply and demand, which can cause prices to move rapidly and often erratically. Traders need to employ sound risk-management techniques on each and every trade.

Interest Rate Risk Traditionally, if a country’s interest rates rise, its currency will normally strengthen

because investors will shift their assets to that country to gain higher returns. Conversely,

if a country’s interest rates fall, its currency will normally weaken as investors shift

money away looking for higher returns.

Consequently, if the interest rate differential of one currency versus another increases or decreases dramatically, the exchange rate and thus Forex prices may also dramatically change.

News and Economic Risk In our global economy, news from anywhere in the world can affect the Forex markets in many ways. These effects can manifest as rapid price movements or changes in trend direction or long-term outlooks. It is prudent when trading either long term or short term to keep your eye on news and other factors like government reports that can affect your profitability.

Governments gather economic activity statistics and release reports almost every day. The challenge is figuring out which reports may have an effect on Forex prices. Below is a short list of the most widely followed reports. Remember that not all countries offer every report, and it is a good idea to monitor how certain reports affect Forex prices before trying to trade based on news and government reports.

Gross Domestic Product (GDP) – The sum of all goods and services produced in a country by both domestic and foreign companies. Increasing GDP indicates a growing economy.

Industrial Production – The change in production or capacity of the nation’s factories, mines and utilities. Increasing production generally indicates a growing economy.

Consumer Price Index (CPI) – A measure of the average price level paid by consumers. Increasing CPI may indicate a growing economy. Changes in CPI can also affect nominal interest rates.

Non-Farm Payrolls – The number of new jobs created by the economy during the previous month and the percentage of workers seeking employment who remain unemployed. Increasing employment generally indicates a growing economy.

Operational Risk Brokers face operational risk as they transact their daily business activities. Some of these risks arise as internal procedures, human resources, organizational structure, technology, etc. Although they do not impose a risk to the market system as a whole, they could prevent you from monitoring positions or placing orders. Forex traders should always maintain backup procedures in case the Internet, the trading platform, or the broker fails.

Settlement Risk In a foreign exchange trade, one party delivers currency while the other takes delivery of the currency. Settlement risk is the possibility that one of the parties in the transaction fails to fulfill their responsibility.

why tradestation?

There are many Forex brokers out there to choose from, but what ultimately sets one Forex broker apart from the others is the ability to provide a complete Forex trading solution – with all the resources clients need to accomplish their trading goals.

Advanced Multi-Asset Trading, Data and Analysis Platform The award-winning TradeStation trading platform offers unlimited analysis potential for every level of trader, driven by world-class data and the ability to back-test ideas before risking your money.*

Regulated Industry Leader Unlike stocks and futures, there are no exchanges or clearing houses that guarantee all Forex transactions, which makes it critical to know who you are dealing with when you trade Forex and who the trustee of your assets is. TradeStation has been in business since 2002.

Financial Strength TradeStation’s management team has a proven record of innovation and success. The company is financially sound with a strong balance sheet.

Lower Trading Costs When trading cash Forex with TradeStation, you pay NO commissions. TradeStation makes the same amount of money on each forex trade from a markup embedded in the spread, which is the difference between the bid price and the ask price. There are no real-time data fees; all real-time and historical Forex price data is free. And there are no monthly service fees for Forex-only accounts.

Competitive Spreads TradeStation brings together multiple competing banks to provide greater liquidity and better access to competitive Forex market spreads. And TradeStation DOES NOT trade against any client position.

Hold Multiple Currencies in Your Account To allow for more flexibility in your Forex trading, TradeStation will allow you to hold multiple currencies in your account in addition to your native currency.

Educational Resources To get you up and running quickly with TradeStation, we offer an extensive set of FREE online educational tools that include online courses and seminars, video tutorials, archived videos, QuickTips, and PDF books.

*Ratings and awards are based on; (1) for Stocks & Commodities, in each award category, the company that receives the highest number of votes cast by the magazine’s subscribers over a fixed time period that ends shortly before announcement of the awards; (2) for TraderPlanet.com, individual reviews of products and services by the TraderPlanet editorial staff to determine the finalists, followed by voting by the full TraderPlanet membership to choose the winners during a two-month voting process that ends shortly before the announcement of the awards. You may contact TradeStation if you are interested in learning more about these ratings and awards. (3) for Barron’s, a hands-on review of each company’s online brokerage products and services by a Barron’s journalist, in several categories, after which numerical scores are assigned per category and aggregated to determine overall numerical score and star rating. You may contact the company if you are interested in learning more about these ratings and awards. Barron’s is a registered trademark of Dow Jones.

Trading off-exchange foreign currencies carries a high level of risk and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your investment, so you should not invest or risk money that you cannot afford to lose.

5
5

when does forex trade?

Forex trading takes place in all major financial centers across the globe. The Forex trading market is open 24 hours a day, from Sunday at 5 p.m. ET through Friday at 5 p.m. ET. Although the Forex markets are open almost all of the time, some trading hours may present better opportunities for traders based on market activity and price action.

for traders based on market activity and price action. Worldwide Forex Trading Forex trading opens in

Worldwide Forex Trading

Forex trading opens in Asia with japan, New Zealand, and Australia (with japan being the biggest player), then in the Middle East, followed by Europe (primarily London) and the U.S.

Approximate Worldwide Forex Trading Hours:

Asia: 6 p.m. – 3 a.m. ET Europe: 2 – 10 a.m. ET USA: 9 a.m. – 3 p.m. ET

These hours are usually the time when the Forex markets are the most active, have the largest volume of trades and the biggest price movements. Notice that these market hours will overlap and trading activity can increase during these overlapping periods. Quiet market conditions typically occur from 4p.m. to 6p.m. ET when no major financial centers are active.

Note: The “FX_Trading Time Zones” indicator, displayed on the chart above, is part of the Forex Trader Pack of indicators available as a download with the book.

Forex Trading Specifications

just like any other trading instrument, cash Forex has product specifications and trading characteristics that the trader needs to understand thoroughly before trading.

What are you trading when you trade cash Forex? When you buy or sell in the cash Forex market, you are anticipating that the value or exchange rate of a specific currency is going to increase or decrease in relation to that of a different currency. There are dozens of unique currency pairs that you can trade. In order to fully appreciate this concept, it is important to understand the nature of cash Forex pair symbols.

Base Currency – (EURUSD) The base currency in a Forex symbol is the first symbol notated. In the case of EURUSD, the base currency is EUR (euro). This is the currency you are buying or selling. For example, if your trade size is 100,000, you are buying or selling 100,000 Euros against U.S. dollars.

