Part 1: Three-Way Orders - Theoretical. Aksjer Obligasjoner Netthandel Corporate Finance

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1 Part 1: Three-Way Orders - Theoretical

2 Agenda Advantages of using 3-way orders Ratio-trading Support and Resistance levels Placing a 3-way order on Norne Investor Example Slide 2

3 What is a 3-way order? Entry order (also called primary order) Limit order (to take your profit at) Stop Loss order (to limit your losses) Long position Short position Slide 3

4 What is a 3-way order? Entry order (also called primary order) Limit order (to take your profit at) Stop Loss order (to limit your losses) Long position Short position Limit to sell Entry Stop Loss to sell Slide 4

5 What is a 3-way order? Entry order (also called primary order) Limit order (to take your profit at) Stop Loss order (to limit your losses) Long position Short position Limit to sell Stop Loss to buy Entry Entry Stop Loss to sell Limit to buy Slide 5

6 Advantages of using 3-way orders Promotes trading discipline Removes emotional impulses Saves time Slide 6

7 Ratio Trading Slide 7

8 Risk-reward ratio Reward Risk Slide 8

9 Risk-reward ratio Reward Risk To calculate the ratio, you need to know your: Entry Price Stop Loss Target Take Profit Target Slide 9

10 2:1 and 3:1 Risk-Reward Ratio Entry Price Buy EURUSD Stop Loss Target EURUSD (30 pips) Profit Target EURUSD (60 pips) Entry Price Buy EURUSD Stop Loss Target EURUSD (30 pips) Profit Target EURUSD (90 pips) Risk/Reward Ratio 60/30 = 2/1 Risk/Reward Ratio 90/30 = 3/ Entry Entry Slide 10

11 2:1 and 3:1 Risk-Reward Ratio Entry Price Buy EURUSD Stop Loss Target EURUSD (30 pips) Profit Target EURUSD (60 pips) Entry Price Buy EURUSD Stop Loss Target EURUSD (30 pips) Profit Target EURUSD (90 pips) Risk/Reward Ratio 60/30 = 2/1 Risk/Reward Ratio 90/30 = 3/ Limit Entry Entry Stop Loss Slide 11

12 2:1 and 3:1 Risk-Reward Ratio Entry Price Buy EURUSD Stop Loss Target EURUSD (30 pips) Profit Target EURUSD (60 pips) Entry Price Buy EURUSD Stop Loss Target EURUSD (30 pips) Profit Target EURUSD (90 pips) Risk/Reward Ratio 60/30 = 2/1 Risk/Reward Ratio 90/30 = 3/ Limit Limit Entry Entry Stop Loss Stop Loss Slide 12

13 Support and Resistance Levels Slide 13

14 Support level The price level at which the currency has historically had difficulty falling below Support Slide 14

15 Resistance level The price level at which the currency has historically had difficulty trading above Resistance Slide 15

16 Slide 16

17 Slide 17

18 Slide 18

19 A good trader knows that he will not win in every game. However, with a good risk-reward strategy, it takes only a few winners to make a very happy trader. Slide 19

20 Placing a 3-way order on Norne Investor Slide 20

21 To place a 3-way FX order, you need to use the Forex Orders module: Slide 21

22 The Forex Orders module: Entry Order Slide 22

23 The Forex Orders module: Entry Order Take Profit Order Slide 23

24 The Forex Orders module: Entry Order Take Profit Order Stop Loss Order Slide 24

25 Order Types Sell Buy Slide 25

26 3-way orders can be seen, changed and cancelled in your Open Orders module: You can see your also see your 3-way orders on a chart: Slide 26

27 An Example Slide 27

28 Entry Slide 28

29 Entry Take profit Stop loss Slide 29

30 Summary Advantages of using 3-way orders Ratio-trading Support and Resistance levels Placing a 3-way order on Norne Investor Slide 30

31 Disclaimer None of the information contained herein constitutes an offer to purchase or sell a financial instrument or to make any investments. Norne Securities do not take into account your personal investment objectives or financial situation and make no representation, and assume no liability to the accuracy or completeness of the information provided, nor for any loss arising from any investment based on a recommendation, forecast or other information supplied from any employee of Norne Securities, third party, or otherwise. Trades in accordance with the recommendations in an analysis, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits. You should carefully consider your financial situation and consult your financial advisor(s) in order to understand the risks involved and ensure the suitability of your situation prior to making any investment or entering into any transactions. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of Norne Securities.