A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
How To Trade Forex
Foreign exchange – forex or the FX
market, as it is commonly known –
is one of the biggest marketplaces
in the world. Here, no trading floor
exists; banks, brokers, companies,
and governments trade among
themselves through high-tech
computer networks, such as those
offered by Reuters and Bloomberg.
Foreign exchange – forex or the FX market, money thanks to deriv.com. You can also trade
as it is commonly known – is one of the in the FX market regardless of which country
biggest marketplaces in the world. Here, no you are in. Prices are always being quoted and
trading floor exists; banks, brokers, companies, are universally accessible.
and governments trade among themselves
through high-tech computer networks, such The currency market offers nearly 24 hours of
as those offered by Reuters and Bloomberg. seamless trading – starting on Sunday at 9:00
pm GMT, which is early morning in Asia, and
It’s hard to comprehend the colossal amount carrying on all the way until Friday evening in
of money traded in this market on a daily New York, or 10:00 pm GMT. Although the FX
basis, which totals around 6.6 trillion USD per market is liquid almost all the time, the most
day, as reported in a 2019 survey by the BIS active times are typically around 1:00 pm
Triennial Central Bank Survey. Approximately GMT to 4:00 pm GMT when the London and
10% is fueled by companies trading overseas, US markets are both open. This is also known
needing to convert currencies for routine as the overlap sessions. Another busy time is
commerce, such as import/export businesses; around 8:00 am GMT, when London initially
the rest is pure speculation and investment. opens and the Far East is closing down for the
day.
Today, it’s possible for anyone to trade
currencies – even with a small amount of
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A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
Before you decide on strategies to trade Although cryptocurrencies such as Bitcoin are
Whilst FX is a global market, the two biggest starting to be more frequently used for cross
trading centres are London and New York, border transfers, the total volume of crypto
accounting for 50% of the trading volume. exchanges is still tiny compared to the FX
This timeframe also coincides with many US market.
economic data releases which are reported
in the morning New York time, such as
unemployment numbers, and these can cause
sharp moves in currencies.
Investors and speculators
In this article we will look at how Investors Exotic pairs
and speculators trade currencies in an attempt
to benefit from movements in the currency Currency pairs consisting of one major
exchange markets. They do not intend to use currency and the currency of a developing
the money itself for any practical purposes; country, such as Turkey (available on DMT5).
instead, their motives are purely driven by Pairs such as USD/RUB or USD/THB would
speculation and a simple desire to profit from come under this group.
the price differences. The actual principal is
not changing hands. Unique Digital options
offered by Deriv.com
The majority of all FX trades – i.e.
approximately 80% – involve the US dollar Digital options have a fixed payout and a
(USD). The USD remains the world’s reserve fixed premium. Before purchasing each trade,
currency, used when trading commodities you’ll know the exact cost of each trade
such as Gold and Oil (which are quoted in and how much you stand to gain or lose. At
USD per ounce or barrel). Companies that worst, the maximum that you could ever part
do business throughout many parts of the with is the price initially paid to purchase the
world still report in USD. Bitcoin whilst a trade; at best, you’ll win back your initial stake
cryptocurrency is still quoted the majority of plus the payout amount displayed for your
the time in US Dollars. consideration when you first bought the trade.
Thus, as forex trading goes, the digital option
What can you trade with Deriv.com? route is clear-cut and predictable in terms of
the potential outcomes. Your risk on DTrader
Major pairs is strictly limited to your premium.
The most popular, commonly traded currency Deriv Digital options give you a variety of
pairs, such as EUR/USD and USD/JPY. All ways to profit from a currency pair.
major pairs include USD since it’s the world’s
most traded currency. In my new E-book How To Trade the Forex
market I go into more depth on the different
Minor pairs ways to back a currency as well as how I
use technical analysis to help spot trends
Currency pairs that don’t include USD, but in the market. I also go through the Forex
still encompass the currency of developed terminology and take your through trading
countries. This could be GBP/CAD or EUR/ examples.
CHF.
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A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
FX Contracts For Difference (MT5)
A CFD is a derivative product that you can
use to speculate on the future direction of a
market’s price.
You’ll never take ownership of the underlying don’t have a stop loss order you will not be
asset (in this case, currencies). Profit or loss asked for additional funds.
results only from the difference in the price
of the underlying asset when the contract is Deriv.com use Metatrader 5
closed. A CFD gives you exposure to a market (MT5)
and allows you to go long (trade for the price
to go up) or short (trade for the price to go MetaTrader 5 (MT5) is a robust online trading
down). The CFD will remain open until you platform developed by MetaQuotes Software.
close it or it gets stopped out. Whilst, at first sight, MT5 can look a little
overwhelming, take it a bite at a time and
Deriv.com believes in reasonable trading and you’ll easily be able to rise to master it. The
offer ways to limit your risk such as stop loss, software is available free of charge and can
take profit and limit orders they also offer a be downloaded on a desktop or you can use
no negative balance guarantee which means a mobile device will apps available for Android
should a trade go heavily against you and you and iPhone/iPad.
