In the spot forex market trades settle in two business days. If a trader sells 10,000 Euros on Tuesday, the seller must deliver 10,000 Euros on Thursday unless the position is held open and "rolled" over to the next value date. As a service to our traders, FX Solutions automatically rolls over all open positions to the next settlement date at 17:00 Eastern Time.

Rollover or "cost-of-carry" involves the applying of a daily debit or credit to a trading account based on positions held open at 17:00 Eastern Time and on the interest differential between the two currencies in the pair(s) being traded. In the majority of cases, if a trader is "short" the currency bearing the higher interest rate then their account will be debited, if they are long then their account will be credited. For example, a short USD/JPY position will incur an interest charge as one is effectively "short" US Dollars and "long" Japanese Yen. Dollar short-term interest rates are currently at 3.5% while Yen rates are around 0.5%, a negative 3% difference. This interest differential forms the basis of the daily premium debit/credit which is applied to all open trades at 17:00 Eastern Time, Monday through Friday each week.

FX Solutions operates a "3 Tier" system of daily premiums that reflect the degree of leverage chosen by the client.

Tier 1 - 50:1 or less
This set of rates is available to accounts that select leverage of 50:1 or less. The rates offered are directly based on the interest rate differentials in the interbank cash market and closely reflect the rates available to more unleveraged, institutional-type participants in that market.

Tier 2 - 100:1
This set of rates will apply to accounts that select a leverage of 100:1. The rates are based on those available in the interbank market but include an additional spread which will take into account the higher degree of leverage chosen.

Tier 3 - 200:1 or higher
This set of rates will apply to those accounts that select leverage of 200:1 or higher. Although based on the rates available in the interbank market, these rates have been adjusted to include a "cost of capital" spread. This spread is based on the institutional lending rate charged to cover the capital costs of maintaining positions on a leveraged basis. By choosing a significantly higher degree of leverage, a client is basically borrowing against the net capital of the brokerage company.

At 17:00 Eastern Time each day, funds are subtracted from or added to accounts with open positions because of this automatic roll over.

The spot foreign exchange market, at times, exhibits extreme price volatility, a condition known as a "fast market". Fast market conditions may be caused by various factors including, but not limited to, news releases such as non-farm payroll numbers, order imbalances-significantly greater orders of one type (e.g., "buys") than another type (e.g., "sells").

During the extreme price volatility in fast markets, currency pair prices will "gap" and spreads widen. A price gap occurs when the price of a currency pair either jumps or plummets from its last bid/offer quote to a new quote, without ever trading at prices in between those quotes. As an example, the Euro/US Dollar currency pair may move from a bid/offer of 1.1891 - 1.1894 and begin trading at 1.1941 - 1.1944, without ever trading at the prices between those quotes. In these instances both stop-loss and entry stop orders will either be executed at their requested rate , if the market has traded there, or at the next recorded price in the market, regardless of order size. These orders will be automatically executed and will not require dealer intervention. This policy creates uniformity and transparency of trade execution and does not discriminate based on the size of the order.

Prior to major economic news releases, FX Solutions may decide to restrict the placing of Entry Orders to, for example, a minimum of 10 pips away from the current market price instead of the normal 1 pip. The decision to widen this spread will be based on the prevailing market liquidity and volatility. Each data release will be evaluated separately. This change will only affect Entry Orders and does not prevent the placing of Market Orders during these times. Our actions are designed to reflect current market conditions and to protect our clients from the possibility of extreme gap fills during periods of increased volatility.

The standard industry practice for currency dealers, including dealers on the interbank market, during fast market conditions and price gaps, is to set market levels and execute orders manually without the use of automated systems or services. The process during fast markets is typically:

  • Initially, major money center banks and other online price providers halt
     all direct dealing and their pricing engines are suspended,
  • Currency dealers analyze event and determine the correct price,
  • Prices enter market 20-30 pips wide or more,
  • Spreads in market narrow as more currency dealers enter the market.

In such an event, there may be a delay in trade execution, which may be significant, while rates are cross-referenced to ensure valid execution. Further, stops placed close to a market that has traded through the stop price are re-priced on the next best tradable price. Thereby, a specified rate order does not provide a fixed-price guarantee to the counterparty.

FX Solutions, like all currency dealers, is a "request for quote" dealer, and follows industry standards for fast market conditions. FX Solutions� clients that elect to trade during fast market conditions are responsible for losses incurred by their account because of such trading, as clients are responsible during normal trading conditions. These responsibilities are the same responsibilities that FX Solutions has with its interbank counterparties during normal and fast market conditions. FX Solutions will not be held liable for any losses due to fast or volatile markets, electronic disruption in service, service delays, incorrect information received from service vendors (i.e., quotations, news services) and/or customers (i.e., client profile data, updated data).

