Placing a trade

Seven steps

Placing a buy or sell trade in the foreign exchange market comes down to seven steps.

1. Choose a currency pair. Pairs are listed with a base currency and a quote currency; in EUR/USD the euro is the base and the US dollar the quote.
2. Decide on the direction. If you think the base currency will appreciate against the quote currency, you buy the pair; if you think it will depreciate, you sell it.
3. Determine your lot size. A lot is the unit of trade size: a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
4. Set your stop loss and take profit. A stop loss is an order that limits your loss if the trade goes against you; a take profit closes the trade at a chosen profit level. Set both from your risk plan and your strategy.
5. Choose your order type. A market order buys or sells at the current price. A limit order buys or sells at a specific price. A stop order buys or sells once price reaches a certain level.
6. Execute the trade. With everything set, press buy or sell; the trade fills at the market price or at your limit price, depending on the order type.
7. Monitor the trade. Once it is open, follow the price and adjust the stop loss and take profit if your plan calls for it.

Every trade, logged

Each trade you place lands in Trades with its pair, direction, size, entry, stop and target, so the seven decisions above are recorded the moment you make them and can be reviewed once the trade is closed.