What is India's Forex Swap Scheme

Basics

Before you begin using the platform's trade functions, you must have a clear understanding of the standard terms order, deal and position.

  • An order is the instruction to the broker to buy or sell a financial instrument. There are two main types of orders: market and pending. There are also take profit and stop loss levels.
  • A deal is the economic exchange of a financial instrument (buy / sell). Buying is carried out at the ask price and selling is carried out at the offer price (bid). A deal can be opened as a result of a market order or a triggered pending order. Note that in some cases, the execution of an order with multiple deals can happen.
  • A position is a trading obligation, i.e. the number of contracts bought or sold in a financial instrument. A long position is a trading instrument bought with the expectation that the price will rise. A short position is the obligation to provide an instrument in the future in anticipation of a lower price.

Relationships between orders, deals and positions

The platform allows you to easily follow how a position was opened or how a trade (deal) was carried out. Each trading operation has its own ID called a "ticket". Every order and every transaction (deal) receives a ticket that relates to their respective position. Each deal receives a ticket of an order with which it was completed.

If several deals have been caused by a position, e.g. in the case of a partial deal or increasing volume, each deal contains the ticket of the position. This makes it easy to keep track of the entire history of the position as a whole.

If trades are sent to an exchange or a liquidity provider, they also have an ID from an external system. This enables additional tracking of the relationships between the operations outside the platform.

General scheme of trading operations

  • From the trading platform, the order is sent to the broker for execution with the specified parameters;
  • The correctness of the order is checked on the server (correct prices, available funds, etc.);
  • Orders that have passed the check are now waiting to be executed on the trading server. The order can then:
  • be executed (in one of the automatic execution modes or by the dealer)
  • canceled on expiry
  • be rejected (e.g. if there is not enough money left or no counter offer was found)
  • be deleted by the trader;
  • A deal is the result of executing a market order or executing a pending order;
  • When there are no positions for a symbol, making a deal is opening a position. If there is a position for a symbol, the deal can increase the position volume, close the order, or reverse it.

Item accounting system #

There are two systems for calculating positions: netting and hedging. The system depends on the account type and is determined by the broker.

Netting system #

In this system you can only have one position open for one symbol at a time:

  • If there is an open position for a symbol, a deal in the same direction increases the order volume of the position.
  • If a deal is executed in the opposite direction, the volume of existing positions can be reduced, the position closed, the same volume or the position reversed.

It doesn't matter what triggered the opposite deal.

The example below shows the execution of two EURUSD buy deals with 0.5 lot each:

The execution resulted in an entire position with a volume of one lot.

Hedging System #

In this system you can have several orders open in one trading instrument, in the same or opposite direction.

When you have an open position on a symbol and you execute a new deal (or a pending order is triggered), a new position is automatically opened. The current position remains unchanged.

The example below shows the execution of two EURUSD buy deals with 0.5 lot each:

Executing two deals in the opposite direction therefore results in two open positions in different directions.

Influence of the selected systems

Depending on the selected type, some functions of the platform can behave differently:

  • Stop Loss and Take Profit Transfer Rule Change.
  • To close a position in the netting system, you would have to open a position in the opposite direction with the same symbol and the same volume. To close a position in the Heding System, you must explicitly select the order close command in the position's context menu.
  • One cannot be reversed in the hedging system. In this case, the current position is closed and a new one is opened with the remaining volume.
  • A new condition for margin calculation is available in the hedging system - Hedged Margin.

Order types #

The trading platform allows inquiries to the broker for trading operations to be prepared and sent. In addition, the platform allows open positions to be controlled and managed. Several types of orders are used for this. An order is the instruction of the trader to the broker to carry out a trading operation. In the platform, orders are divided into two types: market and pending. There are also Stop Loss and Take Profit levels.

Market order #

A market order is an instruction to the broker to buy or sell a financial instrument. The execution of the order results in a deal. The price at which the deal is executed is determined by the execution type, which is dependent on the symbol. A buy transaction is executed at the ask price or above, a sell transaction at the buy price or below.