Unlike most of its competitors, FX Solutions' GTS platform calculates margin in real-time based on the currency pair traded. Margin required is affected by changes in the market rate. For non-Dollar based currency pairs the margin required will be converted into U.S. Dollars at the prevailing market price for that pair. For example, the margin required to place a trade of GBP 100,000 is not the same as the margin needed for a trade of US$100,000.

Once the equity in the client’s account falls below the used margin, (the margin required to maintain all existing positions), ALL POSITIONS ARE LIQUIDATED at the prevailing market rates.

In the case where a stop or limit (or entry stop or limit) is entered at the same price that would trigger a margin call, the margin call will be executed when that price is touched (or gaps through the price) and all pending orders attached to that trade will be cancelled.

A MARGIN CALL, WHEN TRIGGERED, WILL TAKE PRECEDENCE OVER OTHER ORDER TYPES. FX Solutions has implemented this policy in order to better protect clients during times of extreme market volatility.

Please be aware that this margin is marked-to-market in real time for the life of the trade, which is standard market protocol. Therefore, if the GBP/USD mid-price increased theoretically to 2.0700, the margin required to maintain the trade would be GBP 1,000 x 2.0700 or $2,070. If the price fell to 1.9500 then the required margin would decrease accordingly.

Risk Warning

Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose.

There is considerable exposure to risk in any foreign exchange transaction. Any transaction involving currencies involves risks including, but not limited to, the potential for changing political and/or economic conditions that may substantially affect the price or liquidity of a currency. Moreover, the leveraged nature of FX trading means that any market movement will have an effect on your deposited funds proportionally equal to the leverage factor. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin call within the time prescribed, your position will be liquidated and you will be responsible for any resulting losses. Investors may lower their exposure to risk by employing risk-reducing strategies such as 'stop-loss' or 'limit' orders.

There are also risks associated with utilizing an internet-based deal execution software application including, but not limited, to the failure of hardware and software and communications difficulties.

Risk Management

The Forex Market is the largest and most liquid financial market in the world.† Since macroeconomic forces are one of the main drivers of the value of currencies in the global economy, currencies tend to have the most identifiable trend patterns.

Many traders come with false expectations of the profit potential, and lack the discipline required for trading. Short term trading is not an amateur's game and is not the way most people will achieve quick riches. Simply because Forex trading may seem exotic or less familiar then traditional markets (i.e. equities, futures, etc.), it does not mean that the rules of finance and simple logic are suspended. One cannot hope to make extraordinary gains without taking extraordinary risks, and that means suffering inconsistent trading performance that often leads to large losses. Trading currencies is not easy, and many traders with years of experience still incur periodic losses. One must realize that trading takes time to master and there are absolutely no short cuts to this process.

The most enticing aspect of trading Forex is the high degree of leverage used. Leverage seems very attractive to those who are expecting to turn small amounts of money into large amounts in a short period of time. However, leverage is a double-edged sword. Just because one lot ($10,000) of currency only requires $100 as a minimum margin deposit, it does not mean that a trader with $1,000 in his account should be easily able to trade 10 lots. One lot is $10,000 and should be treated as a $100,000 investment and not the $1000 put up as margin. Most traders conduct either technical and/or fundamental analysis and then place sensible trades unfortunately, they also tend to over leverage themselves (open a position that is too large for their portfolio), and as a consequence, are often forced to exit a position at the wrong time.

†Source: Bank for International Settlements

Utilizing Stop Loss Orders

A stop-loss is an order linked to a specific position for the purpose of closing that position and preventing the position from accruing additional losses. A stop-loss order will be executed when the displayed price on GTS touches the order price. The executed price will be the order price or in the case of a fast market the order will be executed at the next displayed price. When a stop-loss order is placed on a Buy (or Long) position it is a stop-loss order to sell and close that position. A stop-loss order placed on a Sell (or Short) position is a stop-loss order to Buy and close that position. A stop-loss order remains in effect until the position is liquidated or the client cancels the stop-loss order.

As an example, if an investor is Long (Buy) USD at 120.27, they might wish to put in a stop-loss order to Sell at 119.49, which would limit the loss on the position to the difference between the two rates (120.27-119.49) should the dollar depreciate below 119.49. A stop-loss would not be executed and the position would remain open until the market trades at the stop-loss level. Stop-loss orders are an essential tool to minimize your risk in currency trading.