Trading Guide

Introduction

The purpose of this trading guide is to provide help with trading on VCX and to answer many of the questions that are likely to arise. If you still have questions, please contact our support to open a ticket. A support specialist will answer your questions as soon as possible.

Basic definitions

Long Position

When you buy a security assuming it will increase the value, you are opening a long position. This will be closed when the security will sell.

Short Position

When you borrow and sell a security assuming it will decrease the value, you are opening a short position. This will be closed when you will buy the security and return it to the lender.

Fill

When you execute an order (buy or sell) matching it with one or more orders of the opposing type, you fill it. You can match buy orders with sell orders and vice versa.

Order Book

The order book is the list of orders (buy and sell) used to fill orders when exchange.

In the order book you find buy and sell orders with a fixed price (def. limit orders) and buy and sell orders with the best available price (def. market orders). Market orders appear in the order book for a very short time so there aren’t publicly viewable in the order book. You can see the order book on VCX under Market Data.

Bid

The buy order in the order book.

Ask

The sell order in the order book.

Bid/Ask Spread

The difference of price between the highest bid and the lowest ask on the order book is defined Bid/Ask Spread.

Under the menu Market Data you can see bid/ask spread chart. It shows the spread between the highest limit buy order and the lowest limit sell order, plotted over time. In this gap you can fill a market order if there are matching market orders of the opposing type sufficient to fill it. Differently you can fill it, also partially, using limit orders of the opposing type.

Bid Depth

The cumulative volume of current buy orders present on the book at given price or higher is defined bid depth. The bid depth at that price indicates the volume that can be sold before the value of the security decreases below the given price. You can see the bid depth chart in the menu Market Data, it shows the bid depth of limit orders on the book.

Ask Depth

The cumulative volume of current sell orders present on the book at given price or lower is defined ask depth. The ask depth at a that price indicates the volume that can be bought before the value of the security increases above the given price. You can see the ask depth chart in the menu Market Data, it shows the ask depth of limit orders on the book.

Reserve Currency

A reserve currency is one that can be withdrawn from or deposited to your account.

Non-Reserve Currency

A non-reserve currency can only be margin traded and cannot be deposited or withdrawn.

Base Currency

Base currency is the first of a currency pair. If you have the currency pair XBT/EUR, XBT is the base currency.

Quote Currency

Quote currency is the second of a currency pair. If you have the currency pair XBT/EUR, EUR is the quote currency.

Currency Pair

In a currency pair, the value of the base currency is displayed relative to the quote currency. The currency pair is priced in terms of the quote currency. The price indicates how much of the quote currency is required to buy one unit of the base currency. If you have a price of EUR 80 for XBT/EUR, to purchase 1 XBT you need EUR 80. In currency pair exchanging on VCX, a pair is effectively a single trading instrument opened as a position by buying (going long) or selling (going short) the pair.

Untouched Orders

An untouched open order is an order not filled. An order completely filled will be listed as closed.

Touched Orders

A touched open order is an order partially filled.

Ledger

Currency Exchange vs Currency Pair Trading

VCX is both a currency exchange for exchanging one currency for another, and a Forex-like market for trading currency pairs. In currency exchange, you must have adequate funds in one currency to exchange for another (you cannot borrow funds for the purpose of exchange). In currency pair trading, however, you always open a position in a currency pair with borrowed funds using leverage. Trading short is only possible with currency pairs, so to open a short position you must use leverage. Only currency pairs are officially considered "positions," so you will only see open or closed currency pairs under the "Positions" tab.

When using the order forms, if you select "None" for leverage, then you are exchanging currency and must have adequate funds. But if you select a level of leverage, then you are opening a currency pair position with borrowed funds. Leverage can only be selected from the "Intermediate" and "Advanced" order forms. Note that there can be currency pairs that can only be exchanged - you will not be able to select leverage for these pairs. Also, there can be currency pairs that can't be exchanged, but can be traded as pair positions using leverage, so you may only have the option to select a level of leverage for some currency pairs. If you are unfamiliar with currency pair trading, please read the "Understanding Leverage and Margin" section below.