Quote Currency – (EURUSD) The quote currency, sometimes called the secondary or terms currency, is the second symbol notated in a Forex symbol. In the case of EURUSD, the quote currency is USD (U.S. dollars). This is the currency price being quoted. For example, if EURUSD is currently quoted at 1.2510 Bid/1.2512 Ask, then you would pay $1.2512 U.S. dollars to buy 1 euro and receive $1.2510 U.S. dollars to sell 1 euro. The realized profit or loss of a trade is always based on the quote currency, and is automatically converted into your native account currency at the end of the session, based on the current conversion rate.

Forex Quotes

Most Forex symbols are quoted out to four decimal places, with the primary exception of the japanese yen, which is quoted out to two decimals. TradeStation quotes out all pairs to another decimal place, creating fractional pips, which allows for greater quote precision and tighter bid-ask spreads.

Pip A pip is the smallest price/rate change movement.

Example 1 – (EURUSD)

1 pip in EURUSD is quoted as .0001 U.S. dollars; if you are trading 100,000 units that would make one pip worth 10 U.S. dollars. (100,000 X .0001) = $10.

Example 2 – (USDJPY)

1 pip in USDjPY is quoted as .01 japanese yen; if you are trading 100,000 units

that would make one pip worth 1,000 japanese yen. (100,000 X .01) = 1,000 yen.

Note: If the quote currency of the trading symbol is not in your native account currency (e.g., U.S. dollars), a balance in this quote currency is generated in your account. This balance is automatically exchanged into your native account currency at the end of the trading session using a conversion factor. In example 2 above, any realized profit or loss trading USDjPY would be in yen. However, this profit or loss is automatically exchanged or converted back into U.S. dollars and placed in your account at the end of the trading session.

Available Forex Pairs and Historical Data in TradeStation

Although there are many available currency pairs to trade, the major pairs primarily traded include U.S. Dollar, japanese Yen, Euro, Swiss Franc, and British Pound. Many of the major currencies or pairs have trader nicknames: Aussie = Australian dollar, Cable = GBPUSD pair, and Sterling = British Pound.

Symbol

Description

Daily Data

Minute Data

Start Date

Start Date

AUDCAD

Australian Dollar / Canadian Dollar

10/22/2007

10/22/2007

AUDCHF

Australian Dollar / Swiss Franc

10/29/2002

07/02/2007

AUDJPY

Australian Dollar / Japanese Yen

04/09/1998

10/21/2002

AUDNZD

Australian Dollar / New Zealand Dollar

10/22/2007

10/22/2007

AUDUSD

Australian Dollar / U.S. Dollar

01/04/1971

10/21/2002

CADCHF

Canadian Dollar / Swiss Franc

06/01/1999

11/28/2007

CADJPY

Canadian Dollar / Japanese Yen

03/14/2007

03/14/2007

CHFJPY

Swiss Franc / Japanese Yen

04/09/1998

10/21/2002

EURAUD

Euro / Australian Dollar

12/03/2000

10/21/2002

EURCAD

Euro / Canadian Dollar

03/14/2007

03/14/2007

EURCHF

Euro / Swiss Franc

01/03/1999

10/21/2002

EURGBP

Euro / British Pound

01/03/1999

10/21/2002

EURJPY

Euro / Japanese Yen

01/03/1999

10/21/2002

EURNOK

Euro / Norwegian Kroner

09/05/2008

09/04/2008

EURNZD

Euro / New Zealand Dollar

10/29/2002

08/16/2007

EURSEK

Euro / Swedish Krona

09/05/2008

09/04/2008

EURUSD

Euro / U.S. Dollar

01/05/1998

10/21/2002

GBPAUD

British Pound / Australian Dollar

10/22/2007

10/22/2007

GBPCAD

British Pound / Canadian Dollar

10/22/2007

10/22/2007

GBPCHF

British Pound / Swiss Franc

04/09/1998

10/21/2002

GBPJPY

British Pound / Japanese Yen

04/09/1998

10/21/2002

GBPNZD

British Pound / New Zealand Dollar

10/29/2002

08/16/2007

GBPUSD

British Pound / U.S. Dollar

01/04/1971

10/21/2002

USDCAD

US Dollar / Canadian Dollar

01/04/1971

10/21/2002

USDCHF

US Dollar / Swiss Franc

01/04/1971

10/21/2002

USDJPY

US Dollar / Japanese Yen

01/04/1971

10/21/2002

Most-Active Forex Pairs:

EURUSD, USDjPY, EURjPY, GBPUSD and USDCHF

Note: TradeStation may offer or add additional currency pairs to trade that are not listed here. You can view all available Forex symbols within the TradeStation platform from the Symbol Lookup dialog.

Bid-Ask Spread

The bid and ask prices/rates determine the entry and exit prices for each trade. Entering a new long BUY order or closing an existing short position with a BUY order is executed at the ASK price. A new short SELL order or closing a long position with a SELL order is executed at the BID price. The difference between the bid and ask prices is called the spread, and is the transactional cost of a Forex trade.

TradeStation, like all other Forex dealers, makes money on the difference in the bid-ask spread for each completed trade. It is important to fully understand this transactional spread cost concept and to be fully aware of the costs associated with every Forex trade you make.

of the costs associated with every Forex trade you make. Note: The values under the “BA

Note: The values under the “BA Sprd$” column above are based on 10,000-unit trades in a U.S. dollar-based account, but the values can be based on the quote currency of the symbol by formatting the Indicator and selecting “Currency Based on: Symbol” in the General tab.

Charting Bid and Ask

In TradeStation, historical and real-time Forex data is based on the BID data stream only. There is no concept of a trade tick in cash Forex.

only. There is no concept of a trade tick in cash Forex. Since ASK prices are

Since ASK prices are not displayed as part of the bar, you may see BUY orders filled above the bar.

Note: In the chart above, the BID and ASK spread is displayed on the last bar as a thicker bar, with the spread in pips below.

Note: The “FX_BidAsk Charting” and “FX_BidAsk Pip Spread” indicators are part of the Forex Trader Pack of indicators available as a download with the book.

Costs of Trading Forex

Experienced Forex traders know that the major costs to initiate any trade are the spread between the bid and ask prices, plus any commission costs. The spread and commission costs will put your position immediately into the negative when entering a trade. This negative amount must be overcome before the position can become profitable.

Pip Spread Trade Cost Although there are no commissions when trading Forex with TradeStation, the bid-ask spread can be a significant trading cost to overcome if you trade frequently or trade less active Forex pairs. The following examples show you how to calculate these costs.

