How to use the Moving Average indicator?

A modern set of technical analysis tools for fix api trading on the Forex market is very diverse. Each year brings us new indicators, on the basis of which traders build their trading strategies. However, there is an indicator that is usually referred to the category of classical tools – all traders without exception know about it, it is used since the beginning of exchange trading on all types of markets. It’s about the Moving Average (MA) or moving average.

MA is an average price of a financial asset for a certain period. Averaging of any indicator is a popular technique used in statistics, economics, physics and other scientific disciplines. Averaging serves as a specific filter that allows you to isolate the trend from the market noise. It should be noted that MA is used in fix api trading as a stand-alone indicator, and as an integral part of more complex indicators of technical analysis.

In our time, several methods of MA calculating are used in trading:

  1. arithmetic moving average (MA);
  2. exponentially weighted moving average (EMA);
  3. linearly weighted moving average (WMA);
  4. smoothed moving average (SMMA).

Each average received by these methods has its own characteristics of reflecting the market dynamics, which makes it possible to effectively use and combine them in trading on the fix api Forex market. Such a set of МА calculation methods together with a wide choice of calculation period allows to form an almost unlimited number of variants of this technical analysis tool.

There are several ways to use MA:

  1. Trend determination – the tool allows you to visually show the current market trend for a selected trading instrument
  2. Formation of resistance/support levels – a properly matched MA period allows the tool to be used as a resistance or support line for the price of the market asset;
  3. Formation of the level of setting the loss limiter for the market order (Stop Loss) – the use of MA as a resistance/support line allows the trader to form a level of placing the Stop Loss of the market order above or below the moving average;
  4. Determination of the point of trend change – the use of two MA with different periods in the fix api trading allows you to determine the moment of a break in the market trend and change the current trend to the opposite.

I listed only the most basic examples of using MA in the financial markets trading, but of course, this list is far from complete. MA is also used as a criterion for selecting assets in the portfolio trading, for filtering the trading signals and constructing other indicators of technical analysis. Trading systems based on several indicators in most cases also include some variants of MA. Especially good results are shown by the combinations of MA with RSI and Stochastic oscillators. Moving averages are used in identification of many popular patterns in graphical analysis of the markets.

Despite all its advantages, MA has two fundamental drawbacks, imposing significant restrictions on their use – lag and false signals. Indeed, this tool clearly demonstrates the features of the market price dynamics in history, but it is very late compared to the current price. In this case, the delay period increases with the increase in the average period. In addition, the use of MA as a technical analysis tool gives the trader too many false signals ( during the market flat period.

In conclusion, I would like to recall the popular market saying that moving averages earned more money for traders than all the other technical analysis tools taken together. Indeed, MA has been used for more than 100 years in all markets for all the trading instruments. MA is included in the sets of all trading platforms offered by the fix api forex brokers to their clients. This tool is able to help any trader to form his unique trading strategy, but to do this, they will need long hours of experimentation, search, trial and error.

Metatrader 4 is integrated trading solution

The most important tool for fix api trading, through which the trading operations on the financial market are actually concluded, is the trading platform. The trading terminal allows the trader both to conduct a comprehensive technical analysis of financial instruments, and conclude exchange transactions. For this purpose, many trading terminals have been developed, but the most popular one is the fix api MT4.

Metatrader 4 is integrated trading solution for both the broker and trader, which is most convenient in using trading conditions for cfd contracts, as well as the foreign exchange market. This terminal is called the “old-timer” of the market, since it has been functioning for more than 10 years and during this time has strongly strengthened its positions. That is why most brokers offer this software for free, because during the current period, many different auxiliary programs were created that synchronize with this software. This is one of the features of the trading terminal, but there are many others included in it:

  1. This software is primarily intended for trading cfd contracts and allows the traders to increase the number of different instruments.
  2. In the fix api MT4 trading terminal, the possibility of trading on a fractional contract is realized.
  3. Ability to use margin trading.
  4. A large list of graphical tools for analysis.
  5. Internal development environment –
  6. Ability to use third-party software (as I wrote above) –
  7. Ability to connect the terminal to the FiX protocol using fix api.


Non-Standard Money Management

Risk control plays an important role in shaping the future financial results. The existence of a trading strategy alone does not guarantee a positive financial result; therefore, it is necessary to develop additional effective parameters for managing the capital.

