You may notice a few differences trading with Eightcap compared to the crypto trading world. Whilst the underlying process is the same, terms like spread, position size, and leverage may be fairly new to you.
We have also been listening to the community’s questions and feedback which has helped us create this definitive guide for funded crypto trading. Below you will find some of the most common questions asked by the community all in one spot.
So in the interest of making your funded crypto trading experience as smooth as possible, check out this starter guide on MT5 and save yourself some time!
The spread is the simplest of the three terms and is important in calculating your profitability whenever you take a trade.
If you look at a crypto pair’s ‘Buy’ price compared to its ‘Sell’ price, you’ll notice that the numbers are different.
This difference in price is what we call the ‘Spread’.
Here’s a Pro Tip for MetaTrader – if you go to the Trading tab on the left side, you’ll be able to see the spread as a number, alongside the Swap! An important note is that the spread number includes two decimal places. So 1200 spread equates to $12 in the image below.
This spread between the prices is one of the primary ways a broker (Eightcap) earns money. The higher volume of trading a pair has, the lower the spread will typically be. This is due to the fact that brokers can then compete with each other for the lowest spread.
We like that as traders! It means we can get increased profits from our trades the lower the spread is.
Don’t be surprised if you see traders comparing spreads across brokers – they are always looking for the best spread in town! The spread is also why your trades will start out in the negative because that cost is immediately deducted from your trade.
Whenever you take a trade, you must check the spread. Some of your trades could be wiped out by the spread and you will end up losing money when you are expecting a win.
Less popular coins are ones to keep an extra close eye on as they will not have the volume of trades that a popular crypto pair will have, such as BTC/USD. These alt coins will have higher spreads so your trades will need to move more in order to net you those gains.
If you want to display the Ask and Bid price on your MetaTrader charts, just right click on the chart, go to Settings, and then tick the ‘Bid and Ask Lines’ box.
Limit Orders & Spread
When it comes to setting a limit order, it’s important to understand the impact that spread can have on these trades. Some of you may have experienced your limit orders not filling, but there is an easy way to avoid this problem.
Let’s say the spread on BTC is $12. If price is at $20,000 and you have a limit order set to buy, the price you are buying at is actually $20,012.
So that means your limit order won’t get filled due to the spread. This is why some of your orders may not be getting filled and is another reason why you should always be aware of the spread before setting or taking any trades.
Differences in Chart and Candles
You may have noticed that Eightcap’s charts look different to Binance’s, or other exchanges you use.
The answer here is a simple one – Eightcap’s charts run on a different time zone, so their charts will display candles that close at a different hour to what you are used to with other exchanges.
You can trade on the weekend with TV and MetaTrader 5 (MT5) – but not on MetaTrader 4 (MT4).
Another term you will see in relation to your trades is the ‘position size’.
This is a simple one to understand – it is the size of the trade you are taking. When we say size, that refers to the amount of money you are putting into a trade.
So another way of looking at it is that the position size determines how much you stand to lose or gain from a trade.
Typically, you will see the position size referred to as ‘lots’. Lots are the unit of measurement for a position size – in MetaTrader you fill in the position size at the Volume box.
There are different sizes of lots and, depending on who you are trading with, you will see one or more of these lots to help you determine your position size.
Standard lots, mini lots, and micro lots are the three different types of lot size.
Your position size is incredibly important when it comes to risk management. If you are consistent with your position size, you are managing your risk well.
However, if you are inconsistent with your position size then you could end up in some trouble. So always make sure you are consistent with the money you are putting into each of your trades!
Taking a Trade
Taking a trade on MetaTrader is fortunately very simple!
- Select the Pair you wish to trade
- Choose the market order type
- Set your volume, target, and stop
- Choose your Fill Policy
- Enter your trade
Fill Policy may be a new option to some of you.
Fill or kill means that your order has to be filled completely or not at all.
Immediate or Cancel means your trade must be carried out immediately, regardless of whether it can be filled completely or not.
Setting Target and Stop Loss
Setting your Target and Stop Loss in MetaTrader is fairly straightforward. Once you open up the interface to take a trade, you’ll see two boxes where you can set your price levels.
Open Multiple Trading Positions
Right now on MT5, and MT4 you cannot set up an automatic trade (limit order) to partially close an open trade. You can do so manually, but you aren’t always going to be able to be at your charts.
The best method around this is to open two positions, of equal size and with the same Entry, Target, and Stop, so that you can automatically exit one of those positions when you want to realise some of those profits.
An alternative on MetaTrader is to look for some Expert Advisors (EAs) to download. We are working on building some of our own but there are a lot of options still available to you – if you’re willing to pay!
Scaling Your Account
Did you know that when you reach the 20% profit on your live account, you can get a free upgrade to the plan above?
For example, if you are trading on a $12.5k live account (not a test/challenge account) and reach 20% profit, you can upgrade for free to the $25k account. You can scale all the way up to $400k – get climbing!
Minimum 5 Days Trading
In order for you to pass the challenge, there is a requirement of 5 days trading. What this means is that you need to open trades on at least 5 separate days.
Finally, we have leverage. This is one that stumps a lot of people but for us crypto lot, it’s going to be a breeze.
Leverage essentially enables you to trade with more money than you have.
What this means is that you can earn, or lose, money at a faster rate.
Trading cryptos on Eightcap comes with a leverage of 1:2 (2x). This means that when you enter a trade, the broker will help you out by giving you some funds for the trade.
So with a 1:2 leverage on crypto trading, that essentially means your money can go twice as far.
Unlike with crypto futures you aren’t able to adjust leverage on a trade by trade basis, it is set at 1:2. The workaround for this is to simply adjust your trade’s position size.
You might be wondering why leverage is useful. Afterall, it may make you more money, but it can also make you lose it just as fast…
Well, it also means that you can do more with the capital you have.
You aren’t restricted by your cash flow – you are being given a boost by the broker. That means you can enter more trades because your money can go twice as far.
So if you typically would only be able to be in two trades at once with the cash you have, you could now enter four trades since the leverage is 1:2.
Obviously your position size influences how many trades you can enter, but either way, your money can be put to work more so than if there was no leverage.
It’s a win-win situation for traders and brokers!
There you have it! You now have a firm grasp over spread, position size, and leverage.
You need to always be aware of the spread and position size in each of your trades as they can vary and both will influence your profitability. Fortunately, the leverage will be static across cryptos when you trade with Eightcap.
Keep an eye out on other assets you trade though. Forex or commodities, for example, have a leverage of 1:10 (10x)!
We hope that clears up any questions you may have about these three terms. You can always catch us on Discord if you have more questions though!
This guide will continue to be updated as we field more community feedback and questions.