"A buy trade is termed a 'long position' in the forex market... A sell trade is termed a 'short position'."
"When you execute a position, there are essentially three points in every trade: entry price, profit target, and stop loss."
The book provides good examples with pips going up and down from the entry price to the stop loss or the profit. I have yet to figure out how to put in stop losses using MetaTrader 4, if that's even an option.
"Whenever a trade reflects an equal distance between the entry price to profit target and between the entry price to the stop loss, the trade is said to have a risk to reward ratio of 1:1."
Stop losses are very important to managing risk. The more I use MetaTrader, the more I see this as a reality. When I watch my open position go deeper and deeper negative, I'm telling myself to just ride it out a little longer. My last one was 3 days long, and I cut my losses at -$80.
Forex prices are actually two price quotes: "the bid price and the ask price. The bid price is the price at which the trader selects to sell. It is also the price at which the broker is willing to buy. The ask price is the price at which the trader selects to buy. It is also the price at which the broker is willing to sell."
"The difference between the bid price and the ask price is known as the spread."
"The spread is the only transaction fee incurred when trading on the broker's platform... The The spread is charged for every 'round turn.' This means that only 2 pips are charged for a complete transaction of buying first and selling later or selling first and buying later."
Here's a pic from the text. Note the typo I caught. The positions show how profit comes from movement in the quoted ask or bid price. Here I was thinking that it was all about the spread.
"The smaller the spread, the less the market needs to move in your favor to register a profit."
In terms of MetaTrader, the red quote is the bid and the blue quote is the ask.
Regarding a country's currency, "the current account is made up of three components:
Current account = Trade balance + Net income + Unilateral transfers"
"On average, more than 90% of the daily trading volume in the forex market is speculative in nature."
*********************************************************************************
Alright, how does that stuff make me money?! Well, understanding the spread, risk reward ratio, and stop losses directly translate to using the app. The other information about currency accounts gets into researching and following currencies to forecast where they're going.
Btw, a reminder that forex standard lots are 100,000 of the base currency, while options have a lot size of 100 shares of the underlying asset/stock. Speaking of research, when I feel confident in my understanding of the fundamentals, the key will be researching options, currency, and stocks. The method to that research will be key to entering the right trades, and I'm reminding myself of that each day. Alright, time to jump into another trade.