FAQs: Foreign Exchange Trading

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The Foreign Exchange market is often referred to as "FOREX," "Forex," "Retail forex," or "FX." The Forex market has been available to retail traders since 1999. It is the world's largest financial market, with an average volume of $3.2 trillion per day. Comparing that to the $50 billion traded daily by the New York Stock Exchange you can easily see how enormous Forex really is. (Source: Bank for International Settlements, September 2007)

Please note: In the off-exchange, also called the over-the-counter market, a retail customer trades directly with a counterparty and there is no exchange or central clearing house to support the transaction.

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Forex is a true round-the-clock market - at any time of day, somewhere in the world, a financial center is open for business. Banks and other institutions exchange currencies every hour of the day and night with generally only minor gaps on the weekend. Forex trading begins at 14:15 Eastern Time on Sunday, when markets open in Sydney and Singapore. At 19:00 Eastern Time the Tokyo market opens, followed by London at 2:00 Eastern Time. Finally, New York opens at 8:00 Eastern Time and closes at 17:00 Eastern Time - creating a seamless 24-hour market.

An advantage of Forex trading is that, unlike in other financial markets, investors are able to respond to currency fluctuations that result from economic, social or political events right away, day or night. FX Solutions' trading hours are 17:15 Eastern Time Sunday to 16:30 Eastern Time Friday.

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The Dollar is the world's most heavily traded currency, being a part of 86.3% of all transactions. The Euro comes in second at 37%. The Yen is at 16.5%.

The most popular currencies and their symbols are shown below:

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Margin is the collateral available for a position. It allows traders to "leverage" their positions (take a loan) with only a fraction of the equity that would be necessary to fund the trade. Important caution: higher margins may significantly increase risk.

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With a "long" position, a trader has bought a currency at a specific price with the intention of selling it later on at an increased price. This strategy enables the trader to benefit from a rising market. With a "short" position, the trader has sold a currency, expecting its price to decline. This strategy enables the trader to gain when the price of the currency pair has dropped.

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For a full explanation of important trading terms, please visit our online Forex Glossary.

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"Intraday" refers to a position that was opened during a given 24-hour period, then closed by the end of that trading day (i.e. at 17:00 Eastern Time). "Overnight" refers to a position that remains open after the end of normal forex currency trading hours (again, 17:00 Eastern Time). FX Solutions will automatically roll overnight positions to the following day's price, at always competitive rates.

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As per standard interbank market protocol, trades remaining open at the close of the forex trading day (i.e. 17:00 Eastern Time) do stay open but are charged a daily "cost-of-carry" adjustment. The adjustment is based on the interest rate differential between the two currencies in the given trade, as well as on the movement of spot value dates.
Generally a trader who is in a long position (has bought) the currency with the higher interest rate will receive a credit to his or her currency trading account at 17:00 Eastern Time. If in a short position (have sold) the higher-interest-rate currency, the account will be debited.

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Foreign exchange trading prices fluctuate with events in the economic, political, and social spheres, from interest rate changes and inflation to political instability, any of which can result in relevant forex news. FX Solutions leverages its proprietary interbank market price feed for price discovery and risk exposure. This price feed uses advanced algorithms to respond to marketplace changes in milliseconds. This allows us to maintain fixed spreads; in this way FX Solutions' forex day trading clients will always know their transaction costs during normal market conditions.

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In order to manage risk, a trader needs to set position limits relative to the amount of money in his or her trading account. With FX Solutions, your risk is minimized, as our GTS trading platform generates a margin call automatically whenever your equity dips below the margin necessary to maintain all your existing positions. In this circumstance, all your open positions are closed immediately, no matter the nature or the size of the positions your account is holding.