is Foreign Exchange?
Foreign Exchange is the simultaneous buying of one currency and selling
of another. The world's currencies are on a floating exchange rate and
are always traded in pairs, for example Euro/Dollar or Dollar/Yen. With
a daily average turnover of approximately US$1.4 trillion, the Foreign
Exchange market, also known as the "Forex" or "FX"
market, is the largest financial market in the world.
is the central location of the FX Market?
Unlike the stock and futures markets, FX Trading is not centralized on
an exchange. Due to the fact that transactions are conducted between two
counterparts over the telephone or via an electronic network, the FX market
is considered an Over the Counter (OTC) or 'Interbank' market.
the participants in the FX Market?
The reason that the Forex market is referred to as an 'Interbank' market
is due to the fact that historically it has been dominated by banks, including
central banks, commercial banks, and investment banks. However, the percentage
of other market participants is rapidly growing, and now includes large
multinational corporations, global money managers, registered dealers,
international money brokers, futures and options traders, and private
the FX market open for trading?
Forex is a true 24-hour market and trading begins each day in Sydney,
and then moves around the globe as the business day begins in each financial
center- first to Tokyo, then London, and finally New York. Unlike any
other financial market, investors can respond to currency fluctuations
caused by economic, social, and political events at the time they occur
- day or night.
the most commonly traded currencies in the FX markets?
The most frequently traded or 'liquid' currencies are those of countries
with stable governments, respected central banks, and low inflation. Nowadays,
over 85% of all daily transactions involve trading of the major currencies,
which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss
Franc, Canadian Dollar and the Australian Dollar.
trading capital intensive?
No. Refco FX requires a minimum deposit of just $2000 for opening a regular
forex trading account, and only $300 for opening a mini account. Refco
FX enables currency trading to be conducted on a highly leveraged basis.
You are able to select the degree of leverage or gearing that you wish
to employ in trading. Unless you specify otherwise, Refco FX sets your
leverage level at Trade Center Inc.'s most lenient requirement. However,
it is important to remember that while this type of leverage allows investors
to maximize their profit potential, the potential for loss is equally
Margin is a performance bond, or good faith deposit, to ensure against
trading losses. The margin requirement allows you to hold a position much
larger than your actual account value. Refco FX' s online trading platform
performs an automatic pre-trade check for margin availability, and will
only execute the trade if you have sufficient margin funds in your account.
The system also calculates the funds needed for current positions and
displays this information to you in real time. In the event that funds
in your account fall below margin requirements, the Refco FX trading station
will close all open positions. This prevents your account from ever falling
below the available equity even in a highly volatile, fast moving market.
it mean have a 'long' or 'short' position?
A long position is simply one in which a trader buys a currency at one
price and aims to sell it later at a higher price. In this scenario, the
investor benefits from a rising market. A short position is one in which
the trader sells a currency in anticipation that it will depreciate. In
this scenario, the investor benefits from a declining market. However,
it is important to remember that every FX position requires an investor
to go long in one currency and short the other.
terms like "bid/ask", "spread", and "rollover"?
Trade Center Inc. has an extensive Glossary, under the New to Forex section
that provides detailed definitions of all Forex related terms.
the difference between an "intraday" and "overnight position"?
Intraday positions are all positions opened and closed before 5:00 PM
EST (rollover cutoff i.e. the end of the international trading day). Overnight
positions are positions that are held through 5:00 PM EST (rollover cutoff),
which are automatically rolled by Trade Center Inc..
currency prices determined?
Currency prices are affected by a variety of economic and political conditions,
but probably the most important are interest rates, inflation and political
stability. Sometimes governments actually participate in the Forex market
to influence the value of their currencies, either by flooding the market
with their domestic currency in an attempt to lower the price, or conversely
buying in order to raise the price. This is known as Central Bank intervention.
Any of these factors, as well as large market orders, can cause high volatility
in currency prices. However, the size and volume of the Forex market makes
it impossible for any one entity to "drive" the market for any
length of time.
I manage risk?
The limit order and the stop loss order are the most common risk management
tools in FX trading. A limit order places restriction on the maximum price
to be paid or the minimum price to be received. A stop loss order ensures
a particular position is automatically liquidated at a predetermined price
in order to limit potential losses should the market move against an investor's
position. The liquidity of the Forex market ensures that limit order and
stop loss orders can be easily executed. Refci FX guarantees execution
of stop loss and other limit orders, at the specified price, on all orders
up to $1 million.
of trading strategy should I use?
Currency traders make decisions using both technical factors and economic
fundamentals. Technical traders use charts, trend lines, support and resistance
levels, and numerous patterns and mathematical analyses to identify trading
opportunities, whereas fundamentalists predict price movements by interpreting
a wide variety of economic information, including news, government-issued
indicators and reports, and even rumors. The most dramatic price movements,
however, occur when unexpected events happen. The event can range from
a Central Bank raising domestic interest rates to the outcome of a political
election or even an act of war. Nonetheless, more often it is the expectation
of an event that drives the market rather than the event itself.
are trades made?
Market conditions dictate trading activity on any given day. As a reference,
the average small to medium trader might trade as often as 10 times a
day. Most importantly, by offering no commission and offering tight spreads,
Trade Center Inc. customers can take positions as often as necessary without
worrying about excessive transaction costs.
are positions maintained?
As a general rule, a position is kept open until one of the following
occurs: 1) realization of sufficient profits from a position; 2) the specified
stop-loss is triggered; 3) another position that has a better potential
appears and you need these funds.
I am interested
in foreign exchange trading, but would like some additional information.
In the New to Forex section we describe the foreign exchange market in
some detail. In order to gain a practical understanding of foreign exchange
trading, there is no better way than to open a demo account, where you
can experience what it's like to trade the Forex market without risking
the Margin Call work?
If the equity balance in your account falls below the margin requirement,
a margin call will be generated. In the event that an account exceeds
its maximum allowable leverage, ALL open positions will be liquidated
immediately, regardless of the size or the nature of positions held within
the account. Further details about margin requirements can be found in
the Spreads, Margins & Details link on the pulldown menu under the
Active FX Traders section. In this situation, clients are not notified
prior to the liquidation of their positions.