Pip Spread Trade Cost Example 1: Long Trade EURUSD

costs. Pip Spread Trade Cost Example 1: Long Trade EURUSD Symbol = EURUSD, Units Traded =

Symbol = EURUSD, Units Traded = 100,000, Buy at the Ask @ 1.27410 Pip Spread Trade Cost = $14.00 USD (1.27410 - 1.27396 = 0.00014* 100,000 Units)

Pip Spread Trade Cost Example 2: Short Trade EURUSD

Units) Pip Spread Trade Cost Example 2: Short Trade EURUSD Symbol = EURUSD, Units Traded =

Symbol = EURUSD, Units Traded = 100,000, Sell at the Bid @ 1.27396 Pip Spread Trade Cost = $14.00 USD (1.27410 - 1.27396 = 0.00014* 100,000 Units)

Pip Spread Trade Cost Example 3: Long Trade USDJPY

Units) Pip Spread Trade Cost Example 3: Long Trade USDJPY Symbol = USDjPY, Units Traded =

Symbol = USDjPY, Units Traded = 100,000, Buy at the Ask @ 88.351 Pip Spread Trade Cost = $13.58 USD (88.351 – 88.339 = 0.012* 100,000 Units * .01132 Conversion Factor)

Pip Spread Trade Cost Example 4: Short Trade EURCHF

Factor) Pip Spread Trade Cost Example 4: Short Trade EURCHF Symbol = EURCHF, Units Traded =

Symbol = EURCHF, Units Traded = 100,000, Sell at the Bid @ 1.34000 Pip Spread Trade Cost = $38.96 USD (1.34041 – 1.34000 = 0.00041 * 100,000 Units * .95024 Conversion Factor)

Note: Conversion factors are based on U.S. dollars.

Costs of Trading Forex

Generally, the more active and liquid a currency pair is, the smaller the transactional bid-ask spread costs tend to be.

Sample (as low as) Bid-Ask Pip Spreads

costs tend to be. Sample (as low as) Bid-Ask Pip Spreads Note: Pip spreads will fluctuate

Note: Pip spreads will fluctuate under different market conditions and will often exceed these minimum spreads throughout the day. Always be aware of the actual bid-ask spread costs before making any Forex trade.

Sample Conversion Factors Conversion factors are used to convert the profit or loss of a non-U.S. dollar-based Forex trade into your account’s native currency. These factors are based on the exchange rate at the time the conversion is made.

on the exchange rate at the time the conversion is made. Remember that the profit or

Remember that the profit or loss of a Forex trade is always realized in the symbol quote currency, then this profit or loss is automatically converted into your native account currency.

Let’s say your native account currency is the U.S. dollar and you have a profit in a EURJPY trade. That profit is in YEN; so your YEN would have to be sold at the bid into dollars in order to sweep it into your account currency. If you have a loss, then you need to buy YEN at the ask to cover the loss.

Note: This requires two different conversion factors for either profitable trades or for losing trades, depending on which currency needs to be bought or sold for the final conversion into your native account currency.

Forex Margin Calculations

In order to place a Forex trade, your broker will set aside a portion of your account funds to guarantee payment for any potential loss of the position. Margin can be thought of as a good faith deposit required to maintain an open position. This is not a fee or a transaction cost.

Calculating Forex Margin The initial margin to trade a major Forex pair is 2% of the trade value (50 to 1) converted to your native account currency. Margin rates are subject to change. Minor Forex pairs offer 20 to 1 margin rates or 5% of the trade value. However, most commonly traded Forex pairs are considered majors. Note: Examples below use U.S. Dollars as the native account currency.

Example 1: USD – Base Currency Based on a 2% margin requirement, the margin for each dollar-based currency pair, where USD is the base currency (first part) of the symbol, is generally 2%, or $200 for every $10,000 U.S. dollars traded.

Symbol

Last

USDJPY

101.569

In this example, if 100,000 units are traded, since USD is the

base currency the trade value equals $100,000 U.S. dollars. So with a 2% initial margin requirement, this trade would require

approximately $2,000 of margin.

Example 2: USD – Quote Currency The margin required for each non-dollar based currency pair, where USD is NOT the base currency (first part) but is the quote currency (second part) of the symbol, is 2% of the value of the base currency times the current price.

Symbol

Last

EURUSD

1.33003

In this example, if 100,000 units are traded, the trade value equals 100,000 X 1.33003 = $133,003 U.S. dollars, so with a 2% initial margin requirement, this trade would require

approximately $2,660 of margin.

Example 3: Cross-Currency Pairs The margin required for a non-dollar cross-currency pair is the same calculation as in Example 2 above, which is 2% of the value of the base currency times the base currency’s exchange rate to U.S. dollars, or to your native account currency.

Symbol

Last

EURJPY

135.161

In this example, if 100,000 units are traded, the trade value equals 100,000 X 135.161(EURjPY) = 13,516,100yen.

Then converted back to U.S. Dollars, 13,516,100 / 101.569(USDjPY) = 133,073 U.S. dollars. So with a 2% initial margin requirement, this trade would require approximately $2,661 of margin.

Note: Margin trading involves risks and you should understand those risks before trading:

You can lose more money than you deposit in your margin account

Your brokerage firm can sell your assets without contacting you.

Carry Trade and Roll Over

In the Forex market, interest rate differential adjustments happen at the end of every trading day for all open positions. At the end of each session (5p.m. ET), all positions are closed and then reopened (rolled over) automatically for the next trading day, which begins just a few minutes later, except on Friday.

At the end-of-session rollover time each day, the interest rate differential between the two currencies is either credited or debited to your account in a cash transaction. Over the weekend, you are credited or debited with three days’ worth of interest rate differential.

Forex Carry Trade The Forex carry trade involves trading a cash Forex pair in which you are selling the base currency with a lower interest rate and buying the quote currency with a higher interest rate, or buying the base currency with a higher interest rate and selling the quote currency with a lower interest rate. The idea is to pay the low interest rate and collect the higher interest rate, creating a profit from the interest rate differential.

The leverage available in Forex can make this a very attractive trade, since your Forex trade allows you to control a large amount of currency for a small amount of margin.

The carry trade is normally a long-term strategy that can generate income and profits. However, you are still at risk for price moves against your position in the underlying currencies, so market direction is also critical to the carry trade. You need the currency prices to remain stable or move in your direction during the life of the carry trade.

Sample Roll Rates in U.S. Dollars:

life of the carry trade. Sample Roll Rates in U.S. Dollars: Notes: The actual Forex prices/rates

Notes: The actual Forex prices/rates for each pair are adjusted by the roll amount on the open of the next session. Interest rate differential roll values may change on a daily basis and are based on the native account currency which at this time only supports the U.S. dollar.

Example:

Let’s say you are long 100,000 AUDjPY in a U.S. dollar-based account, and you carry the position into the next trading session. Using the table above, AUDjPY shows that $7.02 would be credited to your account as of the open of the next session. If you were short 100,000 AUDjPY, $18.72 would be debited from your account as of the open of the next session.

