FOREX TRADING
Forex,
or Foreign Exchange, is the simultaneous exchange of one country's currency for
that of another. Clients can trade the top six currency cross-rates on the
RefcoFX platform that provides foreign exchange for the purpose of investor
speculation. The investor wishes to purchase or sell one currency for another
with the hope of making a profit when the value of the currencies changes in
favor of the investor, whether from market news or events that take place in the
world. This market of exchange has more daily volume, both buyers and sellers,
than any other in the world. Taking place in the major financial institutions
across the globe, the forex market is open 24-hours a day.
Buying / Selling
Placing a trade
in the forex market is simple: the mechanics of a trade are virtually identical
to those found in other markets, so the transition for many traders is often
seamless. Below is a step-by-step guide of what happens when a trade is placed.
In this market you may buy or sell currencies. The objective is to earn a profit
from your position. If you have bought a currency, for example, and the price
appreciates in value, then you will earn a profit by closing your position. When
you close your position, sell the currency back in order to lock in the profit,
you are in actuality buying the counter currency in the pair. By trading
currency pairs, one currency valued against another, a rate of worth has been
established. After all, a country's currency has value only relative to the
currency of another country.
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Just like in
all markets, there are two prices for every currency pair. The difference
between these two prices is the spread, or the cost of the trade. In this
example, the spread is three pips. |
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The Costs of Trading
You will notice
that there are two rates for all currency pairs: the bid, or the rate at which
traders can sell, and the ask, or the rate at which traders can buy. There is a
small difference between the two. This difference, known as the spread, defines
the cost of the trade. Spreads are a part of all markets, but are typically
"hidden" in the broker-based equities and futures markets. When trading directly
with RefcoFX trading platform, there are no commissions charges for trading.
Leverage
Leverage is the process in which a trader
can take a market position much larger than the value of the trader's account.
RefcoFX enables you to take positions up to 100 times the value of your account.
However, we do not recommend using leverage of more than 10 times your account
value. Using leverage exaggerates both gains and losses. Even when market
conditions are relatively calm, using leverage can generate large gains or
losses. In the case where a trader surpasses the maximum leverage allowed (which
can happen when account equity shrinks as a result of trading losses), RefcoFX
will close all open positions in the account.
Rollover
For positions open at 5pm EST there is a
daily rollover (interest payment) you either pay or earn on an open position
depending on your established margin level and position in the market. If you do
not want to earn or pay interest on your positions, simply make sure they are
closed at 5pm EST, the established end of the market day.
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