Pending order #

A pending order is the instruction of the trader to the broker to carry out a trading operation at a certain price. The following types of pending orders are available:

  • Buy Limit - a request to buy at the ask price that is equal to or less than specified in the order. The current price is higher than the value specified in the order. Usually this order is opened in anticipation of a fall and subsequent rise in the trading instrument;
  • Buy Stop - a request to buy at the ask price that is equal to or greater than that specified in the order. The current price is smaller than the value specified in the order. Usually this order is opened in anticipation of a rise and subsequent breakout of the trading instrument;
  • Sell ​​Limit - a request to sell at a bid price equal to or greater than that specified in the order. The current price is smaller than the value specified in the order. Usually this order is opened in anticipation of a rise and a subsequent fall in the trading instrument;
  • Sell ​​Stop - a request to sell at the bid price that is equal to or less than that specified in the order. The current price is higher than the value specified in the order. Usually this order is opened in anticipation of a fall and subsequent breakthrough of the trading instrument;
  • Buy Stop Limit - this type is the combination of the first two types, a stop order to place a buy limit order. As soon as the ask price reaches this stop level, a buy limit order is opened. A stop level is placed above the current ask price, but a stop limit is placed below the stop level.
  • Sell ​​Stop Limit - this order is a stop order to place a sell limit order. As soon as the future bid price reaches the stop level, a sell limit order is placed at the specified level. A stop level is placed below the current bid price, but a stop limit is placed below the stop level.
  • For symbols with the calculation modes Exchange Stocks, Exchange Futures and Futures Forts, Stop Loss and Take Profit orders are executed according to the rules of the exchange on which it is traded. Usually last price is used (price of the last executed trade). In other words, an order is triggered when the last price touches the specified price of the order. Please note, however, that buying and selling are always carried out at the opposite bid or ask price.
  • In "Exchange Execution" mode, the specified price is not verified when the limit orders are placed. This can be specified above the current ask price (for buy limit orders) and below the current bid price (for sell limit orders). When placing an order with this price, this immediately triggers and becomes a market order. In contrast to market orders, in which the trader agrees to execute the deal at an undisclosed market price, a pending order will not be executed at a price that is not worse than the price given.
  • If the corresponding market transaction cannot be executed at the moment a pending order is triggered (for example, the margin is insufficient), the pending order is deleted and moved to the "rejected" area in the history.

- current market condition

- prognosis

- current price

- Order price

- Price at which a pending order is placed

- expected growth

- expected drop

Take Profit #

A Take Profit is intended to secure an accumulated profit when the instrument reaches a certain level. The execution of the take profit results in the closing of the entire position. The take profit is always linked to an open or a pending order. The order can only be executed together with a market or pending order. This order condition for long positions is checked with the bid price (the order is always placed above the current bid price), the ask price is used for short positions (the order is always below the current ask price placed).

Stop loss #

This order is used to minimize losses if the price of the instrument goes in the wrong direction. When the price of the instrument reaches this price level, the position is automatically closed. The stop loss is always linked to an open or pending order. The order can only be executed together with a market or pending order. This order condition for long positions is checked with the bid price (the order is always placed above the current bid price), the ask price is used for short positions (the order is always below the current ask price placed).

If the corresponding market transaction cannot be executed at the moment a Take Profit or Stop Loss order is triggered (e.g. it was rejected by the stock exchange), this order will not be deleted. It is triggered again when a new tick arrives that meets the conditions for triggering the order.

Stop Loss and Take Profit transfer (netting): #

  • When the volume of a position is increased or the position is reversed, Take Profit and Stop Loss are placed based on the last order. In other words, old stop levels are replaced by new stop levels. If no value is specified in the order, the Stop Loss and Take Profit of the position are deleted.
  • If a position is partially closed, the Stop Loss and Take Profit are not deleted by the new order.
  • When a position is completely closed, the Stop Loss and Take Profit are deleted as these are linked to the order.
  • When a trade is carried out on a symbol for which there is a position, the current Stop Loss and Take Profit are automatically inserted in the order opening window. This is to avoid accidentally deleting the current stop orders.
  • During one-click trading (from a panel on the chart or from the market overview) for a symbol for which there is a position, the current Stop Loss and Take Profit are not changed.
  • In the OTC markets (forex, futures), when a position is taken over into the next trading day (swap / rolls), stop loss and take profit remain unchanged.
  • If a position in the stock market is taken over into the next trading day (swap / rolls), Stop Loss and Take Profit are reset.

Stop Loss and Take Profit Transfer (Hedging):

  • If a position is partially closed, the Stop Loss and Take Profit are not deleted by the new order.
  • When a position is completely closed, the Stop Loss and Take Profit are deleted as these are linked to the order.
  • No Stop Loss or Take Profit are set during one-click trading (from a panel from the chart or from the depth of the market.

These rules apply to both manual trading and trading by Expert Advisors (MQL5 programs).

  • Trailing Stop can be used to automatically move the Stop Loss.
  • The activation of the Take Profit or Stop Loss leads to the complete closing of the order.
  • For symbols with the calculation modes Exchange Stocks, Exchange Futures and Futures Forts, Stop Loss and Take Profit orders are executed according to the rules of the exchange on which it is traded. Usually last price is used (price of the last executed trade). In other words, a stop order triggers when the last price touches the specified price of the stop loss. Please note, however, that SL and TP are always executed at the opposite bid or ask price.