Calculating Forex Trading Profit and Loss

Although the TradeStation trading platform automatically does the estimated profit and loss calculations for you in real time, it is important to understand how these P&L equations are derived.

Forex Profit and Loss LongTrade = (Closing Price - Opening Price) * Conversion Factor * Trade Size Forex Profit and Loss Short Trade = (Opening Price - Closing Price) * Conversion Factor * Trade Size

Sample P&L Scenarios:

Example 1: Long 100,000 EURUSD at 1.23200 – U.S. Dollar Native Account Currency The above position is closed at: 1.24350 (Closing Price - Opening Price): 1.24350 - 1.23200 = .01150 (Profit) (Profit X Conversion Factor): .01150 X 1.0 = .01150 (Conversion Profit) (Conversion Profit * Trade Size): .01150 X 100,000 = $1,150.00 (Total Profit)

Example 2: Short 100,000 USDjPY at 89.200 – U.S. Dollar Native Account Currency The above position is closed at: 89.550 (Opening Price - Closing Price): 89.200 - 89.550 = - .350 (Loss) (Loss X Conversion Factor): -.350 X .01145 = -0.0040075 (Conversion Loss) (Conversion Loss * Trade Size): -0.0040075 X 100,000 = -$400.75 (Total Loss)

Example 3: Long 100,000 EURjPY at 88.200 – U.S. Dollar Native Account Currency The above position is closed at: 88.350 (Closing Price - Opening Price): 88.350 - 88.200 = .150 (Profit) (Profit X Conversion Factor): .150 X .01145 = 0.0017175 (Conversion Profit) (Conversion Profit * Trade Size): 0.0017175 X 100,000 = $171.75 (Total Profit)

Example 4: Short 100,000 GBPCHF at 1.60400 – U.S. Dollar Native Account Currency The above position is closed at: 1.61050 (Opening Price - Closing Price): 1.60400 - 1.61050= - .00650 (Loss) (Loss X Conversion Factor): -.00650 X .95963 = -0.006237595 (Conversion Loss) (Conversion Loss * Trade Size): -0.006237595 X 100,000 = -$623.76 (Total Loss)

Note: All examples are hypothetical trades that use sample prices and conversion rates.

Important Disclosure

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

tradestation platform

For traders, today’s unpredictable financial markets present unprecedented challenges. Yet the keys to successful trading – focus, discipline, consistency – remain constant. And that’s where TradeStation comes in. With TradeStation, you can develop and execute trading strategies that are based on informed analysis, rather than on emotion, impulse or guesswork.

TradeStation offers a complete trading solution, allowing you to:

Create custom strategies and back-test them against our extensive historical database

Trade your strategies in live simulated trading – before risking your money in the market

Identify trading opportunities with superior charting and analytical tools

Use your computer to fully automate and execute your strategies in real time.

Since the june 2001 release of the TradeStation electronic platform, TradeStation Forex Inc.’s affiliate, TradeStation Securities, has been repeatedly rated the best online brokerage firm for active traders.* TradeStation’s award-winning combination of advanced technology and brokerage services can help you take your trading to the next level.

Trading Forex in TradeStation

TradeStation Quick Trade Bar The Quick Trade Bar is a dynamic tool that simplifies the placing of market and limit orders and the monitoring of price quotes for different Forex currency pairs. It offers an enhanced

for different Forex currency pairs. It offers an enhanced *Ratings and awards are based on; (1)

*Ratings and awards are based on; (1) for Stocks & Commodities, in each award category, the company that receives the highest number of votes cast by the magazine’s subscribers over a fixed time period that ends shortly before announcement of the awards; (2) for TraderPlanet.com, individual reviews of products and services by the TraderPlanet editorial staff to determine the finalists, followed by voting by the full TraderPlanet membership to choose the winners during a two-month voting process that ends shortly before the announcement of the awards. You may contact TradeStation if you are interested in learning more about these ratings and awards. (3) for Barron’s, a hands-on review of each company’s online brokerage products and services by a Barron’s journalist, in several categories, after which numerical scores are assigned per category and aggregated to determine overall numerical score and star rating. You may contact the company if you are interested in learning more about these ratings and awards. Barron’s is a registered trademark of Dow Jones.

Trading off-exchange foreign currencies carries a high level of risk and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your investment, so you should not invest or risk money that you cannot afford to lose.

17
17

display of real-time prices by highlighting the decimal places representing the pip value of a quote. Single clicking on the Bid to sell and on the Ask to buy provides a better perception of the inherent transactional cost. You may also place market orders, close positions, and adjust the quantity with single-click buttons.

Forex Market Depth

the quantity with single-click buttons. Forex Market Depth Since TradeStation brings banks together to compete and

Since TradeStation brings banks together to compete and offer you the best spread, the Market Depth window is able to display three levels of bid and ask prices with the size of currency at each price level. This information allows you to gauge the strength and size of markets. At a glance you will know the price that an order may get filled based on liquidity. You may also compare the amount of liquidity between the bid and the ask and use this as an indicator of market pressure or sentiment. Having greater liquidity on any side of the bid-ask spread could indicate that prices may move in that direction.

TradeStation Order Bar

prices may move in that direction. TradeStation Order Bar The TradeStation Order Bar is the order-entry

The TradeStation Order Bar is the order-entry facility for discretionary trades. Its design emphasizes simplicity and speed. With a click of your mouse, you can easily select the route, order type and duration for your order. Order types include Limit, Market, Stop Market and Stop Limit. The durations include Day, Good till Cancel (GTC), Good till Day (GTD), Immediate or Cancel (IOC) and Fill or Kill (FOK). Multiple accounts can be managed from the convenient drop-down list, and default settings for most choices can easily be set or changed at any time. By using the Buy and Sell buttons, you may open and close currency positions.

Advanced Order Options

The TradeStation order entry tools provide additional advanced functionality. Some of these advanced order features are:

Activation Rules: Place an order only when your predefined time- and/or price-based conditions are met. With activation rules, your order is held on the TradeStation Order Execution servers until the specified conditions are true, at which time the order is sent to the market.

Trailing Stops: Profit from a currency pair’s movement and limit your downside risk without the need to constantly monitor the stock. With trailing stops, your stop price moves along with the price of the stock, as the TradeStation Order Execution servers constantly monitor your order, protecting you in case of loss of connectivity.*

If Touched: Market-if-Touched (MIT) orders are the opposite of stop orders. Buy MIT orders are placed below the market and Sell MIT orders are placed above the market. MIT orders are usually used to enter the market or initiate a trade. They are similar to limit orders in that a specific price is placed on the order. However, MIT orders become market orders once the limit price is touched or passed through.

