T2W Trading Community

6. Screen-based spot trading

The technology for trading forex has evolved from the telephone and telex (not forgetting voice dealing) through to the modern Electronic Broking System (EBS) that enables “straight through processing” (STP) with integrated quotation, transactional and administrative functionality.

EBS-type technology is now available to individual, private investors who can receive live, streaming data from and transact directly through their chosen brokers. The private dealer, however, does not deal on the highly competitive inter-bank market with its tight spreads. In practice, brokers add points to the price spread in lieu of dealing commission.

A private trader requires: -

• A margin account broker with internet access and a fast connection
• A computer terminal capable of running several programmes simultaneously
• Proprietary software to open and manage positions and to display technical analysis tools.
• Sufficient monitors to handle market data, submit dealing instructions, display technical analysis; and for keeping tabs on open positions, managing orders (e.g. stop loss, TPO, limit etc.) and viewing the state of the margin account. For demonstrations of the kind of proprietary software available, visit Pronet Analytics (www.pronetanalytics.com) and Nostradamus (www.nostradamus.co.uk)

Pronet Analytics provides the only chart-based software package approved by Association of Cambistes Internationale, the governing body of professional forex trading. 

6.1 The screens

The trading screen is where you monitor bid and offer prices in multiple currency pairs. A typical EBS-style screen format will highlight the “pips” (i.e. the second and third decimal places) where most of the movement takes place. All you have to do is pick your moment and click on the buy and sell key.

Forex traders rely heavily on technical analysis, which uses historical activity and price data to forecast future prices and trends. The serious trader needs a separate monitor (and possibly more than one) to display a range of analytical tools simultaneously.

We will return to the tools of technical analysis in the next section.
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Appendix A

Computing cross rates – an example

Assume that the following major exchange rates are known: -

EUR/USD = 1.0060/65
GBP/USD = 1.5847/52
USD/JPY = 120.25/30
USD/CHF = 1.4554/59

To calculate GPB/CHF

GBP/USD: Bid: 1.5847 Offer: 1.5852
USD/CHF: 1.4554 1.4559

GBP/USD X USD/CHF = 1.5847 X1.4554 1.5852 X 1.4559

GBP/CHF = 2.3063 2.3079