Trailing Stop #

The stop loss is used to minimize losses if the price of the instrument goes in the wrong direction. If a position becomes positive, the stop loss can be set to break-even, i.e. the entry price. The trailing stop performs this process automatically. This tool is useful if, for example, the market has no fixed direction or if you cannot constantly monitor the PC.

The trailing stop is always linked to an open position or pending order. This is carried out in the trading platform and not on the server, like the Stop Loss. To set a trailing stop, select "Trailing Stop" in the context menu of the position or order in the "Trading tab":

Select the required value of the Stop Loss Level.

Only one trailing stop can be set for each position.

Scheme of the execution of the trailing stop

  • When a new tick arrives, the platform checks whether an open position is profitable.
  • As soon as the profit in points is equal to or greater than the specified trailing stop level, an automatic command is issued to place the stop loss with the distance from the trailing stop level to the current price.
  • If the price moves in the positive direction and the profit of the position increases, the stop loss is automatically adjusted.
  • On the other hand, the order is not modified. Thus, the profit of a trading position is automatically secured.
  • If a stop loss has been set for a position, it becomes a trailing stop and automatically follows suit.
  • When a pending order is triggered, the trailing stop of the current position for the same symbol is overwritten with the trailing stop of the pending order.
  • If Deal is activated in the opposite direction as a result of a triggered pending order and the volume is less than or equal, the trailing stop is not overwritten.

With each automatic modification you will receive an entry in the journal.

To deactivate the trailing stop, set "No "parameter in the context menu. The" Clear all "command deactivates the trailing stop for all open positions and pending orders.

  • The trailing stop is executed in the trading platform and not on the server like the stop loss. This means that it is only functional when the platform is open. If the platform is closed, the last set stop loss remains active.
  • For a position, the stop loss can occur a maximum of every 10 seconds.
  • If there is more than one trailing stop position on a symbol, trailing stop is processed in a special way. When a tick arrives for the symbol, trailing stop is only processed for the position that was opened later than all others. If a new tick for the same symbol arrives within the next 10 seconds, the trailing stop of the next position (which was opened as the penultimate) is processed. If the next tick arrives later than 10 seconds, the trailing stop of the position that was opened later than all the others is processed again.

Order status #

An order can have one of the following statuses on the trading server:

  • Started - the order has been checked but has not yet been accepted by the server;
  • Placed - the order has been accepted;
  • Partially filled - the order has been partially filled;
  • Filled - the complete order has been filled;
  • Canceled - the order was canceled by the customer;
  • Rejected - the order has been rejected;
  • Expired - the order has expired and has been deleted.

You can view the status of an order in the account history in the "Status" field.The status of a pending order that has not yet been activated can be viewed in the trading tab.

 

Execution types #

There are four order execution modes in the trading platform:

  • Instant execution
    In this mode, the order is executed at the price requested by the customer. When submitting an order, the platform automatically adds prices to the order. If a broker accepts the prices, the order will be executed. If the broker does not accept the price, a requote is sent, a price that the broker proposes to execute the order.
  • Request execution
    In this mode, a market or is executed at the last price received from the broker. Prices for a specific market are requested from the broker before the order is sent. After the prices have been received, the order execution is confirmed or rejected.
  • Market execution
    In this order execution mode, the broker takes over the selection of the price completely. Sending the order means executing it with automatic approval at the price offered.
  • Exchange execution
    In this mode, trading operations are carried out and sent to the external trading system in the trading platform. Trading operations are carried out at prices that are currently available on the market.

Execution modes for each instrument are determined by the broker.

Filling rules #

In addition to the general rules of execution, the trader can set conditions for "filling" when placing orders:

  • Fill or Kill (FOK)
    This rule means that the order is only filled to the full volume or not at all. If the required volume is not currently available on the market, the order will not be executed. The required volume can be filled through various offers in the market.
  • Immediate or Cancel (IOC)
    In this case, the order will be executed with the maximum volume currently available on the market. If the order cannot be completely filled, the rest of the order will be deleted. Whether the IOC method can be used is determined on the trading server by the broker.
  • return
    This policy is used for market orders (buy and sell) as well as limit and stop limit orders. In the event of a partial execution, an order with the remaining volume will not be deleted, but will continue to be valid. For Marktoders, the "Return" policy is only used in the "On-exchange execution" mode, for Limit and Stop Limit orders - in the "Market execution" and "On-exchange execution" modes.

The use of the rules is determined using the following table:

Type of execution / filling rule

Fill or kill

Immediate or Cancel

return

Instant execution

+

Request execution

+

Market execution

+

+

+

Exchange execution

+

+

+