Frequently
Asked Questions
What is Forex?
FOREX (Foreign Exchange Market) is
a global currency market that exchanges
a certain sum of currency from one
country to the currency of another
at a changing rate, subject to the
date of exchange.
Where is Forex?
FOREX is a virtual network of currency
dealers connected among themselves
by means of telecommunications. FOREX
currency dealers are connected to
leading world financial centres, and
round the clock workers. As a result,
FOREX forms a united and very efficient
system.
In what currency are calculations
made?
All calculations are conducted in
one of four currencies: US dollars;
Euro; British pound; Japanese yen.
All transactions for transfer of money
resources on the trading account into
other currencies will be converted
to US dollars at an internal rate
of the bank of the addressee on the
day of transfer.
How can I make a profit in
the Forex market?
We shall assume that you are a client
of our company, and that you have
an account with 1000 USD, which allows
you to strike a bargain on a market
lot of 100 000 USD. Having analyzed
the change of the USD/JPY rate by
means of a method of convergence -
divergence of the sliding averages
MACD (the fast line has crossed the
slow from top to down) - you make
a decision to buy 100 000 USD against
the Japanese yen at the price of 121.00.Within
a few hours of a day when the USD/JPY
rate has grown on 200 points, and
becomes 123.00, you decide to close
a position; therefore, you will have
sold your dollars at a higher rate
than what you bought them at, and
made a profit.
The profit (loss) = [(the price of
closing - the price of opening) lot's
weight] /price of closing Profit =
[(123.00-121.00) *100000]/123.00=1626.02
USD
Notice that the fluctuation of the
JPY on 200 points in a day is not
an unusual occurrence.
Who are the participants
of the market?
The main participants of the currency
market are: the central and commercial
banks, currency stock exchanges, the
companies carrying out foreign trade
operations, investment funds, broker
companies, and individuals.
What advantage can Forex
bring to the private investor?
A trader with small means can operate
on the market with sums amounting
to one hundred thousand dollars. For
example, for a trader to make a transaction
of 100 000 dollars at a mortgage rate
of 1 % only 1000 dollars is needed
as a marginal deposit.
What currencies are the most
liquid?
The most liquid currencies are US
dollar (USD), British pound (GBP),
Euro (EUR), Swiss franc (CHF), Japanese
yen (JPY) which make the main volume
of all operation on the FOREX market.
Why is Forex so popular?
FOREX is popular, because it speaks
for today's market. It is characterized
by the greatest volume of tenders,
the lowest cost of spent transactions,
and the fastest movement of money
resources. It is a unique world market
operating 24 hours a day.
How can I conclude my transactions?
To make a bargain the trader should
request the quotation from the active
participant of the market (market-maker),
as follows:
- specify the tool (currency pair)
on which the trader wishes to make
the transaction;
- specify the sum of the contract;
- receive the bilateral quotation
on the requested tool from the market
maker;
- as a trader make the decision to
buy, sell, or refuse the transaction.
Is it possible to limit losses?
In case the market turns against the
open position of a trader there are
protective stop-orders, known as "stop-losses"
to limit losses under transaction.
We shall assume that we have an open
position on GBP: BUY 100 000 GBP/USD
at the rate of 1.4010 dollars for
GBP. A level 1.4000 for pound is very
strong. We think that the pound will
make a start from it and will grow
in price. We decide to place a "stop-loss"
order at 20 points below 1.4000, i.e.
at a level 1.3980. It is possible
that the pound could fall to a 100
pips below 1.4000, thus reaching a
level of 1.3900. Recent events have
shown the pound falling by 300 points,
because of the link with the Euro
zone. Should this happen we reserve
the right to close the transaction
at 30 points, thus limiting the potential
loss.
What is the difference between
a "demo" account and "real"
account?
The demo-account is ideal for study
purposes. Operating conditions on
demo-accounts are identical to operating
conditions on real accounts: techniques
for fulfillment of transactions, the
order of inquiry for quotations, parameters
for conducting the open position are
the same. The basic difference of
a demo-account from the real is that
making the transaction through a demo-account
you receive the quotation which an
automatic device has chosen from a
current stream of quotations, some
of which come with a certain time
delay. With the real account you receive
the market quotation from the dealer
of the company. Accordingly, with
real account you receive the price
in 1-2 seconds, and in the demo account
in 10-15 seconds (time of reception
of the answer can increase - it depends
on the quality of your liaison channel).
Otherwise, the two systems are identical.