Understanding Leverage and Margin

Leverage allows you to open a position that is larger than the balance of your account. Suppose you fund an account with $5,000. Using leverage, you could open a $10,000 XBT/USD position with this account (long or short). If you close this position for a 20% gain, your account balance will grow by 40% ($2,000). This amplified upside potential is why traders find leverage exciting.

Leverage is a very powerful tool because it can amplify your gains. But it's also dangerous because it can amplify your losses as well, and even wipe out your account if you aren't careful. Opening a leveraged position should be considered a short-term trade, not a long-term investment. Also, sensible risk management should be employed when using leveraged positions: you should set both a stop to limit loss and a profit target for every open position. Before using leverage please take time to fully understand it and the risks involved. Leverage and its related concepts are explained below, but if you have further questions, don't hesitate to ask. There are a lot of concepts to learn, but this is your money at stake, so it's worth your time to walk through everything carefully.

Leverage

Leverage allows you to open a larger position with a smaller amount of funds. For example, if you open a $5,000 position in XBT/USD with 5:1 leverage, only one-fifth of this amount, or $1000, will be tied to the position from your balance. Your remaining balance will be available for opening more positions. If you open this same position with 2:1 leverage, $2,500 of your balance will be tied to the position. If you open with 1:1 leverage, $5,000 of your balance will be tied to the position.

Margin

The margin for a position is the amount of funds from your balance that are tied to the position. Margin is not deducted from your balance, but the margin amount is nonetheless not available for opening other positions. All the funds used to open the position are borrowed funds. It might be helpful to think of margin as a kind of collateral, set aside from your balance for the loan - however, this can be misleading because your loss on the position can be larger than the margin. If you open a $5,000 long position in XBT/USD with 5:1 leverage, your margin for the position is $1,000. But if you later close this position for $3,000, you have lost $2,000 - twice as much as the margin.

Trade Balance

Trade balance is the combined balance of all account currency balances. Trade balance is always expressed in terms of the quote currency for the selected currency pair. If XBT/EUR is the selected currency pair, trade balance will be in EUR. If XBT/US$ is selected, trade balance will be in US$.

Profit

The total paper or unrealized profit for open positions is the profit. For long positions, if your opening cost is lower than current valuation, you have a paper profit. For short positions you have a paper profit if your opening cost is higher than current valuation. The unrealized profit does not affect your currency balances until the positions are closed.

Loss

The total paper or unrealized loss for open positions is the loss. For long positions, if your opening cost is higher than current valuation, you have a paper loss. For short positions you have a paper loss if your opening cost is lower than current valuation. The unrealized loss does not affect your currency balances until the positions are closed.

Equity

Equity is your account trade balance plus or minus paper profit or loss.

Order Options

VCX have a wide range of order options. We offer a high level of flexibility for trading currency pairs. On your account screen, Trade menu, click New Order to access the order forms. There are three most basic elements of any order specify what is to be bought or sold, the size or volume of the order, and how the order will execute relative to price.

Amount and Amount Currency

The amount field determines the volume or size of the order, how much is bought or sold. Volume is measured in terms of the amount currency, which is set to the base currency by default but can be changed to the quote currency. It is important to remember that the amount field only determines how much is being bought or sold and does not determine what is being bought or sold.

Order Types

Market Price:: for an order means the lowest current ask price for buy orders or the highest current bid price for sell orders. Market price is the best offer on the order book, which will be different for buyers and sellers, since the best offer for buyers is the lowest sell order on the book and the best offer for sellers is the highest buy offer on the book. Market price is important for understanding how stop or take profit orders trigger. A stop loss sell order will trigger when market price, the highest current bid since it's a sell order, is less than or equal to stop price.