OCO and OSO Orders

The ability to send multiple orders simultaneously adds efficiency to your trading. OCO and OSO functionality is available via the TradeStation Order Bar and Matrix.

Order Cancels Order (OCO) – An OCO order consists of a group of two or more parallel orders that are linked together in such a way that if one of the orders is filled, then all of the other parallel orders are cancelled.

Bracket OCO – A Bracket OCO consists of two exit orders with the same symbol, quantity and order action (Buy or Sell). When one of the orders is partially filled, the other order’s quantity is automatically decremented by the same amount.

Order Sends Order (OSO) – An OSO order consists of a primary order that will send one or more secondary orders when the primary order is filled. OSO orders can be used in combination with Bracket OCO orders when you want to have a Bracket OCO Order (stop loss and profit target) sent once the initial order is filled.

To expedite the creation of OCO, Bracket OCO and OSO orders, TradeStation includes a set of order templates that may be selected right from the OCO/OSO menus.

*The placing of certain orders (e.g. “stop-loss” orders or “stop-limit” order), which are intended to limit losses to certain amounts, may not be effective because market conditions may make it impossible to execute such orders.

Tracking Orders and Positions

TradeStation’s TradeManager is an advanced order-management system that allows you to easily view and manage your orders and positions on a real-time basis. All it takes is a single glance at your screen to see the real-time status of all your open, cancelled and filled orders, open positions, real-time profit/loss and much more. Multiple accounts can be easily managed from a convenient drop-down list.

Orders Tab The Orders tab displays all your orders for the day, color-coded based on the order status (i.e., open, filled, cancelled, etc.). The colors change automatically as the order status changes. You can easily filter the view based on order status (open, filled, etc.) and/or account number, and sort on any column to quickly find a desired order. To cancel an order, simply right-click on the displayed order and choose “Cancel/Close. “The TradeManager window also allows you retrieve historical orders and trading activity.

allows you retrieve historical orders and trading activity. Position Tab The Positions tab displays your current

Position Tab The Positions tab displays your current long and/or short open positions, color-coded so you can see them at a glance. Winning positions are highlighted in green and losing positions are highlighted in red. Flat positions are shown in a darker shade of color to differentiate them from open positions. In addition, you may format the TradeManager window to display other helpful information such as cumulative profit and loss, and conversion factors. Balances Tab

profit and loss, and conversion factors. Balances Tab Trading off-exchange foreign currencies carries a high level

The Balances tab of the TradeManager window provides extensive information on the funds in your account. You have access to information such as Beginning Day Cash Balance, Real-time Purchasing Power, Conversion Factors for each of the currency pairs traded, and a detailed breakdown of realized and unrealized profit and loss for each of the positions transacted during the trading day. The Native (USD) column displays an estimated U.S. dollar value of your real-time profit and loss for your convenience.

of your real-time profit and loss for your convenience. Position Graphs Once you’ve placed an order,

Position Graphs Once you’ve placed an order, TradeStation’s unique PositionGraphs™ allow you to track your positions with a glance at your Position Graph Bar. PositionGraphs graphically display each position’s drawdown, current profit/loss and run-up in percentage or the account currency amounts. Advanced color coding allows you to easily identify profitable positions displayed in green and losing positions displayed in red. PositionGraphs also enable you to quickly close or reverse a current position by simply right-clicking your mouse on the appropriate PositionGraph and selecting the “close position” or “reverse” position option. Enabling cumulative profit and loss allows you to keep track of how much a particular currency pair has affected your account’s overall performance.

pair has affected your account’s overall performance. Trading off-exchange foreign currencies carries a high level

Rollover Adjustments in TradeStation

At 5 p.m. ET, any open Forex position in TradeStation is exchanged for a new position to expire the following settlement date. The interest rate differential between the two currencies is either credited or debited to your account in a cash transaction. If you are long the currency bearing the higher interest rate, then you should receive a credit in your account. On the other hand, if you are short the currency bearing the higher interest rate, then you should receive a debit in your account.

rate, then you should receive a debit in your account. This information is accessible via the

This information is accessible via the TradeStation Support Center at www.TradeStation.com. These credits and debits are applied on a daily basis and are clearly identified as part of your daily trades and other transactions.

as part of your daily trades and other transactions. You may view rollover rates and the

You may view rollover rates and the adjustment amounts for currency pairs by using two TradeStation built-in indicators called FX Roll Acct Value and FX Roll Rates. These two indicators can be used in RadarScreen and Chart Analysis windows, and they display the rollover rates that are applied each day and the amounts that are debited and credited for both long and short positions.

Strategy Back-Testing and Automation

One of TradeStation’s most significant advantages is that it enables you to design, historically test and optimize your own custom trading strategies before you risk a penny of trading capital. With hundreds of technical indicators to choose from – along with TradeStation’s proprietary EasyLanguage technology – you can create strategies ranging from simple to complex. You can design strategies with multiple entry and exit signals, order types, money management rules and more. TradeStation gives you the power to translate your trading ideas into a multitude of custom strategies.

The chart below contains a TradeStation built-in strategy based on a 2-Line Moving Average crossover. The rules of this strategy are tested against historical data and the Chart Analysis window displays a signal wherever the strategy would have bought or sold based on the moving average crossover. TradeStation enables you to test your strategies using one of the industry’s most extensive historical databases. You may test your trading ideas and strategies against days, weeks or even years of historical data.

With TradeStation Simulator, you can do more than back-test your strategies against historical market data. just like a “live” TradeStation brokerage account, TradeStation Simulator allows you to trade your strategies in today’s markets and see the results in real time – but without risking a penny of your own money. TradeStation Simulator also gives you the opportunity to gain hands-on experience with all the advanced features of the TradeStation platform.

with all the advanced features of the TradeStation platform. Trading off-exchange foreign currencies carries a high

Strategy Performance TradeStation’s Strategy Performance Report allows you to analyze how your strategy could have performed historically. You are able to see your net profit or loss, annual rate of return, number of winning and losing trades and much more. The report not only shows how your strategy could have performed in the past, but may also provide insights into potential opportunities in today’s markets.

insights into potential opportunities in today’s markets. The Strategy Performance Report may be formatted to display

The Strategy Performance Report may be formatted to display values in the foreign currency or the account currency. By default, a strategy uses the currency of the quote symbol in a currency pair. For example, if a strategy is applied to USDjPY, all calculations will be done based on the japanese yen. You may change this behavior by adjusting the strategy properties and changing the base currency. Values such as commissions, slippage and initial capital will display based on the selected currency. In addition, built-in stops, analysis techniques, and other strategy calculations will be affected by the currency selected.