What must I do if the trading
terminal gives an "Invalid Login"
signal?
When this happens it is most likely
that more than 60 days has passed
since the demo account was opened,
so your demo-account has been removed
by a server. In this case open the
new educational account.
What do the position names
"long" (LONG) and "short"
(SHORT) mean?
In slang of traders "to open
a long position" means to buy
the base currency and "to open
a short position" means to sell
the base currency.
For example, the trader has bought
Euro 100,000 for Dollars, i.e. has
opened a long position on euro.
BUY 100,000 EUR/USD - a long position
on euro.
SELL 100,000 EUR/USD - a short position
on euro.
What is a credit shoulder
and who gives it? What is the principle
of margin trading?
Margin trading means that for the
trader it is not obligatory to have
the whole sum of the contract. It
is enough to bring the mortgage (margin),
which usually makes 1-2 % of the necessary
sum. The missing amount will be given
to you by bank through which you will
make transactions in the Forex market.
In slang of currency traders it is
referred to as "granting of a
leverage" So, to purchase a 100,000
dollars for Japanese yens at a leverage
1:100 it is necessary to bring only
1 000 dollars as a marginal deposit.
What is "trailing-stop"?
How does it differ from the "stop-order"?
Does it work when my computer is switched
off?
When you implement trailing-stop (for
example on X points) the following
occurs:
Stop Loss order is intend to minimize
losses in case the chart of the financial
instrument price has started moving
in the unprofitable direction. When
an opened position becomes profitable,
Stop Loss can be moved manually at
the certain distance from the current
price. Trailing Stop is used to automate
this process and maximize the profit.
This tool is especially useful by
the strong unit-directional motion
of the price (by the pronounced trend
without a deep back off) and also
in case there is no possibility to
watch closely the changes of the markets.
To set Trailing Stop it is necessary
to run the context menu command in
the window "Terminal - Trade
- Trailing Stop". After that
one customize the desired value of
distance between the order level and
the current price.
After this by each tick-quotation
incoming the terminal starts proving
checking for position profitability.
If an open position is profitable
and Stop Loss Order is missing and
the predicted level of Trailing Stop
is in the loss zone, this mechanism
is idle. The terminal traces the boundary
in price levels and as soon as the
jump into the profitable zone occurs
(profit at the points is equal or
is more than the parameter Trailing
Stop), the command for Stop Loss placement
is being executed automatically. The
order level is set at the distance
indicated from the current price.
Later in case the price moves to large
profitability of the position, Trailing
Stop automatically moves Stop Loss
behind the price. If each incoming
tick-quotation decreases profitability
of position then no order modification
occurs. Thus, there happens limitation
of losses of the opened position without
the participation of the trader. By
each automatic modification of the
Stop Loss Order there is a record
being made in journal. By the considerable
current trend correction there can
occur Stop Loss execution. At that
Trailing Stop stops being executed.
The execution of the Trailing Stop
Order can be stopped if one shows
the parameter "None" in
the order management menu. To cut
off all Trailing Stops it is necessary
to run the command "Delete All".
Attention: Trailing Stop woks on the
client terminal and not on the server
like Stop Loss or Take Profit. Therefore,
by exit from terminal, in contrast
to the specified above orders, Trailing
Stop will not be worked. At the deactivated
terminal there is only Stop Loss,
placed by Trailing Stop that can be
executed.
What is Margin Call?
It is a demand need for additional
funds required by the clients to increase
their margin level of their deposits
in case of a sudden adverse change
in the international market price.
If the current condition of the trader's
account in view of the open positions
becomes less than the necessary margin
needed for maintenance of the trader's
positions in the market, the dealer
has the right to close all or some
positions of the trader. This condition
also refers to Margin Call. Usually
for the open position in 100 000 USD
Margin Call comes, if the current
condition of the account of the trader
makes less than 50 USD, i.e. less
than 5 % from the mortgage of 1000
USD.
What is the cost of one point
in the Forex market?
Let's say that you have bought USD/JPY
- 1.0 lot at the price of 109.59.
Then you have closed the position
at the price of 109.99. What's your
profit? Opening the transaction, you
have bought 100000 USD and have sold:
109.59 * 100000 = 10959000 JPY. Closing
the transaction, you have sold 100000
USD and have bought: 109.99 * 100000
= 10999000 JPY. Thus, (10999000-10959000)
= + 40000 JPY, that makes (in US dollars)
at the rate of closing the transaction:
40000 / 109.99 = 363.67 USD. It is
also your profit. Accordingly, 1 point
(1 pip) will be equal: 363.67 / (109.99-109.59)
= 9.09 USD. It is similarly possible
to lead calculation on other currency
pairs.
