Foreign exchange, also known as Forex or FX, is the market in which currencies are traded. The Forex market is the largest, most liquid financial market in the world, open 24 hours a day, five days a week. To put it into perspective, the New York Stock Exchange handles approximately $169 billion worth of transactions a day, while the Forex Market sees over a colossal $5 trillion worth of transactions a day.
Forex is traded in currency pairs. Common currency pairs are the Euro/US Dollar, US Dollar/Japanese Yen, Great British Pound/US Dollar, and Canadian Dollar/US Dollar. You buy one currency and automatically sell another. The goal is to make a profit by buying and selling currencies as their value increases and decreases. There are many economic factors that contribute to currency movements which traders and dedicated analysts alike attempt to decipher.
The Forex market is open 24 hours a day, 5 days a week and currencies are traded worldwide among major financial centres. It opens on Sunday at 10:00 pm GMT, and closes on Friday at 10:00 pm GMT:
It depends on the leverage used and the amount of capital invested. You could invest a starting capital of $50, or $50 000, the sky is the limit. However, it is important to remember that increasing leverage, increases risk; ultimately it depends on a trader's tolerance to and management of risk. Skilled traders are able to minimise risk and maximise profit thorough analysis, a trading strategy that suits their style and wise money management.
Unlike the stock market, the Forex market is not tied to a central exchange. Transactions are conducted between two counterparts over the telephone or via an electronic network, therefore the Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market.
The primary participants in the Forex market - who make the spreads - are the largest banks in the world; Such banks include central Banks, commercial banks, and investment banks. Known as the interbank market as they constantly deal with each other on behalf of themselves or their customers. However, the percentage of other market participants is rapidly growing and now the list includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders and individual investors.
There are many factors that can and do contribute to currency prices. Such factors include economic and political events and announcements, interest rates, inflation, natural disasters and the list goes on. There is even debate over a mass psychology of how traders perceive the market at a certain point in time, which could contribute to how many base their trading decisions and thus influence the market. While there is absolutely no Holy Grail and sure way to predict price movements, there are some very thorough techniques implemented by analysts in an attempt to forecast potential price movements.
You only need a computer with internet connection and a free demo account or a funded live account with Admiral Markets to start. However, you should be equipped with proper Forex education and tools to minimize risks in the Forex market.
Reading through this FAQ is a great start! Be sure to check out the other educational content we offer such as – training programs, seminars, webinars and video tutorials. Creating a demo account is definitely your first step toward successful trading, novice and expert traders alike make use of demo accounts to get a feel for the platform, test and perfect trading strategies and configure various add-ons, plugins, scripts and indicators. More importantly, you will see the market as it exists in a live account and nothing beats a hands-on approach while you do your research. Demo accounts are both free of charge and risk. For more information simply contact your account manager. If you do not yet have an account manager open a demo account and one will be in touch soon.
Essentially you will want the market to move in your favour. You can move the odds in your favour by analysing the market in various ways. Technical analysis involves trends, historical data and current market movements. It takes a more statistical approach to trading by thoroughly examining the charts and indicators. Alternatively you have fundamental analysis which focuses more on important economic events and announcements which are likely to influence the market. In either case you should attempt to capitalise on potential market movements with a formulated trading strategy, wise decision making and clever money management. The sum of your profit depends on the efficiency of your trading strategy, on how well you learn to predict the alteration in rates and their tendencies and on the amount of your deposit which allows you to sustain unfavourable situations during market movements as well as capitalise on good trading opportunities.
The spread is the difference between the bid and the ask price. The bid price is the rate at which you can sell a currency pair, and the ask price is the rate at which you can buy a currency pair. With us, you can trade a large range of instruments with flexible spreads. That gives you a greater degree of price transparency on your trades.
The rollover rate, also referred to as “swap" or “interest" rate, is simply the cost-of-carry that is applied to your account on a day-to-day basis. It is the difference between the interest rates of the two currencies which a trader either earns or pays when a position is kept open overnight.
The term “order volume" refers to the number of standard lots you want to trade.
Spot markets refer to the markets that deal with the current price of financial instruments. Prices are settled on the spot at current market prices as appose to forward prices
Essentially it's just trader's lingo for a buy or a sell order. If you are buying a currency pair, you are opening a 'long' position, and vice versa, a 'short' position while selling. For example, if you buy 1 lot of EUR/USD, it means you open a long position for 100,000 units of EUR against USD. If you sell 1 lot of EUR/USD that means you open a short position for 100,000 units of EUR vs USD. Think of it like this, when buying you want the value of the euro to increase (long) against the dollar and when selling you want the value to decrease (short) against the dollar.
Slippage occurs when the market gaps over prices or because available liquidity at a given price has been exhausted. Market gaps normally occur during fast-moving markets when a price can jump several pips without trading at prices in between. Similarly, each price has a certain amount of available liquidity. For instance, if the price is 50 and there is 1 million available at 50, then a 3 million order will get slipped, since 3 million is more than the 1 million available at the price of 50.
Margin is a percentage amount of the total trade size which a broker requires as a good faith deposit in order to allow a trader to open a position. This amount is not a fee or a transaction cost; it is simply a portion of your account equity set aside within your account as a deposit towards the trade. Margin requirements are calculated by taking a percentage of the notional trade size as determined by the broker in advance and specified in the trading conditions. For example, when you want to open 1 lot of USD/GBP (or 100,000 units of USD) using the leverage of 1:500, you will only need 200 USD as a margin (100,000/500). If you have less than 200 USD set aside you will be unable to meet the margin requirement, if you have 200 or more the order will attempt to execute.
A Margin Call is an alert when the account equity falls below the required Margin Level. This means, the account only has the supplied margin left and should be funded with more money in order to prevent it from facing a Stop Out or forced closure.
A Forex broker is an intermediary between you and the interbank market - networks of banks that trade with each other. Typically, a Forex broker will offer you a price from the banks that act as their liquidity provider. Admiral Markets uses multiple banks for pricing and we offer you the best price quotes with fast execution.
Trading on interbank is possible for private individuals, however it requires significant investment. So, unless a trader has at least $50,000.00 to $100,000.00 on hand, a financial leverage is also required. Forex brokers such as Admiral Markets provides that very leverage.
Admiral Markets also offers exceptional educational material regarding Forex trading, as well as tools to equip and assist traders in making wise trading decisions. We also offer webinars, live-trading sessions, daily Forex analysis, trade alerts, and one-on-one consultation with our resident experts.
Yes, we conduct regular trainings and seminars for free. Our sales team also does one-to-one consultation with clients for their specific trading needs, however Admiral Markets is restricted from providing actual financial advice.