The off-exchange retail foreign currency market, also referred to as the 'Forex' or 'FX' market, is one of the largest financial and investment markets in the world. Forex 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. Forex investors use various methods of analysis (both technical and fundamental) in an effort to predict future price movement and thus profit from well timed transactions. *Trading currencies is a very risky form of investing. Any funds used when speculating on the values of currency prices should be considered as risk capital.
The Foreign Exchange market, also referred to as the 'Forex' or 'FX' market, is the largest financial market in the world, with a daily average turnover of approximately US$1.9 trillion. 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.
FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
The Forex market is called an ' Interbank ' market 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 speculators.
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and 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.
What are the Most Commonly Traded Currencies in the FX markets?
The most often traded or 'liquid' currencies are those of countries with stable governments, respected central banks, and low inflation. Today, 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.
No. Interbank FX requires a minimum deposit of $2,500 for a standard account and a minimum deposit of $250 for a mini account. Interbank FX allows customers to execute margin trades at up to 100:1 leverage. This means that investors to execute trades up to $100,000 with an initial margin requirement of $1000. 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 great.
The amount of cash or other Eligible Collateral that Interbank FX requires a customer to deposit or maintain in the Customer's Account in connection with the Customer's trading activity. Interbank FX's initial margin requirement is .5% for mini accounts and 1% for standard accounts. The system performs an automatic pre-deal check for margin availability, and will only execute the deal if the client has sufficient margin funds in his or her account. Additional margin is required when a client's initial margin drops in value by 50% based on the value of any open positions. Interbank FX reserves the right to liquidate any open positions should a client's initial margin drop below 50%. This is an important risk management strategy for both Interbank FX and our clients; it ensures that clients do not lose more than their account balance.
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.
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.
The most common risk management tools in FX trading are the limit order and the stop loss order. 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.
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 rumor. 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.
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.
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. Any Suggestions?
In The Forex Market 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 any capital.
How do I open a 30 Day Free Demo Account? Go to http://www.interbankfx.com/open_a_demo.php Back to top
How do I open a Live Account? Go to http://www.interbankfx.com/open_a_live_account.php Back to top
What is the Minimum Deposit to Open An Account?
To open an account, a minimum margin deposit of $2,500 for a standard account or a minimum margin deposit of $250 for a mini account is required by wire transfer, bank check, money order, certified check, or personal check. Personal checks may take up to ten business days to clear depending on the bank, state of origin, and amount.
Interbank FX's minimum transaction size is 1 lot, or 100,000 of the base currency, with a minimum margin deposit of 1%. For example, a US $100,000 position would require an initial margin deposit of US $1,000.
How do I access Interbank FX if I am behind a firewall or use a proxy server?
Every computer owner needs a firewall. It hides your computer from hackers, who run scanning programs on the Internet to find computers with open communications ports. After finding a vulnerable computer, they attempt to trick the owners into downloading Trojan horses or plant one on the person s system.Trojan horses tout a supposedly useful program. They also include a dangerous, secret program. The hazardous program uses the open port to send information from the victim s computer to someone else. A firewall should keep the hacker from ever seeing your computer.It is not recommended that you disable your firewall.In order to access Interbank FX while running through a proxy server, it is necessary to make sure that the proxy server has port 8080 open for bi-directional traffic as well as have all ports from 1024 and up open to send data. If it is not possible for the proxy server to accommodate this, it may be necessary to request a connection separate from the proxy server in order to facilitate connection to Interbank FX Trader. It would be good to note that the requirements for a proxy server are the same as what is needed to access Interbank FX Trader while behind a firewall. Once again, port 8080 must be open for bi-directional traffic and all ports from 1024 and up open to send data.
Forex and commodity trading is always conducted on 'margin'. This means that a cash deposit, usually much smaller than the underlying value of the currency or commodity contract, is required in order to trade.For example, a broker might require only $1,000 in the trader's account in order to trade a $100,000 currency position. The $1,000 is referred to as 'margin'. This amount is essentially collateral to cover any losses that you might incur. Since nothing is actually being purchased or sold for delivery, the only requirement, and indeed the only real purpose for having funds in your account, is for sufficient margin.Margin should reflect some rational assessment of potential risk in a position. For example, if a currency is very volatile, a higher margin requirement would normally be justified. One common rule of thumb is a worst-case one day move in the market. So if a $100,000 currency position is unlikely to move by more than 1% (or $1,000) in a 24 hour period, a $1,000 margin requirement is probably reasonable. If, however, the currency or commodity in question is highly volatile and is likely to move by, say, $3,000 or more (or 3%, as is often the case with certain NASDAQ stocks and some commodities) it would put the broker at increased credit risk to require only a $1,000 margin deposit.Note that margin available in your trading account is based on account equity, not account balance. The equity is the most accurate measure of the value of your account, as it takes into account unrealized gains or losses.With a Interbank FX forex account, clients can never lose more than their deposited funds. Other brokers may have other policies with respect to satisfying margin requirements.
