Forex Handbook & Definitions

Trading Hours

The forex trading desk is open 24 hours daily from 17:00 ET Sunday through 16:30 ET on Friday.

Currency Pairs

24-hour trading is currently available in the following 14 currency pairs: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, EUR/JPY, EUR/GBP, EUR/CHF, GBP/JPY, AUD/JPY, CHF/JPY, EUR/AUD, GBP/CHF.

Dealing Spread

Forex Day Trading's normal dealing spreads are 3-5 pips for the major currency pairs.

Fees

No fees or commissions are charged to the customer, regardless of account balance or trading activity (See the "Commission-Free Trading" section of the disclosure page).

Trading Minimums

Mini Accounts:
Forex Day Trading's minimum transaction size for mini accounts is 1/10th the size of a standard lot, or 10,000 of the base currency, with a minimum margin deposit of 0.5% (that is, 200:1 leverage). For example, a US$10,000 position would require an initial margin deposit of US$50.

Standard Accounts:
The minimum transaction size for standard accounts is 1 lot of 100,000 of the base currency, with a minimum margin deposit of 1% (that is, 100:1 leverage). For example, a US$100,000 position would require an initial margin deposit of US$1,000.

Price Quotes

Forex Day Trading clients have the ability to execute trades directly from real time streaming bid/ask quotes. Live prices are continuously published to clients via the currency trading dealing software, and traders can at any time click on the current bid or offer and instantaneously execute a trade. Prices are updated automatically as market conditions dictate. On average, the forex traders make 100,000 prices per day. More importantly, we publish the same dealing price to the entire client base and allows any client to deal on the available price.

Trading over the Internet

Executing a deal via the Internet is a simple two-step process. Simply enter the number of lots and then click on the bid (buy) or offer (sell) for the currency pair you wish to trade - your deal is automatically executed. The forex trading software automatically calculates the initial margin requirement based upon the notional amount of the deal, and if sufficient funds are available in your account, will accept the transaction. Deals are confirmed online, normally within one second, and the system instantaneously updates both your open position and calculates your current P&L.

Phone Trading

Live clients may trade over the telephone with the forex trading desk 24 hours a day, from Sunday at 1700 ET through Friday at 1630 ET. When trading via phone, our dealers will quote the same tight spreads available via the trading platform. All trades executed via the phone are subject to a pre-deal margin availability check and will be manually entered into the customer's account for integrated P&L analysis and reporting. All telephone calls are recorded for the safety of both parties.

Phone Dealing Procedure

Immediately state your ID and Password.

State your interest. Always be sure to include the number of lots and the currency pair you are interested in.
Example: "I would like a price on 5 lots of Euro/Dollar."

The Forex Dealer will then provide a 2-way price quote.
Example: "Euro/Dollar is 1.2416/20" (the first number being the bid, the second the offer)

State your trade.
Example: "At 1.2416, I sell 5 lots of Euro/Dollar,"

or

"At 1.2420, I buy 5 lots of Euro/Dollar"

If you do not wish to deal at the quoted levels, simply say "Nothing Done," hang up and call again later. Or, place a limit or stop order at your desired level.

Remember: A price given is the dealing price at that time; haggling is not allowed nor are Traders allowed to remain on the phone until the price changes.

It is important to remember that Dealing Desk phone lines are reserved for the placing of orders only, and that proper Phone Dealing Procedures be observed at all times.

Order Types

The forex dealing platform provides sophisticated order entry and tracking. Orders may be entered at any rate - inside or outside the existing spread - using the following orders types:

Limit orders
An order with restrictions on the maximum price to be paid or the minimum price to be received.

If a trader is long USD/CHF is 1.4627, a limit order would be entered to sell dollars above that price, for example, at 1.4800.

Stop Loss orders
Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position.

If the trader above is long USD at 1.4627, a stop loss order could be left at 1.4549, in case the dollar depreciates below 1.4549.

As a rule, sell stops are filled on our bid, and buy stops are filled on our offer. This allows us to fill client stop orders at the rate they requested in almost every case. In the rare instance that the market gaps over a requested rate, the stop is filled at the best available price. This is an important point for traders who are accustomed to being filled on sell stops when the offer reaches the requested order rate. For example, if a stop order is placed to sell USD/CHF at 1.4549, the trader will be filled when the bid reaches 1.4549 (i.e. the bid/offer is 1.4549/54).