Averaging is also highlighted among the possible options for risk control as a non-standard option for risk and money management. I do not recommend to use this type as a basis for risk control, but nevertheless it will allow you to get out of the drawdown on a specific financial asset by opening additional transactions in the direction of a losing transaction. To do this, you need to understand the levels and logic of its work.

If we consider the example more specifically, then the averaging is used in the event that the trader has a loss on the transaction and in order not to close the loss and not to fix the position, he opens another deal in the same direction. Thus, he adds more volume to the unprofitable position and brings the break-even point closer to it. For example, when a trader has a loss on the EURGBP currency pair of 50 points and he predicts a spread of quotations to the previously opened side, he makes an additional deal in the same direction. Thus, the break-even point will be divided by two. When the quote demonstrates the dynamics of 25 points in the right direction, the fix api trader can close both deals: the first with a loss of 25 points, and the second with a profit of 25 points.


Methods of risk control in trading

Money management in the financial market plays an important role in shaping the future profitability of the fix api trading. Each exchange speculator should be aimed at keeping risks at a fixed level and try not to reach them. But nevertheless, they always present in trading and in the financial market only the fix api forex broker can earn stable and risk-free profit. We also need to manage our risks to ensure the safety of our funds and multiply them.

Methods of risk control in trading:

  1. Transaction risk: it is necessary to limit the losses in a particular trading operation, in order to understand how much will we lose in the event of incorrect forecast even before opening the position. This parameter also helps you to determine the volume of the position based on the risk. For this, there are auxiliary programs or calculators that display the volume of the deal in lots for fix api MT4.
  2. The risk for a certain time interval: I also recommend to set the maximum risk for a certain period of time. So, if you have reached maximum weekly losses, it is best to suspend trading, take a break and try again on Monday.
  3. Trailing stop: this option will allow you to improve the indicator more than once, based on the fact that it will always fix the guaranteed interest, which will allow you to leave the market even with a minimum profit in case of a sharp price turn.

These parameters are not new and unique, but they are able to take control of your risks and I recommend starting to apply them in your trading today!


High-frequency approach in trading

Fix api Latency Arbitrage is a high-frequency approach in trading, which consists in opening trading positions based on the exchange rate delays. This approach is implemented through trade both in the faster and in the slower broker. Thus, the trading robot conducts a constant analysis of price quotes and, in case of maximum delays, it commits a trading operation on the side of the slower broker towards the faster one. The logic of the automatic trading strategy consists in an implemented parameter, which is analyzed in an online mode. As soon as the price quotes for the same currency pair reach a certain (given) value in points, the robot will open the deal and close it after reaching the price marks that were for the asset on the side of the faster broker at the time of opening the transaction.

However, this simplicity of the algorithm has its hidden pitfalls, of which not every fix api trader knows:

  1. Most brokers prohibit the arbitrage principle of trading, so if the broker determines your trading style, he may not pay you the profit from the trading positions.
  2. Continuing the first point, the broker can easily identify this algorithm, because it also contains algorithms that automatically monitor such operations.
  3. Since all the operations on the transactions were carried out on the side of the slower broker, it is possible that the trader will go to a company that operates by the “kitchen” scheme. Therefore, he can lose not only his profit, but his capital as well.

Profitable Method Of News Based Trading

There are many different methods of trading in the financial market that can take profits even with the smallest price movements. There are also approaches that, on the contrary, are based on the fix api trading at the time of the most volatile phase of the market. This method of trading is the opening of trading positions when publishing important statistics that have the greatest impact on the price quotes. In the market, this type of trade is called news based trading.

News based trading is carried out for the purpose of quick earnings, because when new data enters the market, the exchange speculators rebuild their forecasts and open new trading positions that instantly cause increased volatility. Imagine a market boom when a lot of players compete for the same product. The same thing happens with the quotes of the financial asset in the fix api forex market. This is an excellent opportunity for a professional trader to earn at the moment, because the price for a short period of time can go up to 100 points.

For example, if the Central Bank changes its monetary policy and raises the interest rate, this indicates a toughening of the conditions. Thus, the supply of currency decreases, and the demand remains at the same level, which causes an increase in the asset value. For example, the decision to change the rate of the FED was marked by strengthening of the dollar compared to the US dollar by 80 points. This is an excellent yield potential for the trader. If he opened one lot at the fix api MT4 trading terminal ( ), he could earn approximately $800 in an hour (with a leverage of 1:100).

