Understanding spreads and managing margins are two ground rules that a skilled forex trader always uses to one selves advantage.
A spread means the difference between the bids and ask prices for a currency. Besides, a spread means the difference in price between two related futures contracts. Bid/Ask spreads are measured in pips, which are the smallest increments of price movement.
On the FX Trading Station, trades are done in standard lots of 100,000 in the base currency. There is no maximum volume on the FX Trading Station. Still, for trades larger than US$10,000,000, a quote must be provided via the phone.
Margin is the deposit held by your forex trading partner to establish and keep up your account. Forex Dealers allows you to trade on a highly leveraged basis. You must choose the level of leverage or gearing, and unless you specify or else, your leverage level is set at the most lenient required level for your account size. Your account equity means the total value of the account adjusted for current profit and loss on any open positions.
Up to $50,000 – Minimum $1,000 in equity per open lot (1%)
$50,000 – $200,000 – Minimum $2,000 equity per open lot (2%)
$200,000 – $500,000 – Minimum $3,000 equity per open lot (3%)
$500,000 and Up – Minimum $5,000 equity per open lot (5%)
A lot has an estimated market value of US$100,000. Hence, the requirement of US$1,000 per open lot is more or less equal to a maximum leverage ratio of 100:1.
Our dealers monitor continually leverage levels of all accounts. Though Forex Dealers makes no guarantees, the dealing desk may effort to contact clients whose accounts are near the minimum equity requirement for their open positions. Clients are totally liable for monitoring the movements in their accounts.
The dealer has the right to liquidate all positions in the account, in the event that an account exceeds its maximum permissible leverage.
Dealing Details and Rollover Policies:
Forex Dealers and it’s associated dealing centres can support personally your trading at any hour from Sunday, 5:00 PM Eastern Time to Friday, 4:00 PM Eastern Time. Quotes, placement, order and confirmations are available on line or over the telephone.
All the trades in the spot foreign exchange market are to be established within two business days. One can settle trades by the full delivery of the sold currency, or the position can be rolled over. Forex Dealers rolls over any open positions to 5:00 PM Eastern Time of the next settlement day automatically by exchanging it for a new position that expires on the following settlement date. It is usual that from day to day these positions are not valued equally.
Considerable differences can emerge based on the currency pair, interest rate differentials, and other daily fluctuations. On any particular day a rollover might cost US$3 per lot for USD/JPY and US$16 per lot for EUR/USD.
On Wednesdays, the volume of funds added or subtracted from an account as a result of rolled over positions can be around three times the typical amount. This accounts for any “three day” rollovers that settle trades made during the weekend.
At 5:00 PM Eastern Time, open positions are rolled over automatically, and funds are added to or subtracted from accounts with open positions. Accounts that have a 2% or greater margin constraint will have funds added to the account for positions that are long (being held) in a currency with the higher interest rate. As well, the account is debited if the opposite circumstances are true.
Accounts which do not have the 2% margin requirement will have the rollover amount for each position deducted from the account despite the holdings in the account. A 2% margin requirement is the lowest required threshold in the forex industry – some other firms require a 5% minimum margin before their clients benefit from rollovers.