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A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
The power of Leverage
If you have say $1,000 with no leverage then the most you could trade
is $1000 which is not that appealing fortunately Deriv offer generous
leverage which will vary depending on your country of residency.
Lets take for example 50:1 leverage this Trading a pair
means for every $1000 you can control
$50,000 this of course will magnify your In currency trading you are always trading a pair,
gains and losses so should be used carefully. its one currency the base currency against the
I explain risk management techniques in my quote currency. If you went long (buy) EUR/
E-book How To Trade Forex. USD then you are buying Euros and Selling US
Dollars, you cannot just say buy Euros.
Bid price: The bid price (SELL) is what the cover the spread between the bid and ask
broker is willing to pay for the base currency prices, you can start making a profit on your
in this example 1.18816 position. (Spread = Ask price minus Bid price).
Tighter the spread the better.
Ask price: The ask price (BUY) is the rate at
which a broker will sell the quote currency. Overall currencies do not move in large
The ask price is always higher than the bid percentages but what exaggerates the moves
price in this case 1.18831 is the use of leverage. A 0.5% daily move
when you have 100 x leverage becomes
Spread: The difference between the ask price magnified.
and the bid price, which allows the broker to
earn a commission on your trade. After you
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A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
Average True Range (ATR)
The chart below of the EURUSD was plotted of the last 20 candles. It’s current value is
using MetaTrader5, by MetaQuotes. It is the 0.00633. If you look at the last 10 bars as the
standard for charting Forex pairs, and is free price is dropping the ATR has gone up which
to download from Deriv. It shows a daily means more volatility.
chart, where each candle represents a full day.
You can easily change this in MetaTrader5 if
At the very bottom you can see the ATR, you want an average for a longer or shorter
which stands for Average True Range. The period. The average month has 20–22 trading
parameter, 20, indicates that it is an average days and 20 is a popular one to use.
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A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
Ready to discover more?
You can download my new 75 page Ebook How To Trade the
Forex which will cover:
• The Simple Basics of Forex
• Who Needs and Uses the Currency FX Market?
• Popular Digital Options FX contracts
• What Makes a Currency Go Up or Down?
• Which Currencies Can You Trade?
• Trading commodities with Deriv
• Currency pairs you can trade with Deriv
• Fundamental Analysis
• Technical Analysis and Trading
• 3 Possible States for Currency Pairs
• Three Main Tools a Trader Can Use
• Chart Formats
• Power Tools for Forex Traders
• Support and Resistance: How to Make Money
from a Sideways or Dull Market
• Deriv Meta Trader 5 – Step up to the next level
• Money Management and keeping your emotions in check
• 7 Top Tips to Help You Trade profitably with Deriv
• FAQs
• Glossary of Key Terms Used in Forex and Digital Options
Trading
You can also put your new found skills to the test zero risk by
using a deriv.com practice (demo) account.
To get your copy just go to: https://trade.deriv.com/forex-ebook/
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A beginner’s guide to trading the Forex market using Digital Options and CFDs with the MT5 platform
by Vince Stanzione
RISK WARNING
CFDs offered by Deriv Investments (Europe) Ltd are considered complex derivatives and may
not be suitable for retail clients. They may be affected by changes in currency exchange rates;
If you invest in this product you may lose some or all of the money you invest; The value of
your investment may go down as well as up.
CFDs offered by Deriv Investments (Europe) ltd also come with a high risk of losing money
rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with
Deriv Investments (Europe) ltd. You should consider whether you understand how CFDs work
and whether you can afford to take the high risk of losing your money.;
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Please trade responsibly. For more information about responsible trading please click in the
next link. For complete regulatory information please click here https://deriv.com/responsible/
Nothing in the article should be taken as financial advice and is for information and
educational purposes only.
About the Author
Vince Stanzione has been trading markets for over 30 years
and is a self-made multi-millionaire. He is the New York
Times bestselling author of The Millionaire Dropout and is
the author of “Making Money from Financial Spread
Trading” He has been featured favourably and quoted in over
200 newspapers, media outlets and websites including CNBC,
Yahoo Finance, Marketwatch, Reuters.com, Independent,
Sunday Independent, Observer, Guardian, The Times, Sunday
Times, Daily Express, What Investment, Growth Company
Investor, New York Times, Bullbearings, City Magazine, Canary
Wharf, Institutional Investor China and Shares Magazine.
He mainly lives in Mallorca, Spain, and trades financial
markets including currencies, stocks, commodities and . For
more information, visit www.fintrader.net and follow him on
Twitter @vince_stanzione