With TradeStation, you can automate virtually any trading strategy imaginable, with multiple conditional entries and exits, profit targets, protective and trailing stops and much more.* While TradeStation allows you to execute trades manually at your discretion, automated trading gives you a host of powerful advantages:

automated trading gives you a host of powerful advantages: • TradeStation continuously monitors the markets,

TradeStation continuously monitors the markets, identifies trading opportunities based on your rules and sends your orders within fractions of a second for execution

TradeStation allows you to monitor dozens or even hundreds of symbols at once

TradeStation helps you combat the urge to trade based on emotion or impulse, by getting you in and out of the market based on your pre-determined strategy.

*The placing of certain orders (e.g. “stop-loss” orders or “stop-limit” order), which are intended to limit losses to certain amounts, may not be effective because market conditions may make it impossible to execute such orders.

forex analysis in tradestation

Chart Analysis

In addition to offering conventional time-based charts such as Open-High-Low-Close bar charts and candlestick charts, TradeStation also provides market-driven chart types that concentrate on price movement. These price-based charts reduce the typical noise associated with the market, allowing users to more clearly discern the actual market trend. The pictures below display a sample of these charts based strictly on price activity.

a sample of these charts based strictly on price activity. Trading off-exchange foreign currencies carries a
a sample of these charts based strictly on price activity. Trading off-exchange foreign currencies carries a
a sample of these charts based strictly on price activity. Trading off-exchange foreign currencies carries a
a sample of these charts based strictly on price activity. Trading off-exchange foreign currencies carries a

Analysis Techniques and Drawing Tools

TradeStation includes an extensive library of over 100 of the most popular indicators. You are able to apply a Moving Average, Stochastic or a host of other common indicators to your Chart Analysis or RadarScreen windows. All indicators have standard alerts built in, which you can use as is or modify.

standard alerts built in, which you can use as is or modify. A TradeStation ShowMe Study

A TradeStation ShowMe Study is one

type of analysis technique that marks every point on a chart that meets the criteria you specify. For instance, you

can mark gap-up bars on your chart instantly, or you can automatically mark every bar where volume was 30% greater than the average volume of the previous 20 bars. You may enable alerts in any ShowMe Study so that TradeStation monitors these rules on a real-time basis and notifies you as soon as they are met.

a real-time basis and notifies you as soon as they are met. PaintBar Studies will paint

PaintBar Studies will paint a series of bars on your chart a different color to highlight specific market activity. For example, you can scan your chart to see when momentum has increased or decreased. With a PaintBar study, TradeStation will automatically display those bars on your chart in a different color. As with any study in TradeStation, simply enable the alert feature and TradeStation will let you know the instant it occurs – in real time.

TradeStation also allows you to measure, mark and highlight your price charts with an arsenal of drawing tools. You may use Trendlines, Gann Fans, Support and Resistance lines and other objects on your chart.

Your drawing tools even have pre- set and customizable alerts; so, for

instance, you’ll know when a trendline

is penetrated, either on an intra-bar

basis or on the close if you choose.

either on an intra-bar basis or on the close if you choose. Trading off-exchange foreign currencies

appendix

Forex Trader Pack Indicators for Charting and RadarScreen

The TradeStation Forex Trader Pack is a collection of useful Forex utilities that provide easy access to Forex trading-related data, information and calculations. Most of the indicators are designed to be used with TradeStation’s RadarScreen, but many can also be used in TradeStation’s charting to view historical values.

The Trader Pack is provided as an ELD file that contains all of the indicators. There is also a sample workspace that includes all of the indicators inserted into RadarScreen and charting.

Important Information

All analysis techniques provided in this Trader Pack are for informational purposes and to help customers learn more about how to use the power of TradeStation software and services. Any symbols referenced are used only for the purposes of the demonstration, as an example, and not a recommendation.

All profit and loss values, conversion factors and spread calculations performed by the analysis techniques herein are approximations and solely used for educational purposes.

Use the link and follow the instructions below to download and access the Forex Trader Indicator Pack: https://www.tradestation.com/support/books/files/forex_trader_pack.zip

1. Save and extract the contents of the ZIP file onto your computer. A Workspace (TSW file) and EasyLanguage Document (ELD file) are included. Before using the workspace, all analysis techniques must be imported using the EasyLanguage document file.

2. From TradeStation, click File – Import/Export EasyLanguage… menu sequence.

3. In the Import/Export wizard select Import EasyLanguage file (ELD, ELS or ELA).

4. Click Next

5. Click Browse and find the ELD file you saved in your computer.

6. Continue to click Next until all Analysis Techniques have been successfully imported.

7. To open the workspace, click File – Open Workspace … menu sequence and locate the TSW file you saved in your computer.

Charting Indicators

There are three exclusive charting indicators that come with the Forex Trader Pack:

charting indicators that come with the Forex Trader Pack: “FX_BidAsk Charting” (Charting Indicator) (For Any

“FX_BidAsk Charting” (Charting Indicator) (For Any Interval)

This useful utility plots the real-time bid-ask spread on the last bar on the chart and will also draw a text object for the number of pips of the spread. The text object can either display the spread in pips or in account currency based on the “AccountCurrencyOn” input switch. When AccountCurrencyOn = TRUE, the pip spread in account currency is based on a trade size that is set with the “TradeSize” input. This allows you to see the approximate transactional cost of your Forex trade in real time.

The indicator can be set to display in any desired color based on the “Color” input.

Input

Value

Description

AccountCurrencyOn

FALSE

Display the pip spread in… TRUE = account currency, FALSE = pips

TradeSize

10,000

Trade size for display in account currency

Color

YELLOW

Display color in the chart

“FX_Trading Time Zones” (Charting PaintBar) (For Intraday Intervals Only)

This indicator paints the bars in the chart based on which international market is most or primarily active during the Forex session. There are three primary markets (Asia, Europe, and USA) that trade during the Forex session. There is no exact time that each of these markets starts or finishes, so you can control the start time and end time for each market with an input. A consistent color scheme is used for painting the bars: Red = Asia, Blue = Europe, Green = USA; overlapping sessions use a different color (Asia and Europe =

Purple, Europe and USA = Cyan, and USA and Asia = Yellow); and quiet markets are colored gray. There is a light and bright version of the color scheme that can be set with an input. A text object can be drawn on the chart to notate the start of each session. This can be turned on or off with an input.

Input

Value

Description

AsiaTimeStart

2000

Asia market start time

AsiaTimeEnd

400

Asia market end time

EuropeTimeStart

200

Europe market start time

EuropeTimeEnd

1000

Europe market end time

USATimeStart

800

USA market start time

USATimeEnd

1600

USA market end time

TextOn

TRUE

Draw text object at start of session TRUE = On, FALSE = Off

BrightColors

FALSE

Bright or light color scheme TRUE = Bright, FALSE = Light

Note: Initial default start and end times are provided only as a guideline.

