Forex FAQ's (page 4)
How do I fund my account?
When trading the Forex online there are usually a few different ways to fund your account:
- Credit Card - The fastest way to fund your account
- Bank or Cashier's Check
- Personal or Business Check
- Wire Transfer
What happens to my open positions at the end of the trading day?
Most online forex brokers will automatically roll forward all open positions to the next day's value date at the end of each business day.
How much money do I need to open an account?
The minimum deposit to open a trading forex account online with most trading companies is around 20 USD using a credit card. You might require to wire at least 2500 USD with most online forex brokers when wiring the funds straight from your bank account.
Can I place profit limit and stop loss orders?
Yes, they are strongly recommended. The stop rate is used as a backup to close the position when the market moves against it to protect you from further losses. When the market reaches this value the position is closed. The profit limit rate is used as a profit limit. When the market reaches this value, your position is closed.
How much am I willing to risk?
- What is my upside and downside potential?
- What are the market conditions? Is the market volatile or calm?
- What is the logic behind entering this trade?
- When will "I" know if the assumptions/logic behind the trade is right or wrong?
Having answers to these questions is not enough. Being able to articulate a definite plan and then execute it is, in National Academy of Forex's view, a necessary pre-condition for being a successful trader. Many are able to develop excellent plans yet do not have the discipline to carry the plans to fruition. Emotions get in the way of individuals being able to execute their trading strategies. Trading decisions are business decisions and should not be decided on an emotional basis.
What is the spot market and on what exchange is it traded?
In the Wall Street Journal, one can read quotations for the spot rate, forward rate, and options. At the spot rate, currencies can be exchanged within two days i.e. on the spot. The word market is a slight misnomer in describing Forex trading, since there is no central location where trading takes place. The bulk of trading is between 300 large international banks, which process transactions for large companies and governments. These institutions are continuously providing prices for each other and the broader market. The most recent quotation from one of these banks is considered the market's price for that currency. Forex trading is not bound to any one trading floor, but done electronically between a network of banks continuously and over a 24-hour period.
What is the difference between futures and spot trading?
When you are dealing in Yen or CHF in the futures market, you are buying a currency contract based on a forward date, dealing in standardised contracts made and traded on an exchange that is chartered and licensed to serve as a trading arena in specific futures contracts. Spot trading in the Forex market is different. A forward market is one in which people agree to trade a commodity at a fixed price at some future date. In the Spot market, the price in question is that for immediate delivery i.e. within two days. You can also think of spot trading as the money exchange (Bureau de Change or cambio) you have to deal with when you travel when exchanging one currency for another. Depending on the rate, one USD will get you so many Lire or Yen or GBP, because you are trading a pair of currencies, one for the other.
What is a "margin call?"
A Margin call is the liquidation of one's positions due to an inability to meet margin requirements. When one's account balance is no longer able to cover one's minimum margin requirement one's positions are closed automatically. Due to the fact that margin requirements are so low the Trader will not receive a margin call warning, but will instead be closed out automatically. Due to this policy, no client has ever lost more money than they had in their account, though it is theoretically possible. Were the market to gap at the same time your positions were being closed due to margin you could theoretically get a closing price much lower than the price you would receive under normal market conditions. Most trading platforms require a minimum margin requirement of between $2000 and $5000. This once again depends on the company you trade through.
Why a bull trend in chart is a bear trend in value?
Similarly, our use of words such as "up" and "down", or "bullish" and "bearish" are meant to intuitively follow or reflect the visual chart direction of trade of a currency, not necessarily its value against USD. In case of JPY, CHF, and CAD, their bullish trend in chart means bearish trend in value. For example, if we say, "JPY is expected to slide back down from 120.00 to 118.00," we mean that yen's chart movement pattern is to turn south while its value is to strengthen against dollar from the weaker rate of 120.00 to the stronger rate of 118.00. One would have to get used to it in order to elude the confusion, and one usually does in time.
What should I do if prices on my screen do not update?
Check your connection to the Internet, then your service provider and then try calling the company that you are trading through.
Can I deal over the phone?
Yes. Most market makers offer clients the option of dealing with their Dealing Desk either over the Internet or in the more traditional manner - over the phone.
What is a trading session?
A trading day (or session) starts at the open of the Asian and Pacific Markets at 12h30 (CET – Central European time) and ends at the close of New York market (NYC) at 11:00 CET the following day.
What is a profit/loss point value?
Pip or point value depends on the leverage or gearing of the investment. With most companies, the pip value is about $10, depending on the exchange rate and interest rate differentials between currencies.
Why is Swiss Franc called "CHF" on the Forex market?
- Swiss Franc CHF
- German mark DEM
- British pound GBP
- Japanese yen JPY
- Canadian dollar CAD
- Australian dollar AUD
- Chinese yuan CNY
What is the difference between Demo and Live Trading?
There is no difference except for the fact that a demo account uses fictitious money and the live account uses real money.
Do all of the units I'm trading of a particular currency get closed when I only want to close one unit at a time?
Yes and No. Only on some trading platforms can you choose the amounts in units of a currency that you want to liquidate or close at any given time. Once again, here you need to check with the company that you are trading through.
Will a Stop-Loss order be filled at the exact exchange rate, which the order is placed?
Yes mostly. Trading systems are programmed to do that but once again – check with the company that provides the trading platform that you will trade on. Unfortunately, on some other systems you do get filled at the next price.