A pip is the smallest increment in any currency pair. In EURUSD, a movement from 1.0066 to 1.0067 is one pip, so a pip is .0001. In USDJPY, a movement from 120.45 to 120.46 is one pip, so a pip is .01. How much in dollars is this movement worth, for example, per 100,000 Euros in EURUSD? How much is one pip worth per 100,000 Dollars in USDJPY? We will refer to the size, in this case 100,000 units of the base currency, as the 'Notional Amount'. The formula for calculating a pip value is therefore:(one pip, with proper decimal placement/currency exchange rate) x (Notional Amount)Using USDJPY as an example, this yields:(.01/120.46) x USD100,000 = $8.30or $8.30 cents per pipUsing EURUSD as an example, we have:(.0001/1.0066) x EUR100,000 = EUR 9.93But we want the pip value in USD, so we then must multiply EUR 9.93 x (EURUSD exchange rate):EUR 9.93 x 1.0066 = $10.00This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EURUSD, GBPUSD, or AUDUSD): the pip value is always $10.00 per 100,000 currency units. This is why pip (or 'tick') values in currency futures, where the currency is quoted first, are always fixed.Approximate pip values for the major currencies are as follows, per 100,000 units of the base currency:USD/JPY: 1 pip = $8.30; In other words a change from 120.45 to 120.46 is worth about $8.30 per $100,000.EUR/USD: 1 pip = $10.00; 1.0066 to 1.0067 is worth $10.00 per 100,000 Euros.GBP/USD: 1 pip = $10.00; 1.5765 to 1.5766 is worth $10.00 per 100,000 Pounds.USD/CHF: 1 pip = $6.87; 1.4555 to 1.4556 is worth $6.87 per $100,000.
The FOREX currency market is an integral part of the rapidly expanding financial, business and political landscape. The FOREX Interbank market has three sessions of trading. The first begins Sunday at 7:00 P.M. NYT, which is the Asia session. The second is the European session, which begins at 3:00 A.M. The third and final is the New York, which begins at 8:00 A.M. The majority of the trading occurs between 3:00 a.m. and 1:00 p.m. EST.
How do I download and install the Interbank trading platform? Go to this page http://www.interbankfx.com/software_installation.htm Back to top
I have 5 different accounts. Can I open all of them at the same time?
Yes, you can. To open each new account:1. Open a new browser.2. Go to the Navigator and click on the 'accounts folder'.3. Click on the account you want opened.4. If you want an expert advisor to run on the new account click on one in the Navigator.You cannot have more than one 'Expert Advisor' running within the same platform.
If I am using my home computer to trade, can I use my office computer to log in to my accounts and trade?
Yes. You can log into your accounts from any computer. However, the computer you are presently using has to have the Interbank FX Trader installed. Another option would be to access your home computer via a remote access program like www.radmin.com or www.pcconnect.com.
When I open the FX Trader, it automatically logs me in. Can I secure it so that I have to use a password?
Yes. We have it automatically log you on for your convenience but if you would like to enable the password follow these steps:1. On the menu bar go to Tools2. From the dropdown menu click Options3. Click the box next to - 'Keep personal settings and data at startup'.4. The check mark will disappear.From then on every time you restart the FX Trader you'll need to enter your password. Make sure you have your Login number and Password recorded before you do this.
Is there a way to print reports without saving them? No. You must save them first and then print them. Back to top
If I want to hedge a position by shorting an opposing long position for example, is there a margin requirement on the second position as well?
There is not a margin requirement on the new position that you might open up provided that it is the same number of lots and that it is against the first one (or in the opposite direction of the first one). Again the second position will be margin free if it's the same amount of lots, in the opposite direction on the same currency.
Trading During Economic or Geo Political News releases
In the case of significant economic releases, like non-farm payroll, there could be a significant gap from the price of a currency and the price immediately after. We have seen a gap on the gbpusd of 150 pips about three years ago. Basically what occurs is right after a release all of the Offers in the market go away from the current price. Banks can move their offers significantly from where it was prior to the release. This was the case on Friday the 4th of August 2006, the Market reacted negatively toward the dollar and the EURUSD and GBPUSD jumped significantly. If someone has a resting order such as a buy stop or sell stop, those stop orders are activated and turn into market orders and then are filled at the current prevailing market price. A buy stop or sell stop is not a guaranteed order at a certain price. It simply turns into a market order when it is activated and it then filled at the current prevailing price. The actual fill on a buy stop or sell stop could vary significantly from the original order price during significant market moves or gaps, during an economic release like non-farm payroll.