“FX_ATRTrading Time Zones” (Charting Indicator) (For Intraday Intervals Only)

This indicator is based on the standard ATR (Average True Range) indicator and plots the ATR value as a histogram, with each bar colored based on the international market that is currently most active. As with the “FX_Trading Time Zones” above, you can also control the start time and end time for each market with the inputs. The same consistent color scheme is used in this indicator as in the “FX_Trading Time Zones” indicator above. A text object can also be drawn on the chart to notate the start of each session. This can be turned on or off with an input.

Input

Value

Description

ATR Length

14

Number of bars used to calculate the average true range

AsiaTimeStart

2000

Asia market start time

AsiaTimeEnd

400

Asia market end time

EuropeTimeStart

200

Europe market start time

EuropeTimeEnd

1000

Europe market end time

USATimeStart

800

USA market start time

USATimeEnd

1600

USA market end time

TextOn

TRUE

Draw text object at start of session TRUE = On, FALSE = Off

BrightColors

FALSE

Bright or light color scheme TRUE = Bright, FALSE = Light

RadarScreen Indicators

There are eight exclusive RadarScreen indicators that come with the Forex Trader Pack:

“FX_Trading Time Zones RS” (RadarScreen Indicator) (For Intraday Intervals Only)

This indicator is based on the charting indicator with the same name above. It displays a text message in the RadarScreen cell based on which international market is most or primarily active during the Forex session. There are three primary markets (Asia, Europe, and USA) that trade during the Forex session. There is no exact time that each of these markets starts or finishes, so you can control the start time and end time for each market with an input.

A consistent color scheme is used for painting the bars: Red = Asia, Blue = Europe, Green = USA; overlapping sessions use a different color (Asia and Europe = Purple, Europe and USA = Cyan, and USA and Asia = Yellow); and quiet markets are colored gray.

Input

Value

Description

AsiaTimeStart

2000

Asia market start time

AsiaTimeEnd

400

Asia market end time

EuropeTimeStart

200

Europe market start time

EuropeTimeEnd

1000

Europe market end time

USATimeStart

800

USA market start time

USATimeEnd

1600

USA market end time

Note: Initial default start and end times are provided only as a guideline.

start and end times are provided only as a guideline. Trading off-exchange foreign currencies carries a

“FX_BidAsk Pip Spreads” (Indicator) (Any Interval)

This indicator allows you to track real-time bid-ask spreads across all Forex pairs. It displays the bid-ask spread in three forms: the raw bid-ask spread, the bid-ask spread in pips and the account value of the bid-ask spread for a given trade size. This allows you to see the approximate transactional cost of trading any Forex pair.

By double-clicking on the “BA Sprd Pips” or “Acct BA Sprd” column, you can sort and rank the list of Forex symbols by the smallest and largest pip spread values.

Input

Value

Description

TradeSize

10,000

Trade size to base account bid-ask spread value

10,000 Trade size to base account bid-ask spread value Note: Remember that the column “Acct BA

Note: Remember that the column “Acct BA Sprd” displays values based on the native account currency which at this time only supports the U.S. dollar.

“FX_MarginReq” (Indicator) (Any Interval)

This indicator allows you to track the approximate margin requirement in your account currency across all Forex pairs, in real time, for a set trade size. The trade size is set with an input.

Generally, the leverage on cash Forex positions is 50 to 1, but market policy and regulatory conditions may change and the amount of leverage currently allowed may be adjusted. To accommodate any leverage changes, this indicator also includes an input that allows you to change the amount of leverage for the margin calculation.

Input

Value

Description

TradeSize

10,000

Trade size to base margin requirements

MarginRateToOne

100

Margin rate to one:50 = 50 to 1, or 2% 100 = 100 to 1, or 1%

Margin rate to one:50 = 50 to 1, or 2% 100 = 100 to 1, or

Note: Remember the column “Margin Req” displays values based on the native account currency which at this time only supports the U.S. dollar.

Minor Pairs That Require a Higher 20 to 1 or 5%Margin Requirement:

USD/SGD, USD/HKD, SGD/jPY.

“FX_Position Profit and Loss” (Indicator) (Any Interval)

This indicator allows you to calculate and track real-time Forex positions profit and loss (P&L). The indicator displays the current-day profit and loss conversion factors, position parameters, position P&L in the quote symbol and the conversion of the P&L into the native account currency which at this time only supports the U.S. dollar.

The plots are colored to organize the indicator values. The “Profit Rate” and “Loss Rate” columns are the real-time conversion rates/factors needed to convert the position P&L into the native account currency which at this time only supports the U.S. dollar.

The “EntryPx,” “ExitPx,” and “TradeSize” columns display the manually set input values for entry price, exit price and trade size.

The “SymTrdPL” column displays the P&L for the position in the quote currency of the symbol. This P&L needs to be converted into your native account currency using the profit or loss conversion factors. The final P&L conversion into your native account currency is displayed in the “Acct Profit” or “Acct Loss” columns, with profitable trades in green and losses in red.

The indicator also has the ability to calculate P&L on a historical Forex position by overriding the conversion rate/factor with an input.

Input

Value

Description

TradeSize

100,000

Trade size of position, use negative values for short trades

EntryPx

Close[1]

Entry price of position

ExitPx_InsideBid_or_In-

InsideBid

Exit price of position

sideAsk_or_Other

OverRideConversionRate

0

OverRideConversionRate(0) Set a historical conversion rate

OverRideConversionRate(0) Set a historical conversion rate Note: If you are tracking real-time positions, make sure to

Note: If you are tracking real-time positions, make sure to set the “ExitPx” to “insidebid” for long positions and “insideask” for short positions in order to calculate the most accurate real-time P&L.

“FX_Conversion Factors” (Indicator) (Any Interval)

This indicator allows you to display and track real-time Forex position conversion factors/rates. Conversion factors are used to calculate and convert the profit or loss from a Forex position back into the native account currency.

from a Forex position back into the native account currency. No Inputs. Historical Forex P&L In

No Inputs.

Historical Forex P&L In order to model the P&L for a historical Forex position, the calculation requires that you know the correct conversion factor at the time and date the position was closed.

You can apply this same indicator in charting to get the conversion factor for the exact time and date a position was closed.

factor for the exact time and date a position was closed. Trading off-exchange foreign currencies carries

“FX_Carry Roll Rates” (Indicator) (Any Interval)

This indicator allows you to display and track a Forex position’s overnight carry roll rates. Carry roll rates are a credit or debit to your account for each position you hold from this session into the next session. This credit or debit is based on the interest rate differential between the government bonds of the two currencies you are trading.