However, the scenario given above is very rare. Especially, if you conduct a chaotic fix api trading and do not have a special approach, because even in this trading method there is an algorithm of actions, about which I am going to tell you today.

Profitable method of news based trading

In order to conduct trading based on the news, each trader must be prepared for trading on this algorithm.

  1. Initially, you need to determine the news on which you plan to trade and see its dynamics on history. If this news does not cause more than 20 points of movement for a currency pair, then such a game is not worth the candle. If the expected indicator regularly shows 50-100 points of movement, then certainly it is worth choosing it for your trade.
  2. The second stage is to establish two pending orders: buy stop and sell stop. These two pending orders must be accompanied until the opening of the trading position. However, it is necessary to ensure that the transaction does not open on the basis of spread expansion or price noise on the threshold of data publication.
  3. After the news comes out, the quotes with a high probability will break one of the pending orders and you will have an open position for one “delay.” An order that is not open must be removed in order not to get into the lock.
  4. The open position is connected with further actions. It is your decision when to close a position. However, I would advise you to transfer almost immediately the transaction to the breakeven zone (to set a stop loss at the opening level) and include a trailing stop.

As you can see, this algorithm does not guarantee the fixation of absolutely all traffic after the news, but it allows you to fix a huge percentage of profitability in a single transaction and in the shortest time period. Moreover, the news based trading fits perfectly into the more standard trading systems for working in the fix api forex market and can be combined with other manual algorithms and automatic systems. Therefore, I recommend the fans of speculative trading and quick earnings to test the algorithm described above and which can be implemented in the form of a speculative trading robot ( ).


Trade with the help of automatic programs

The trading result directly depends on the methods of trading. If the exchange speculator does not have a tool for analysis that allows him to predict the future value of the asset, then there will be no positive financial result. I consider it a senseless waste of money to start trading in real funds without tool of analysis. This is a key mistake of the novices in the market, because almost everyone comes here for quick money and concludes chaotic transactions that only contribute to a fund loss. Therefore, to make the trading process profitable and able to demonstrate a positive result, each fix api trader must trade according to the trading system.

Everyone can find a ready-made description of trading systems on the Internet and start his acquaintance with the market with them. I advise you to initially try virtual means that you can get in the fix api MT4 trading terminal, and supplement the ready methods with his analysis forming an individual trading approach, because each trader is unique and not every trading system is suitable for all. Only after the first positive test results of this method, you can think about opening a trading account in the fix api forex broker.

There is also an alternative scenario – to use automatic trading programs in the form of robots ( ), which will make transactions without the trader’s direct participation. With this approach, you cannot think about creating a trading strategy and spend time studying market patterns, because it will all be included in the robot, and the beginning speculator will turn into a full-fledged investor. Thus, a passive percentage of profit from trading in the fix api forex market is formed.

Undoubtedly, before you connect the program to a trading account, you need to test it on historical data, as well as pay attention to the statistical indicators. Only if the program already demonstrates profits on the existing trading accounts and its indicators do not cause increased risks, you can trust your capital to it. In other cases, I do not advise it.

If you have chosen a working algorithm, the trade with the help of automatic systems has a number of advantages:

  1. It allows you to save time on finding investment opportunities;
  2. It conducts permanent trade in the foreign exchange market (around the clock five days a week), which allows you not to miss the advantageous entry points;
  3. It controls risks, because the program sets a maximum loss parameter and risk and money management parameters are not violated;
  4. It controls the emotional background, as the robot works based on a specified algorithm and short-term losses will not affect its analysis of the transaction and financial assets;
  5. It allows formation of a highly profitable source of passive profit.

This is not a complete list of automatic programs and depends on each particular robot. However, this is the main basis, on which the manual trading of the novice speculators does not work, and the use of robots solves this problem. Moreover, the use of automatic algorithms can go in combination with manual trading and become a means to withhold the trading account from losses.

If you have your own system and conduct profitable trading, I still advise you to diversify it using an automatic approach. In this scenario, it is best to use another account in order that the logic of the trading robot in the fix api forex market is different from your system. This can be a completely different strategy or a more speculative algorithm, for example scalping or arbitration ( ). Therefore, automatic trading is suitable for both beginners and professional players on the financial market.