Is there any commission on
the trade?
No, our company does not charge commissions
on FOREX.
What kinds of leverages do
you give? How can I change them?
We give a leverage from 1:1 up to
1:500 (NorthFinance). You can choose
your desirable level of leverage during
the opening procedure, or you can
change your leverage level at any
time by sending us a written request
letter.
An example: you have bought standard
contract - 100 000 EUR/USD ({100 000
euro for 100 000 USD} * current quotation).
At a leverage - 1:50 spent the margin
will make (100 000 USD* current quotation)/50.
At a shoulder 1:100 - (100 000* current
quotation)/100;
At a shoulder of 1:200 - (100 000*current
quotation)/200.
Required margin: at a leverage 1:50
- 2451,2 USD; at a leverage 1:100
- 1225,6 USD; at leverage 1:200 -
612,8.
How long is it possible to
keep the position open?
You can keep a position open as long
as you want. Every day at 00.00 server
time, the charge of a swap will be
executed on your account.
What is the price of carrying
the position to the next day, and
when is it carried out?
Carrying forward an open position
in FOREX market to the next day is
done in the form of market swaps which
can be both negative, and positive,
depending on the difference of interest
rates in countries of the currencies.
We shall assume that in Europe the
SWAP rate is 4.25 %, and in USA 3.5
%. Let's say you have 1.0 lot of EUR/USD,
and you are open for sale. You decide
to sell 100,000 EUR, which means you
should borrow the lot for under 4.25
% annually. Having sold euro you buy
dollars, which you put at a deposit
for under 3.5 % annually. The total
costs on your transactions will be:
(4.25-3.5) % annually or the same
at rate EUR/USD 0.9000. This sum makes
675 dollars per year or 1.85 dollars
per day.
Carrying a position occurs at 00.00
(Server time).
Is it necessary to pay for
carrying a position to the next day?
In our company, the prolongation of
a position to the next day is carried
out through a short operation called
"Roll-over" (Roll-over or
Swap Tom/Next).
Roll-over consists of; two opposite
transactions in accordance with an
identical sum, different dates of
value (Volume - tomorrow and Spot
- the other working day) and slightly
differing rates.
Roll-over is an artificial closing
of the available open positions fora
certain value date and simultaneous
opening of the same positions for
the following value date under the
prices reflecting a difference of
interest rates between considered
currencies. Depending on the kind
of position (Buy or Sell) the client
receives or pays a sum to carry a
position (from the several tenth poitns
up to several points). When the position
is transferred since Wednesday on
Thursday (value dates mean), this
sum increases approximately three
times.
Why does the client pay or
receive funds for carrying a position?
This is because at the conclusion
of the transaction he will have received
the credit in the currency at which
he/she has sold the position and should
pay a percent of the sale. At the
same time, he has placed his purchased
currency in a deposit and should receive
an interest. Interest rates on currencies
differ; therefore there is a difference
which is considered at the carrying
of a position. If the client has sold
the currency with a greater interest
rate the profit will pay for the carrying
of a position. If he has bought currency
with a greater interest rate, the
broker will pay for the carrying of
his position. Usually roll-over is
carried out automatically at the beginning
of the day prior to the value date.
What are the conditions for
setting "Stop-loss" or "Limit"
orders?
Pleace refer to specification page
for each broker.
What time MetaTrader shows?
GMT+2 for NorthFinance and GMT+1 for
Neuimex
Why I can see in "Market
Watch" (the Review of the market)
only 4 currencies though it is written
on your site, that you give cross-country-rates?
Press the right button of the mouse
on any tool in a window "Market
watch" and choose in the menu
"Show all symbols" (To show
all symbols); or choose "Show
symbol" (To show a symbol) and
then specify the tool interesting
you.
Why I can't buy or sell on
Sunday, some kind of a message "Trade
is stopped" jumps out?
The Forex Market works round the clock
from Monday till Friday. Accordingly,
on Saturdays and Sundays the tenders
are closed.
At my account I have got
1005 dollars. A credit shoulder is
1:100. I wish to open a position on
EUR/USD (1 lot), but the terminal
gives out the following message -
"Not enough money" (Not
enough means). Why?
For opening one lot on EUR/USD it
is necessary to have 1000 EUR, i.e.
1000 * (current rate EUR/USD) =1000*1.2074=1207.4
dollars.
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