The carry roll rates displayed are multiplied by the trade size input, to allow you to more accurately model the overnight carry roll debit or credit for a position.

This indicator can also look back and display the carry roll rate for any day historically by setting the “RollRateOn_YYMMDD” input.

Input

Value

Description

RollRateOn_YYMMDD

0

Display Carry Roll Rate for this date 0 = Current

TradeSize

10,000

Trade size to multiply by roll rate

TradeSize 10,000 Trade size to multiply by roll rate You can apply this same indicator in

You can apply this same indicator in charting to get the carry roll rates historically.

in charting to get the carry roll rates historically. Trading off-exchange foreign currencies carries a high

“FX_Carry Roll Rates Cumulative” (Indicator) (Any Interval)

This indicator also allows you to display and track a Forex position’s overnight carry roll rates; in addition, it allows you to accumulate daily roll rates starting from a specified date. This allows you to calculate the overall cumulative debit or credit to your account for a long-term position.

Input

Value

Description

AccumRollStartData_

0

Date to start accumulating roll rates 0 = display current roll rate only

YYMMDD

TradeSize

10,000

Trade size to multiply by roll rate

TradeSize 10,000 Trade size to multiply by roll rate Trading off-exchange foreign currencies carries a high

“FX_BidAsk Spread Stats” (Indicator) (1-Minute Bar Interval)

This indicator calculates and displays the average bid-ask pip spread for a Forex symbol based on one of two averaging methods: running average or rolling average over a specific number of minutes set with an input.

It also displays the minimum fractional movement of the Forex pair and the

maximum pip spread over the averaging period. Bid-ask spreads are displayed as raw values, values in pips and values in account currency.

A running average means that the average is calculated ongoing from the point at which

the indicator is inserted into RadarScreen as every tick comes in. Rolling average means that every n minutes, 75% of the data points are removed and the average rebuilds. If the indicator gets refreshed or reset, the average starts over again from that point.

Input

Value

Description

TradeSize

10,000

Trade size to multiply pip spread for position value

Run1_Roll2

2

Choose an average spread calculation method

1 = Running from insertion

2 = Rolling average over “RollMinutes”

RollMinutes

180

Used only for the average roll method

RollMinutes 180 Used only for the average roll method Trading off-exchange foreign currencies carries a high

Trading off-exchange foreign currencies carries a high level of risk and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your investment, so you should not invest or risk money that you cannot afford to lose.

37
37

forex Glossary

Ask The price at which an instrument is offered and can be purchased.

Base Currency The first currency in any Forex pair symbol (e.g., EUR in EURUSD). This is the currency you are buying or selling. (See Quote Currency)

Bid The price at which an instrument is bid and can be sold.

Bid-Ask Spread The difference in price between the current bid and current ask of a currency pair or other financial instrument.

Central Bank A central bank provides financial and banking services for a country’s government and commercial banks. It implements the government’s monetary policy as well, by changing interest rates.

Counterparty The person or entity on the other side of your trade.

Cross-Rate The exchange rate between two currencies that does not involve the trader’s native currency.

Good Until Cancelled

A type of order that will not expire at the

end of a trading session but will continue

to be active until the customer instructs

otherwise. These orders typically will be automatically cancelled by your broker at the end of 90 days.

Hedging

A means of offsetting or reducing a possible

loss by buying and selling other instruments that are likely to rise and fall in opposite directions under the same conditions.

Inflation

A state of rising prices caused by

intensive consumer buying and usually proportionately lesser increases in industrial output, the latter usually associated with full utilization of a country’s plant and equipment.

Interbank Trading between banks and large institutions.

Limit Order An order to buy or sell a specified amount of a specific instrument at a specified price or better.

Liquidation

A transaction that will offset or “close out”

any open position that a customer may have.

Foreign Exchange

Long position

The rate for converting one currency into

To buy.

another.

Margin

A good-faith deposit that must be in your

margin account in order to open and maintain a position in a financial instrument.

Margin Call

A demand for additional funds to be

deposited in a margin account to meet margin requirements because of adverse price movements.

Market Order An order to buy or sell a financial instrument immediately at the best possible price.

Mark-to-Market

Quote Currency The second currency in any Forex pair symbol (USD for EURUSD). This is the currency in which the prices are quoted. (See Base Currency)

Range The difference between the highest and lowest price of a security recorded during a given trading session.

A

term that means a security is to be valued

Retail Price Index

Selling rate

at

its current market price.

Measurement of the monthly change in the

Offer The price at which an instrument is offered and can be purchased. (Also See Ask)

Native Currency The currency held in your account.

average level of prices at retail, normally of a defined group of goods.

The rate at which a bank is willing to sell foreign currency.

 

Short Position

Pip

To sell.

The full minimum price fluctuation for a currency pair in the Forex market. TradeStation quotes Forex in fractional pips (1/10 pips).

Stop-Loss Order An order placed to prevent a loss or limit an existing loss on any open position.

about the authors

about the authors michael burke Michael Burke is Vice President of Institutional Training at TradeStation Securities,

michael burke

Michael Burke is Vice President of Institutional Training at TradeStation Securities, and has been part of the TradeStation team since 1997. During this time at TradeStation, he has been instrumental in developing innovative trading tools, platform features, and educational programs.

As a TradeStation educator, he has shown thousands of traders, novice and professional alike, how to better utilize the power of strategy back-testing, options trading, and the TradeStation platform, including EasyLanguage® programming.

With over 25 years of experience analyzing and trading stocks, futures, options, and forex, he is often a featured speaker at industry events and conferences, sharing his practical knowledge of market analysis, trading, and TradeStation. Mr. Burke holds Series 7, 63, 3, and 34 registrations with TradeStation and is an active associate of the Market Technicians Association.

an active associate of the Market Technicians Association. jesus nava jesus Nava is Client Training Manager

jesus nava

jesus Nava is Client Training Manager for TradeStation. He was hired by TradeStation Securities in 1999 as an account manager for its international resellers division. In 2003, he started managing the TradeStation Client Services Department, where he trained brokerage and technical support representatives in topics including stocks, futures, options and advanced platform features.

His interaction with thousands of clients has broadened his understanding of how traders invest in the markets and use the TradeStation platform to their advantage. He is currently involved in developing learning materials and delivering platform training to TradeStation users nationwide. Mr. Nava holds Series 24, 7, 63, 3, and 34 registrations with TradeStation and is an active associate of the Market Technicians Association.

and is an active associate of the Market Technicians Association. TradeStation.com • 800.808.9336 or 954.652.7677

TradeStation.com • 800.808.9336 or 954.652.7677