One Cancels Other orders (OCO's)
A contingent order providing that one part of the order is cancelled if the other part is executed. This is a particularly useful order type in that it allows traders to execute specific trading strategies based on technical analysis - without having to watch the market tick by tick.

As above, with the trader long USD/CHF at 1.4627, a typical OCO order would be a stop loss at 1.4562 and a limit (take profit) at 1.4700. If one part of the order is filled, the other is automatically cancelled.

All of the above orders may be entered as Day Orders, entered today and good until end of NY business day (1700 ET). Or, clients may choose to may enter a Good 'til Cancelled Order (GTC), which is valid until the order is executed or cancelled. Orders remain open until they are triggered or cancelled. If you close out a position manually, you must cancel any order(s) relating to that position.

Order Execution

First In First Out (FIFO)

Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

Stop Loss Orders - Execution Rules

As a rule, sell stops are filled on our bid, and buy stops are filled on our offer. This allows us to fill client stop orders at the rate they requested in almost every case. In the rare instance that the market gaps over a requested rate, the stop is filled at the best available price. This is an important point for traders who are accustomed to being filled on sell stops when the offer reaches the requested order rate. For example, if a stop order is placed to sell USD/CHF at 1.4549, the trader will be filled when the bid reaches 1.4549 (i.e. the bid/offer is 1.4549/54).

Good Til Cancelled (GTC) Orders - Execution Rules

All GTC orders remain open until they are triggered or cancelled. If you close out a position manually, you must cancel any order(s) relating to that position.

Orders left over the weekend

Orders left pending at close of trading on Friday at 1630 ET or placed over the weekend are subject to a gap open on Sunday evening when trading at 1900 ET. For both stop loss and limit orders - if your order is triggered due to news, events or other fundamental factors, it will not be executed over the weekend. Your order WILL be executed at the prevailing price when the trading desk opens Sunday. Because of the additional gap risk involved, you may want to reconsider leaving open orders over the weekend.

Margin

The initial margin requirement is 0.5% for mini accounts and 1% for standard accounts.

If you do not have adequate funds available to enter a new forex position, you will receive an "insufficient margin funds" message when attempting to deal.

If the unrealized P&L of your net total open position falls below your account balance, your trading account is under margined and all your open positions may be liquidated. To avoid liquidation of your positions, do not use your entire account balance as margin for open positions. Instead, leave enough funds in your account to withstand a market movement against your open positions. We suggest you always use stop loss orders to limit your downside risk when trading.

Please contact us if you wish at any time to use a lower degree of leverage or otherwise adjust the margin settings in your forex account.

Rollovers

A rollover is the simultaneous closing of an open position for today's value date and the opening of the same position for the next day's value date at a price reflecting the interest rate differential between the two currencies.

All open positions are automatically rolled over to the next day's value date following the close of NY trading at 1700 ET.

Clients have the opportunity to earn interest on rollovers, depending on the direction of their positions and interest rate differential between the two currencies involved. For example, US interest rates are higher than Japan's, so if a trader is long USD/JPY (i.e. holding dollars), they will earn interest on the roll. Conversely, if a trader is short USD/JPY (i.e. holding yen) they will pay interest on the rollover.

The spot forex market is traded on a two-day value date. For example, for trades executed on Monday, the value date is Wednesday. However, if a position is opened on Monday and held overnight (remains open after 1700 ET), the value date is now Thursday. The exception is a position opened and held overnight on Wednesday. The normal value date would be Saturday; because banks are closed on Saturday the value date is actually the following Monday. Due to the weekend, positions held overnight on Wednesday incur or earn an extra two days of interest. Trades with a value date that falls on a holiday will also incur or earn additional interest.

Rollover credits or debits are reflected in the unrealized P&L of the open position, and a rollover report (available in the "Reports" tab of the trading platform) provides additional detail of rollover activity.

Confirmations

Deals are confirmed on screen, typically within one second. Full transaction details may be accessed on screen as well, including date, time, rate, notional amount bought and sold, USD value, and reference number.

Daily Housekeeping

Daily Housekeeping will occur each evening at 1700 and will last about 5 minutes. During that time, important system maintenance tasks will be performed and back office staff will conduct daily rolls. Online trading MAY be unavailable, but we will accept phone orders.