Pair arbitration: what is it?

The financial market attracts more and more traders to their networks with the illusion of quick money simplicity. However, those who are familiar with the market, have long understood that this is not so. Everyone who has started and continues to work on the fix api forex, brought something new to this market. Some created their own authorial approaches in the form of a trading strategy. Others have authored technical indicators, and others have trading robots. Today, this abundance of auxiliary elements of analysis makes it possible to form a huge knowledge base and useful content for the future generation. However, do not forget about the traditional tools that have long been alien to this market. And I’m talking about such an approach in the trading as the fix api arbitrage.

Arbitrage trading is based on the opening of trading positions on the same financial asset, but on different stock exchanges. At one time, when computers were just beginning to appear in this segment, this approach was widely used on different stock exchanges, when on one exchange the price of an identical asset could differ and the fix api trader had the opportunity to buy at a lower price and sell at a higher ( ).

For a long time, this approach was not available for the foreign exchange market due to the specificity of its robots, because this market is inherently a single exchange platform. Therefore, arbitration here was not applied. But everything changed drastically after the forex market began to actively use special auxiliary programs for the fix api trading ( ).

The brokerage companies have contributed a great support for this, as they set significant markups on the currency pairs. These mark-ups cause a gap in the exchange rates and an opportunity to open arbitrage transactions.

Pair arbitration is precisely in the classic work on this trading strategy. For example, when the value of the EURUSD currency pair in one broker is 1.1250, and the second one reaches 1.1258, the trading robot receives a signal to the beginning of the action. To do this, you need to specify the normative discrepancy between different brokers (let’s say this difference is 3 points in our example), as well as the maximum discrepancy at which it is necessary to open positions (let this parameter amount to just 8 points). Thus, the robot will open two trading positions: a purchase in the broker, where the quotes are 1.1250, and also the sale on the platform where the quotes are 1.1258. After that, when the two pairs of transactions after a prolonged breakdown return to the regulatory range, the trading robot will close both positions simultaneously. Continuing our example, let’s consider that the closing prices will be 1.1267 and 1.1270 respectively. Thus, the first transaction will close with a yield of 17 points, and the second one with a loss of 12 points. The financial result for these polices is 5 points of profit, which was formed absolutely without any risk.

Some exchange speculators have developed this direction and a few more fix api arbitration algorithms have been created, the boiler has an identical idea, but completely different logic of operation (fix api Latency Arbitrage and fix api Lock Arbitrage). I think we will discuss the other options for the work of arbitration techniques in next articles.

This approach is used with the help of special algorithms, because a trader cannot keep a track of such micro-oscillations, especially on different brokerage trading accounts. Therefore, I advise you to use this algorithm in your trading, because it is able to get perfectly combined with other trading strategies and the fix api trading can be conducted without changing the risks.


Arbitrage operations in the foreign exchange market

The number of trading operations over the past few years has rapidly grown. This phenomenon is caused not only by the increase in the number of new players on the market, but also by the current feature of the fix api forex market. As you know, when there is demand, you need to make an offer. The brokerage companies perfectly cope with this function, and the currency brokers prevail in number today.

High market volatility provokes the search for more and more methods of currency pair analysis. Given the fact of the technical environment we live, the automation of fix api trading processes has reached the market segment as well. So, there are HFT algorithms and trading robots in the market that are able to conduct analysis and perform trading operations without the direct involvement of the trader. Also, the methods of trade that were previously impossible to apply in this market were widely used. One such method is the fix api arbitration approach, which got a second breath by automation of this process.

Arbitrage trading is a kind of trading system that is based on a speculative algorithm, opening trading transactions at the time of the largest exchange rate discrepancies in price quotations for the same financial asset, but on various exchange platforms. Thus, this type of trading analyzes not the movement of the price or predicts its future marks, but compares it with the identical value of the price at another broker. A trading operation is carried out if this discrepancy exists. It is necessary to consider each of its forms to understand the logic of this system.

