FAQ’s

What is forex trading?

Forex or FX stands for foreign exchange and forex trading is trading in different currencies. In other words it is exchange of one country's currency for another countries currency and is most commonly done through a broker.

What does fractional lot trading mean?

Fractional lot trading in layman terms would mean the flexibility given to the trader to trade in any desirable amount of his or her choice. This could mean trading even in cents.

What is rollover?

Each currency the trader or a customer trades in, has got an interest rate associated with it, Rollover is the interest paid on/earned for holding a position overnight. This gives extra profit/loss to the trader.

There are two basic types of rollovers,

Positive Roll (Rollover Credit): If the rate of interest of the currency bough by the customer is higher than that of the one he/she sold.

Negative Roll (Rollover Debit): If the rate of interest of the currency customer bough is lower than that of the one he/she sold.

Every day at 22:00 GMT, we will automatically rollover all existing positions into the next spot settlement date which result in a debit or a credit in the customer’s account.

When does the market open/close?

Although the forex market is open 24 hours a day, it is always wise to trade when the market is most active in order increase the chances of making a good profit. Below are the forex trading hours for some of the major cities around the globe (all timing are in US EST),

New York opens at 8:00 am to 5:00 pm EST

London opens at 3:00 am to 12:00 noon EST

Sydney opens at 5:00 pm to 2:00 am EST

Tokyo opens at 7:00 pm to 4:00 am EST

What is margin and how is usable margin calculated?

The bare minimum amount of equity that must be maintained in a trader’s account in order to keep a position open is called as margin.

Calculating the usable margin available after placing a trade can be done using simple math. If an account has a balance of $1000 usable margin available and the trader has a 1% margin requirement and wishes to place a trade for 20k, the amount that is deposited into the used margin field after placing the trade can be calculated by multiplying the trade size by the margin requirement ($20,000 x 1% = $200). This leaves the account with $800 of gross usable margin ($1000 - $200 = $800).

Which are the best currency pairs to trade in and which ones to avoid?

Forex market offers many different currency pairs to the traders to deal in, but a beginner should stick to the major few currency pairs viz. EUR/USD, GBP/USD, USD/JPY because these are widely traded and have the highest trading volumes. It is best to avoid any new or exotic currency pair.

How is the spread calculated for major currency pairs?

A spread is the difference between the price a currency pair is bought and the price at which it can be sold. It can be better explained with a simple example; let’s say the customer buys a currency for 100 which a higher price than the actual market value but later realized that he has made a mistake and sells it at 95 which is lesser than the price he had bought it at, thus having a loss of 5 (100 -95 = 5). The difference between the two i.e. 5 is called the spread which is measured in a unit called pips.

What is the difference between limit order and stop order?

The Sell and Buy Limit order and Sell and Buy Stop order are opposite of each other (vice versa). In Sell Stop order the trader places the order below the market price but in Sell Limit order he places it above the market price while In Buy Stop order the trader places the order above the market price but in Buy Limit order he places it below the market price.

For example, say the trader/customer is focusing on EUR/USD currency pair again, and he does all the calculations, technical analysis, and come to a conclusion that the resistance for EUR/USD is at 1.2700. So what he might do is set a SELL LIMIT ORDER at 1.2700 so when the market price reaches there, it takes the position as Short Sell, and if the market goes down the position is in profit or if it goes up then position is in loss.

Both futures and options are traded on an exchange.

Under which situations do the spreads increase?

Spreads may increase depending on how volatile the market is or depending on the liquidity. The added liquidity keeps advertised spreads fairly consistent and diminishes the risk of spread widening.

What is scalping?

Scalping is a type of forex trading system that attempts to quickly enter/exit the market; it helps in capturing small, profitable price movements. A scalping strategy can range from few to thousands of trade each day.

If there is a price gap during the overnight/weekend period, will a pending order still be executed at the specified price?

Under normal circumstances the trade order is executed at the best available price. In the event of a market gap, we always place the order when the market opens and try to execute it as close to the specific price as possible.

Are ‘stop loss’ orders guaranteed?

Execution of an order is not guaranteed under hectic market condition but only in normal market conditions. During hectic market hours the order is executed at the best first quote available.

Forex vs traditional stocks trading: How do they differ?

Forex and conventional stock are two different types of trading. In forex trading Forex a trader's objective is to predict short term spikes in the currency exchange values. Majority of the Forex trading is done in the day-trading style where in a trader buys and sells the currency pair in the same day. Where as stocks and mutual funds trading represent more of long term trading style where in the trades may last for days, months or even years.

Where can one learn about forex trading?

We have prepared an extensive course which will cover all aspects of Forex and Forex trading. Please visit the Learn Forex section.

How high are the risks in Forex trading?

Forex trading is a high risk market. But with proper knowledge, the rewards in Forex trading can be very lucrative.

Who are the major players in Forex trading?

Many of the top banks in the world are big time players in the forex market. Some of which are Deutsche Bank, UBS, Citi Group, HSBC, Barclays, Merril Lynch, J. P. Morgan Chase, Coldman Sachs, ABN Amro, and Morgan Stanley.

How much money do I need to start trading Forex?

The minimum starting deposit is $250.

Is there a central location for the Forex Market?

Forex market is an interbank market or can also be called an over the counter market, so transactions are carried out between two counterparts. It is not managed through any exchange.

Who participates in the forex market?

Banks (Central, commercial and investment) and other financial institutes have always been one of the major players in the forex market. The other market players constitute of international brokers and money managers, private investors, multinational corporations, and registered traders.

How fair is the Forex Market?

According to many experts Forex market is one of the fairest trading markets in the world and this is because of the fact that it is not controlled by any major players or government body but instead is comprised of many participants from all across the globe.

How are currency prices determined?

Currency prices are determined based on various elements including but not restricted to political/economic condition of a country, political situation, inflation rate, interest rates and more. There have also been cases of central bank intervention where in the governments participate in the forex market in order to influence the value (increase or decrease) of their respective currencies by either buying or selling large volume.

Why is forex so popular?

Forex trading is popular because of two major reasons, it can be easily done from any place around the world (office, home even while on vacation) via the internet and it can be done at any time of the day as forex markets are open 24 x 7. It also is totally hassle free as it involves no shipping, billing, commuting or even the need of keeping an inventory. On top of all this with proper knowledge forex market provides an opportunity to earn an extra income.

What is a pip?

Pip is the standard unit used to measure the spread (cross price changes). Pip stands for "percentage in point". Since most currency pairs are quoted to four decimal places one pip would be equal to 0.0001 so if a currency pair is to move from 2.1234 to 2.12345 it would constitute to one pip. For example, if EURUSD is quoted with four decimals, for a given position one can multiply the position amount by the value of one pip, so, on a EURUSD 100,000 contract, one pip would equal USD 10.

How do I manage risk?

Limit order and stop loss order are two of the best risk management tools available in the forex trading. Stop loss order is a predetermined price fixed by the trader which automatically liquidates a position in order to limit the potential loss in case the market direction changes drastically against the investor’s position.

A limit order on the other hand places restriction on the maximum price to be paid or the minimum price to be received.

How often can a trader trade?

It depends on the market condition which dictates the trading activity of a trader on any given day. On an average a trader can trader up to ten times a day or even more since there is no commission levied on the transactions unlike traditional stock market