Interest

Client funds maintained in a non-segregated account earn interest on deposited funds not used as posted margin. In addition, clients either earn or pay on overnight rollovers, depending on the direction of their positions. Open trades are rolled forward in the base currency of the position.

Reporting

The dealing software tracks all trading activity in real time, allowing clients to view current open positions, real-time profit and loss, margin availability, account balances, and all historical transaction details directly on-screen.

How to Read a Currency Quote

Before trading currencies an investor has to understand the basic terminology of the forex market, including how to interpret forex quotes. In every foreign exchange transaction an investor is simultaneously buying one currency and selling another. These two currencies make up a currency pair. This is an example of a foreign currency exchange rate of the dollar versus the yen:

USD/JPY = 119.72

The currency to the left of the slash ("/") is called the base currency (in this example, the US dollar) and the one on the right is called the quote currency or counter currency (in this example, the Japanese Yen). This notation means that 1 unit of the base currency (that is, 1 dollar) is equal to 119.72 Japanese Yen. If buying, the exchange rate specifies how much you have to pay in units of the quote currency to buy one unit of the base currency; in the above example, you have to pay 119.72 yen to buy 1 US dollar. If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency; in the above example, you will receive 119.72 Japanese Yen when you sell 1 US dollar.

As with stocks, a forex quote includes a bid price (or bid) and an ask price (or ask). This can be easily illustrated with an example of a currency quote taken from the forex trading software:

In the above example, the bid price is 119.68 yen and the ask price is 119.75 yen [notice that when the ask price is displayed, only the last two decimal places are displayed to the right of the slash (75 instead of 119.75)]. The bid price is the price at which dealers are willing to buy the base currency (in units of the quote currency) and users of our software can sell. Thus, if a trader presses the button "Sell USD," he/she would sell dollars at 119.68 yen. The ask price, on the other hand, is the price at which dealers are willing to sell the base currency and users of our system could buy it. By clicking "Buy USD," an investor would be buying dollars at 119.75 yen.

Even though there are many currencies all over the world, 85% of all daily transactions involve trading a group of currencies known as the "Majors." These currencies include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. The four most actively traded currency pairs are the US Dollar / Japanese Yen (USD/JPY), Euro / US Dollar (EUR/USD), British Pound / US Dollar (GBP/USD), and the US Dollar / Swiss Franc (USD/CHF). The US Dollar / Canadian Dollar (USD/CAD) and the Australian Dollar / US Dollar (AUD/USD) are also actively traded pairs. For traders, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies; i.e., the "Majors."

The examples below were taken from the currency dealing system which provides forex real time quotes. From left to right are the euro-dollar exchange rate, the british pound-dollar exchange rate, and the dollar-swiss franc exchange rate. All of these currency quotes are of major currency pairs.

Taking the example of the euro forex quote (first pair above), buying one euro would cost 1.0099 US dollars and selling would provide 1.0093 US dollars.

If you want to see more live currency quote examples, you can sign up for a free test drive of our forex trading software by clicking the appropriate link below. You will be able to obtain live forex quotes as well as place simulated trades in real time using different currency pairs.

Tips for beginners to trade forex online

Have you seen a lot of advertisements recently telling you how easy it is to trade on the Forex market and make big profits? Do you know what Forex trading is? It's very easy to get conned into committing your hard earned cash into get rich schemes. This website has been set up to explain Forex trading, the pitfalls as well as the profits!

If you do decide to risk Forex trading, hopefully some of the articles will help you avoid making costly mistakes. In case you don't know, Forex stands for foreign exchange and Forex trading is the exchange of one foreign currency for another. The daily volume of Forex trading is three times that of the stock exchanges yet there are no physical market places. Trading takes place 24 hours a day with only a short break at weekends.Traders range from the big banks to individuals sitting at home working on their computers. Successful Forex trading means studying the market carefully, watching for trends to show when to enter and exit as well as following economic indications. Even then no trader can be 100% right all of the time.

Unless you want to lose your shirt,you should carefully study and fully understand how the Forex market works before you consider trading. Firstly learn which of the different currencies are most actively traded, it is pointless buying a currency that rarely changes hands. Find yourself a good online broker. The money market changes by the second, you need a broker with a good trading platform. Understand the mechanics of trading, including putting a stop-loss price. The market can be very volatile, huge losses can occur and well as huge profits. Study the different ways in which traders decide when it is a good time to enter the market. Will you use fundamental or technical analysis? Both methods have advantages and many traders use a combination of both when making a decision.