Today, the market has implemented three main types of arbitrage transactions for the currency market:

  1. Fix api 2-leg Arbitrage. The logic of this principle is the most common in traditional markets ( ). According to this principle, the trading robot analyzes the value of the same financial asset, but on different stock exchanges (thus, fix api forex brokers). When the exchange rate discrepancy returns to the regulatory range, the two transactions are closed and the total positive result is fixed ( ). The peculiarity of this principle is that transactions can be held for a long time, which reduces the possibility of the broker’s influence on the trading result.
  2. Fix api Latency Arbitrage. This type of trading is very similar to the previous one based on the logic of its work: analysis is carried out between the same financial asset, however, the trading is performed only at one of the brokers. To do this, the fix api trader should analyze and determine which broker is faster in terms of quotes, and which one is slower. Transactions should be made on the slow side in the direction to the faster one, based on the temporary exchange rate delays.
  3. Triangle Arbitrage. This principle of operation is based on opening several trading operations on the fix api forex market. Such an algorithm uses imports by large companies (banks and hedge funds). The logic of the algorithm is based on the exchange rate divergence of three currency pairs simultaneously. Arbitration is transformed into a form of mediation. The trading algorithm analyzes the situation on the market and opens deals to ensure two market orders. Thus, when the market has an application for the purchase of EURUSD, and the second one holds the EURJPY position and at the same time expects the necessary entry point, this arbitration algorithm provides the first transaction, then converts it into USDJPY and provides the second transaction. To implement this principle, there must be some “gap” in the cost, which will ensure the profitability of the trading operation.

Today, these trading approaches can be used with the help of special auxiliary programs ( ). Arbitrage is a trader’s tool that allows him to form a passive source of profitability in the fix api forex market. Moreover, arbitrage can be perfectly combined with other trading systems of the trader due to its unique approach, which increases the diversification of investment capital and overall profitability.

How to optimally choose the parameters of money management?

Trade in the financial market requires maximum control and a systematic approach. Without observing certain rules (fix api trader should be guided by his own trading system), the result will be negative and lead to a loss of investment capital. Namely because of the absence of a system, many traders take an inefficient approach of trading.

However, the presence of a system alone does not give a result. The trading algorithm must be honed and improved in order to achieve a stable result. But this is only 20% of the success. The remaining 40% depends directly on the trader, his emotional stability from working with money, as well as psychological factors such as greed, fear, desire to win back and so on. The last 40% depend on the trading risk control. Even if the system is unprofitable and the trader lends himself to the psychological factor, but there will be a stable capital management, the loss of investment funds will not be sudden. Moreover, sometimes introducing a competent structure of risk distributions helps to improve the performance of the system and enter a positive profitability zone.

That is why every trader must develop and implement rules for managing capital in his trading on the fix api forex market. Of course, it all depends on the trading strategy and parameters that determine the entry and exit from the position.

If you nevertheless decided to control the risks in your fix api trading, then you should implement these optimal parameters:

  1. Determine the risk for the entire deposit. The trader should be aware of the maximum risks even before the commerce. Thus, in the system’s rules he should write down the key maximum value, upon which you should stop trading.
  2. Determine the maximum risk in the context of each trading operation. Similarly, like the parameter above, the trader should understand what will be the maximum percentage of loss in one trade operation. It is optimal to choose a parameter that would help keep all positions to maximum risk. For example, if your TS has a maximum loss risk of 20%, the risk to deal should not be more than 0.25%. Thus, you can wait 80 unprofitable transactions in a row.
  3. It is necessary to determine the volume of the trading operation based on the risk, or a fixed lot in the fix api MT4. If you set the maximum risk parameter in the transaction, then it is more logical to choose the option of automatic lot determination for opening positions. Fixed lot will solve the problem of large volumes, but not the risks, because the system should determine the exit from a position under certain conditions. If you make a fixed lot, the loss in the transaction will always be different. But it will also restrain the yield in case of a correct forecast. Therefore, I recommend determining the volume based on the risk, as well as the distance to the stop loss level

( ). The formula is quite simple: the distance in points to SL is initially determined, after which the cost of the item is calculated and this value is calculated from the capital. The result will be the required volume.

To sum it up, I want to note the fact that each trader must develop his own rules for capital management. If you have not realized this yet, you will come to this soon. Running the parameters of money management allows each trader to create an algorithmic approach in the future, because the robot is a program that needs to set the circumstances and parameters when it is worth to close the position ( ). And the robot should initially know and calculate the risks. Therefore, creation of quality parameters for money management will allow to improve the trading result in the moment and automatize the fix api trading in the future.