THE COMPONENTS OF A FOREX DEAL 2

Stop Loss Order
This is an instruction to deal if the market moves to less favorable level (i.e. an
instruction to buy if the market goes up to a specified level or sell if the
market goes down to a specified level). For example, if you have a long
USD/JPY position which you bought 115.50 and you want to set a stop loss
order in case USD/JPY starts to fall to stop your loss, you could set a stop loss
order at 115.10. this order will close your position with a 40 pips loss when
prices falls to 115.10.
Entry Orders
Entry orders are orders that can be filled or executed when the market reaches
that rate. For instance, supposing you are trading GBP/USD and the market at
price 1.5900, you can set an entry order to buy the pair at 1.5970.
consequently your order will only be filled when the market price reaches
1.5970.
There two types of entry:
A. Limit Entry Order
These are entry orders whereby the rate specified is either below the current
market rate if is buy or conversely, above the market rate if is a sell order.
B. Stop Entry Order
This order is the opposite of the limit entry order. It is an entry order whereby
the rate specified is either above the current market price if is a buy order or
conversely below the current market price if it is a sell order.
Limit entry orders are usually used by traders who believe the market is trading
within an upper and lower range and that it will not break out of the range.
On the other hand, stop entry orders are used by traders who believe the
market will make a big move.
Liquid
A liquid or “thick” market is a market in which selling and buying can be
accomplished with ease. This is because there are more buyers and sellers in a
liquid market like forex. A market with few buyers and sellers is referred to as
“illiquid.”
Entry
The entry or entry point is the point at which a long or short position is
opened. This is where the trade begins.
Support
Support is a point on the chart where the exchange rate has shown a tendency
to stop falling. Support is not an exact price point, but an area. Think of

support as the floor beneath you.

Resistance
Resistance is a point on the chart where the exchange rate has shown a
tendency to stop rising. Like support, resistance is an area, not an exact price
level. Think of resistance as the ceiling above you.
Breakout
A breakout occurs when the exchange rate breaks beneath support or above
resistance.
Trend
A trend occurs when the exchange rate moves consistently in one direction,
either higher or lower.
Range
A range occurs when the exchange rate has no clear direction and is contained
within visible support and resistance levels.
Consolidation
A consolidation occurs when the exchange rate is trapped in an ever narrowing
area. Consolidations often lead to breakouts.
Volatility
Volatility is a measure of the amount by which a currency pair is expected to
fluctuate over a given period. A volatile currency pair tends to make rapid,
forceful moves, while a pair that lacks volatility tends to trade in a more
predictable fashion.