Consider your own personality. Trading on the Forex Market is a science and you cannot be swayed by emotions, whether a fear of losing money or greed. You must learn to make a plan and stick with it.

Before you actually start trading, sign up with several online Forex brokers who offer live trading platforms where you can practise without using cash. Brokers don't want to see you lose money, if you succeed you will stay with them and become a profitable client, a win-win situation.

Invest In Gold wisely

In January of 1980, the Dow Jones Industrial Average was at 850, and gold was worth $850 an ounce. Twenty-two years later, the Dow is up ten times, while gold (at $320) has been cut in half.

With such a dismal 22-year performance, you might wonder if investing in gold stocks is a wise move. The answer is "yes" - but not under typical circumstances. Here's what I mean.

All you need to really know about gold is this: when everything else is getting clobbered, gold does well. Of course, the opposite is true, too when everything else is doing fine, gold does poorly. The problem for gold has been, from 1982 to now, everything else did just fine.

Since March of 2000, however, stocks have been clobbered. Meanwhile the XAU Index, the index of major mining stocks, is up 20%. And the price of gold has risen from about $280 to about $320 an ounce in that same period. What this tells us is that gold's traditional role hasn't changed, even though nobody has paid much attention. Nowadays, a 5% or greater portfolio position in gold makes sense, to diversify your risk and give you a boost up in your investments when everything is going down.

Why Invest in Gold?

Historically, gold has been a proven method of preserving value when a national currency was losing value. If your investments are valued in a depreciating currency, allocating a portion to gold assets is similar to a financial insurance policy. In the past year, the climb in the price of gold above $700 per ounce is due to many factors, one being that the dollar is losing value.

Reasons to say YES to Gold
• The dollar is weak and getting weaker due to national economic policies which don't appear to have an end.
• Gold price appreciation makes up for lost interest, especially in a bull market.
• The last four years are the beginning of a major bull move similar to the 70's when gold moved from $38 to over $800.
• Central banks in several countries have stated their intent to increase their gold holdings instead of selling.
• All gold funds are in a long term uptrend with bullion, most recently setting new all-time highs.
• The trend of commodity prices to increase is relative to gold price increases.
• Worldwide gold production is not matching consumption. The price will go up with demand.
• Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.
• Several gold funds reached all-time highs in 2006 and are still trending upward.
• The short position held by hedged gold funds is being methodically reduced.
• U.S. government economic policies over the past decade have systematically projected the U.S. economy down a road with uncontrollable federal spending and an uncontrollably increasing trade deficits. Both will cause the dollar to lose in international value and will increase the price of alternative investments, such as gold.
• With the recent devaluation of many international currencies, the U.S. dollar was the international safe haven of last resort. We are seeing signs of this ending due to many financial factors, the most important one being a falling dollar.
• There are over One Trillion dollars ($1,500,000,000,000) of U.S. debt owned by foreigners which could be repatriated under certain conditions. This could cause a major decline in the value of the dollar and a soaring gold price.
• If you believe in 'buy low, sell high', gold is still low, but climbing.

Trading with a mini Forex account

Opening a mini Forex account, instead of a standard Forex account means you can trade smaller amounts, where the value of a pip will be $1, and greatly reduce the risk of a large loss. For example, a 10 pip loss on a standard trade of $100,000 would result in a loss of $100, whereas a 10 pip loss a mini Forex trading lot of $10,000 would be $10.

Many online Forex brokers will allow you to open a mini Forex account for as little as $250. Knowing that your losses are not likely to be great, will allow you to concentrate on adhering to a good trading strategy instead of watching your balance and worrying about a margin call.

Every Forex currency trader dreads a margin call. This means your Forex broker believes you do not have sufficient funds in your mini Forex trading account to cover your trading and he may liquidate all your trades.

If you are a beginner, the best way to protect yourself against a margin call is to only trade one pair at a time and use a small percentage of the capital in your mini Forex account. Most important of all, set a stop-loss order, then you are protected if the market moves against you.

