The Trading Platform: real-time software

The  main  feature  of  any  Forex  trading  platform  is  real  time  access  to exchange rates, to deal and order making, to deposits and withdrawals, and to monitoring the status of positions and one’s account.

  Forex on the internet: basic steps

In general, the individual Forex trader is required to fulfill two steps prior to trading:

•    Register at the trading platform

•    Deposit funds to facilitate trading

 Overview of trading Forex online

 The internet revolution caused a major change in the way Forex trading is conducted throughout the world.
Until the advent of the internet-Forex age at the end of the 1990’s, Forex trading was conducted via phone orders (or fax, or in-person), posted to brokers or banks. Most of the trading could be executed only during business hours.  The same was true for most activities related to Forex, such as making the deposits necessary for trading, not to mention profit taking. The internet has radically altered the Forex market, enabling around the clock trading and conveniences such as the use of credit cards for fund deposits.

 Up-to-date exchange rates

As rates change so rapidly, any Forex software must display the most up-to- date    rates.    To    accomplish    this,    the    Forex    software    is    continuously communicating with a remote server that provides the most current exchange rates. The rates quoted, unlike traditional bank exchange rates, are actual tradable rates. A trader may choose to “lock in” to a rate (called the “freeze rate”) only as long as it is displayed.

 How a Forex system operates in real time

Online foreign exchange trading occurs in real time. Exchange rates are constantly changing, in intervals of seconds. Quotes are accurate for the time they are displayed only.    At any moment, a different rate may be quoted. When a trader locks in a rate and executes a transaction, that transaction is immediately processed; the trade has been executed.

Risks in Forex Trading

 Although  Forex  trading  can  lead  to  very  profitable  results,  there  are substantial risks involved: exchange rate risks, interest rate risks, credit risks and event risks.
Approximately 80% of all currency transactions last a period of seven days or less, with more than 40% lasting fewer than two days. Given the extremelyshort  lifespan  of  the  typical  trade,  technical  indicators  heavily  influence entry, exit and order placement decisions.

A spot transaction

A spot transaction is a straightforward exchange of one currency for another. The spot rate is the current market price, which is also called the “benchmark price”. Spot transactions do not require immediate settlement, or payment “on the spot”. The settlement date, or “value date” is the second business day after the “deal date” (or “trade date”) on which the transaction is agreed by the trader and market maker. The two-day period provides time to confirm the agreement and to arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.

Leverage Forex

 Leveraged financing is a common practice in Forex trading, and allows traders to use credit, such as a trade purchased on margin, to maximize returns. Collateral for the loan/leverage in the margined account is provided by the initial deposit.  This can create the opportunity to control USD 100,000 for as little as USD 1,000.

Margin and Maintenance Margin

Margin

Banks and/or online trading providers need collateral to ensure that the investor can pay in the event of a loss. The collateral is called the “margin” and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future.
Margin enables private investors to trade in markets that have high minimum units of trading, by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but similarly enhances the rate of loss, beyond that taken without leveraging.

Prices, Quotes and Indications

The price of a currency (in terms of the counter currency), is called “Quote”. There are two kinds of quotes in the Forex market:
Direct Quote: the price for 1 US dollar in terms of the other currency, e.g. – Japanese Yen, Canadian dollar, etc.

What is a forex spread

It is the difference between BUY and SELL, or BID and ASK. In other words, this  is  the  difference  between  the  market  maker's  "selling"  price  (to  its clients) and the price the market maker "buys" it from its clients.
If an investor buys a currency and immediately sells it (and thus there is no change in the rate of exchange), the investor will lose money. The reason for this is “the spread”. 

Exchange rate forex

Because currencies are traded in pairs and exchanged one against the other when traded, the rate at which they are exchanged is called the exchange rate. The majority of currencies are traded against the US dollar (USD), which is traded more than any other currency. The four currencies traded most frequently after the US dollar are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or “the Majors”. Some sources also include the Australian dollar (AUD) within the group of major currencies.

Components of a Forex deal

A Forex deal is a contract agreed upon between the trader and the market- maker (i.e.the Trading Platform). The contract is comprised of the following components:
•    The currency pairs (which currency to buy; which currency to sell)
•    The principal amount (or "face", or "nominal": the amount of currency involved in the deal)
•    The rate (the agreed exchange rate between the two currencies).

What is Forex trading

The investor's goal in Forex trading is to profit from foreign currency movements.
More than 95% of all Forex trading performed today is for speculative purposes (e.g. to profit from currency movements). The rest belongs to hedging (managing business exposures to various currencies) and other activities.

What is forex

The market

The currency trading (foreign exchange, Forex, FX) market is the biggest and fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars. The participants in this market are central and commercial banks, corporations, institutional investors, hedge funds, and private individuals like you.