Best Average Market Price: for a market order means the weighted average price of the best current asks or bids that can fill the order. This is important for understanding how market orders fill. Typically a market order will be filled by several opposing orders on the book. A market buy order will be filled by several of the lowest asks on the book and a market sell order will be filled by several of the highest bids on the book. Hence, the average fill price of a market order will be the best average market price - a weighted average of the different orders at different prices that filled the market order weighted according to the size of the filling orders.

Market and Limit Orders

Market: Buy (or sell) at the best average market price.

Limit: Buy (or sell) at a fixed price (or better).

The advantage of limit orders over market orders is that they can ensure a better average fill price, since the bids or asks used to fill the order will be at the limit or better. The disadvantage is that there's no guarantee the order will completely fill or fill at all. It may not be the case that adequate bids or asks to fill the order will appear on the market.

Stop Loss Orders

A Stop loss order is typically used as a closing order to limit your losses or lock in your profits on a long or short position.

Stop Loss: Triggers a market order (buy or sell) when market price hits the stop price.

Stop Loss Limit: Triggers a limit order (buy or sell) when market price hits the stop price.

Set the stop price at which you want the limit order to trigger in the stop price field on the order screen. Set the limit price for the limit order in the Limit field on the order screen. For a long position, if you make the limit price lower than the stop price, this will increase the chances that the limit order is filled (vice versa for a short position).

Trailing Stop: Triggers a market order (buy or sell) when market price goes against the position by the stop offset amount.

Trailing stop orders are used to automatically adjust your stop as a position goes in your favor. This is done by setting a stop offset (in absolute price, or as a percentage). For a long position, the market (sell) order will trigger when market price falls from a high by the stop offset amount. For a short position, the market (buy) order will trigger when market price rises from a low by the stop offset amount. Thus, trailing stops allow you to start automatically locking-in profit on a long or short position once the trade goes in your favor by more than the offset amount.

Trailing Stop Limit: Trailing stop limit orders work exactly like trailing stop orders except that a limit order is triggered when market price goes against the position by the stop offset amount.

Trailing stop orders are used to automatically adjust your stop as a position goes in your favor. This is done by setting a stop offset. For a long position, the market (sell) order will trigger when market price falls from a high by the stop offset amount. For a short position, the market (buy) order will trigger when market price rises from a low by the stop offset amount. Trailing Stop Limit: Trailing stop limit orders work exactly like trailing stop orders except that a limit order is triggered when market price goes against the position by the stop offset amount.

Take Profit Orders

Take profit orders are used to set a target profit price on a long or short position. The profit price can be set in terms of absolute price. As with stop orders, take profit orders can also be used to open positions.

Take Profit: Triggers a market order (buy or sell) when market price hits the profit price.

Take Profit Limit: Triggers a limit order (buy or sell) when market price hits the profit price.

Combined Orders

There are three types of combined orders for setting both a stop to limit loss, and a price target for taking profit. We recommend that you use these orders to set a stop and a profit target.

Stop Loss, Take Profit: Either triggers a market order when market price hits the stop price or triggers a market order when market price hits the profit price.

This order combines a stop loss order and a take profit order such that one is cancelled if the market order triggered by the other is filled.

Stop Loss, Take Profit Limit: Either triggers a market order when market price hits the stop price or triggers a limit order when market price hits the profit price (where the limit order price is the same as the profit price).

This order combines a stop loss order and a take profit limit order such that one is cancelled if the market/limit order triggered by the other is filled. But the take profit limit order is simplified by making the limit order price the same as the profit price.

Stop, Limit Orders: Either triggers a market order when market price hits the stop price or fills a limit order at the limit price.

This order combines a stop loss order and a limit order. The limit order appears in the order book when the stop, limit order is placed (rather than being triggered later as in the stop loss, take profit limit order). If the limit order is filled, the stop loss order is cancelled, and if the market order triggered by the stop loss order is filled, the limit order is cancelled.