Another of the advantages of a Forex mini trading account is that you still have all the benefits of a whole standard account, the trading platform, charts etc. If you are a beginner I personally think that a Forex mini trading account is the most sensible option. Too many people rush in, thinking Forex currency trading is a quick way to make an easy buck, they are the 95% beginners who lose on the Forex market. Protect your capital while you learn the skill.

Once you have developed your skill and hopefully made a profit, you can invest the profit by trading slightly larger lots, $20,000 instead of $10,000. Don't become over-confident, remember that profit comes from sound research.

Wait until the best trading signals

Why do so many beginners lose money at forex market? The simple answer is that they do not have the patience to rigidly apply their forex trading strategy. Firstly, they are too concerned with instant gratification and don't take the time to learn all the skills necessary to make a successful trade. Secondly, even if they have taken the trouble to learn skills, in their eagerness to start, they forget everything they have learnt about sticking with their forex trading strategy. Instead of waiting for the right forex signal, they leap in at the hint of a possible good trade, hoping that luck will be with them. That is a gamble and gamblers lose.

Selling Your House At The Maximum Value

All Houseowner would want to get the maximum value when selling their houses. However some people mistakenly pay huge amounts of money and undertake complete repair and renovation jobs in an attempt to make the house more appealing. Consider yourself lucky if you ever do recover that money from the sale of your home.

It's a lot of little things, combined with only a few big ones that make the difference between a house that is so-so and one that is irresistible.

Start with the Exterior

First impressions count and the first thing your potential buyers are going to see is the exterior of the house and the garden. Chances are they may decide to drive past your house if they see an unruly garden and an unpainted house. So make sure your garden is well tended and cared for. Mow the lawn, water the plants and place your pots with flowering plants within plain sight. Make sure the exterior of your house is spotlessly clean and that includes the driveway, front porch, shutters and window screens. Take pains to ensure your front door and the surrounding area look absolutely clean. Give the door a fresh coat of paint if need be. Your customers will have a lot of time to have a good look at the front door and the surroundings while they wait for you to answer the door bell.

Lead the way in

Giving your interior walls a fresh coat of paint is undoubtedly the best way to increase the market value of your house. Neutral colors such as antique white or off white give your rooms an elegant and sophisticated quality that is unmatched. Get your carpets and drapes professionally cleaned. Replacing old and worn out fixtures with brand new ones is an inexpensive investment that will most likely reap you rich rewards.

And now, those three most important words that can make or break your sale- 'Clear The Clutter.' Now is a good time to throw away items that have been lying around and have never been used. Clean out and organize your closets. The client's wife will most likely want to see what the clothes cupboard looks like.

The right time to enter the money market

Forex traders usaully use fundamental analysis or technical analysis to decide the right time to enter the money market.

Fundamental analysis
Fundamental analysis is based on the demand and supply of the currency to be traded. This depends on the economic factors of the country using the currency, for example, economic strength, or otherwise, current interest rates, gross domestic product (GDP) etc.
The difficulty with using fundamental analysis to trade on the Forex money market is that the market is very fast moving, with rapid changes throughout the day. Economic data is more suited to long term investment. It involves constantly studying the data, knowing when a country is going to publish its economic reports and how to interpret them. This is why most short term traders use technical analysis based on price movements.

Technical Analysis
Technical analysis is based on the theory that prices move in a pattern and it is possible to predict when a currency has reached a high or low point based on historical evidence, then buy or sell accordingly.
There are a number of methods, based on charts, that technical analysts use to follow price trends, for example candlestick charts and Bollinger Charts. Traders may study several before taking a decision.

So which of the two methods of analysis should you use? Most traders probably use a combination of both. Fundamental analysis provides a long term view of the strength of a currency based on economic situation of the country using the currency plus current supply and demand, but it would be difficult to trade on a daily basis using this method. Nevertheless a trader needs to be aware of economic situations and when economic figures are published as these can affect trading. Technical analysis is useful for daily trading indicating possible entry and exit points. Therefore most traders will use both fundamental and technical analysis. To succeed on the Forex money market you need to have a thorough understanding of the currency you are trading in. Over 24 hours that currency may move dramatically up or down yet end the day at the same price as it started. Buying or selling at the wrong time can result in huge losses. Even experienced traders have bad days and the skill is to minimize the losses, hence the importance of having a stop/loss price in place. Understand how this works fully before attempting to trade.