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New to 4x
Why Forex?
History of Foreign Exchange
Foreign Exchange Basics
Frequently Asked Questions
4x Time Chart (Adobe pdf document)
FREQUENTLY ASKED QUESTIONS
What is the spot market?
The spot market is the currency market where you trade spot or cash currencies in the over-the-counter foreign exchange market. This market is known as the currency, forex, fx, or spot market. It simply means you are trading one nation's currency for another.
What is Foreign Exchange / Forex / FX?
Foreign exchange is the simultaneous purchase of one currency and sale of another - currencies are always traded in pairs. International currencies are traded on floating exchange rates. There is a daily average turnover of about US$1.5 trillion in the foreign exchange markets. The foreign exchange market is known as the "Forex," or "FX" market. It is the largest financial market in the world.
What are the most common currencies in the Forex markets?
The most "liquid" currencies in the Forex market are those of countries with low inflation, stable governments, and respected central banks. Nearly 85% of daily transactions involve the major currencies, including the U.S. Dollar, Japanese Yen, the European Union Euro, British Pound, Swiss Franc, and the Canadian and Australian Dollars.
What foreign currencies can I trade with TradeSTEPS4x?
There are 19 different currency pairs to choose from.
Can I trade foreign exchange 24 hours a day?
The currency market is open to trade 24hrs a day, from Sunday afternoon through Friday afternoon. Unlike the stock markets which close each evening, the forex market has thousands of market makers and traders at all times. In addition, there are no gap up or gap downs in the price as are seen with stock in the U.S. stock markets. With a 24 hour market place, you can trade when you want, morning, noon, or night.
Is there a central location for the Forex Market?
Forex trading is not managed through an exchange. Since transactions are conducted between two counterparts, the FX market is an "inter-bank," or over the counter (OTC) market.
What is Margin?
Margin is a performance bond that insures against trading losses. Margin requirements in the FX marketplace allow you to hold positions much larger than the asset value of your account.
What are typical FOREX margin requirements?
Currency positions can be leveraged at various amounts depending on your broker. Tradesteps4x uses a dealer that allows 400:1 margin. This means that a .25% margin deposit allows you to control $100,000 one-lot position in the currency market (trades are executed in standard units of 100,000 of the base currency, commonly referred to as "lots".) Futures traders, who are accustomed to margin requirements generally equal to 5% - 8% of the contract value, will immediately recognize that the currency market allows much greater leverage than the futures markets. But be careful - leverage can be a double-edged sword, and without proper risk management, the market may move against you and result in the loss of all your trading capital.
How do margin calls work?
A margin call is generated when the equity balance in an account drops below the margin requirement for that size account. If the maximum allowable leverage has been exceeded, any open positions are immediately liquidated, regardless of the nature or size of the positions.
Is there a trading commission charged in the spot FOREX market?
Most brokers in the currency market do not charge a commission. The spread between the bid and ask, what you can buy and sell for is where the brokers make their money. Not all brokers are commission free in the FOREX, some charge transactions fees or ticket charges, you have to read their disclosures, but most do not charge to trade currencies.
How much money do I need to open a currency account?
The account minimum is $200 for a mini account and $250 for a full size account.
What's the difference between a practice and a live trading account?
Practice and Live trading accounts are the same, except that in Practice accounts, you are not trading any real capital. Additionally, in practice trading, you may find that most of the trades skip the "Pending Orders" window and immediately appear in the "Open Position" window. In live trading, all orders first appear in the "Pending Orders" window. After confirmation from the dealer that this price exists, the trader's order will appear in the "Open Positions" window. If the price changes, the trader will see a popup window with the new price. To confirm or to cancel this order, the traders should right-click on the price in the "Pending Orders" window for a menu and then choose the appropriate selection to accept or to reject the price and cancel this order. Live accounts are also connected to dedicated and more robust servers, separate from the ones used by Practice accounts.
What does it mean have a 'long' or 'short' position?
In trading parlance, a long position is 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.
How often can trades be made?
As one might expect, trading activity on any particular day is dictated by current market conditions. Some small to medium size traders might make as many as 10 transactions in a day. By not charging commission and offering tight spreads, CMS traders can take positions as often as is necessary without concern for excessive transaction costs.
How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes 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.
How can I manage risk?
The most common risk management tools in Forex trading are the stop-loss order and the limit order. Stop orders are triggered when market price touches the price specified in the order, and Limit orders are triggered when the market price touches but does not break through the price specified in the order. When this happens, the client's platform sends an initial order to the Dealing Desk requesting that the order be filled at the specified price. CMS has an in-house policy of honoring Stop and Limit orders of up to $1 million. Larger orders may be requoted if the market price has moved away from the specified price.
Who participates in the FX market?
Central, commercial and investment banks have traditionally dominated the Forex market. Other market participation is rapidly increasing, and now includes international money managers and brokers, multinational corporations, registered dealers, options and futures traders, and private investors.
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