Forex Trading FAQ's
iFOREX offers online trading for a wide range of financial assets, including Shares, Indices, Commodities and Currencies, in the forms of CFDs, Forex and Binary Options. In CFDs and Forex, investors have the ability to profit from the fluctuations in the price of a financial asset, by buying it cheap and selling it at a higher price or vice-a-versa. Most investors take advantage of the optional Leverage feature, which allows them to obtain large exposure for a relatively small initial deposit. The high degree of leverage that is obtainable in the trading of CFDs and Forex can work both against you as well as for you.
- What is a CFD?
- What is Forex?
- How does CFD and Forex trading work?
- What are the Market trading hours?
- What tools do I need to trade online?
- How old do I need to be to trade?
- What is Leverage?
- What is a Pip?
- What is a Spread?
- What does going "long" and "short" mean?
- Does the Forex market have a central location?
- How are prices determined?
- Are orders executed even if the underlying market is closed?
- Are there any conditions that can affect the rate at which my Market Orders are executed?
- Can I place Limit Orders when the market is closed?
- What are the costs for opening & closing deals on CFDs thru iFOREX?
- What is the validity of a Spot transaction and what is Rollover in the Forex markets?
- What happens if a CFD position remains open overnight?
- What are Binary Options?
- What is a CALL option?
- What is a PUT option?
- What does ‘in-the-money’ mean?
- What does ‘out-of-the-money’ mean?
- How much can I lose if the investment I made turns out wrong (out-of-the money)?
- What happens if my option expires at the Option Rate (Strike Price)?
- How much do I need to invest on a trade?
- What return will I receive for a successful investment?
- What options can I trade?
- What is an underlying asset?
- What is the expiry time?
- What is the Time Zone of the expiry time?
A: A CFD, or Contract for Difference, is an agreement between two parties to exchange the difference between the opening price and closing price of a contract. CFDs are derivatives products that allow you to trade on live market price movements without actually owning the underlying instrument on which your contract is based. You can use CFDs to speculate on the future movement of market prices regardless of whether the underlying markets are rising or falling. You have the opportunity to sell and profit from falling prices, or buy and profit from rising prices. Moreover, with our vast variety of markets, you can gain exposure to markets you may not have had access to before. We offer CFDs on shares, indices, and commodities.
Q: What is Forex?
A: Forex is a shortened term used for ‘Foreign Exchange’. It is the process of buying and selling currencies. The foreign exchange market is the biggest and most liquid financial market in the world. The market operates 24 hours around the clock from Sunday night through Friday and comprises central banks, currency speculators, organizations, governments, retail investors and international investors. Over the years, the size of the Forex market has been constantly increasing. According to the Bank for International Settlements’ (BIS) 2013 Triennial Survey of global FX market volumes, the average daily volume in the global Forex markets was estimated at $5.345 trillion, 34% higher in than the $3.971 trillion in April 2010 ($3.21 trillion daily in April 2007 and $1.7 trillion in 1998).
Q: How does CFD and Forex trading work?
A: Forex is traded in currency pairs while CFD’s are commonly a financial instrument that is valued in a specific currency. Common currency pairs are the Euro/US Dollar (EUR/USD), US Dollar/Japanese Yen (USD/JPY), Great British Pound/US Dollar (GBP/USD), Euro/Japanese Yen (EUR/JPY) and Australian Dollar/US Dollar (AUD/USD). You can buy and sell each currency or financial instrument.
Q: What are the Market trading hours?
A: Normally, during the European and North American winter time, weekly activity begins on Sunday at 22:05 GMT continuously until Friday 21:00 GMT. During the Day Light Saving times in these regions, the weekly market activity begins on Sunday at 21:05 GMT and ends on Friday at 20:00. Market activity hours may vary due to public holidays or due to unusual liquidity conditions which may arise from exceptional global events. Opening or Closing times may also be altered by iFOREX due to liquidity and risk management considerations. Please be advised that while most of the instruments are traded on a 24 hour basis without interruption, some instruments, mainly shares and indices, have special Trading Hours.
Q: What tools do I need to trade online?
A: To be able to trade you only need a device with an internet connection and a funded trading account. In addition, we strongly recommend you to be equipped with Forex/CFD’s or other financial education and trading tools to help you minimize the risks in the market.
Q: How old do I need to be to trade?
A: You must be over the age of 18 to trade.
Q: What is Leverage?
A: Leverage is used to significantly increase your purchasing power. No other market gives you so much liquidity and leverage at the same time. On some instruments, iFOREX provides a leverage of up to 400:1. This means that with a deposit of $100, you can trade with up to $40,000.
Q: What is a Pip?
A: In financial markets, specifically in the Forex market, pip (percentage in point) is a unit of change in an exchange rate of a currency pair. Most major currency pairs are priced to four decimal places, and a pip is one unit of the fourth decimal point: for dollar currencies this is to 1/100th of a cent.
Q: What is a Spread?
A: The spread is the difference between the BUY price and the SELL price of two instruments. For example, if the EUR/USD is trading at 1.3100 (buy) and 1.3098 (sell), then the spread is 2 pips.
Q: What does going “long” and “short” mean?
A: Going “long” is when a trader buys an asset expecting its value to rise. This is also called opening a long position. Going “short” or opening a short position, is when a trader sells an asset, expecting its price to decline so it can be bought back in the future at a lower price
Q: Does the Forex market have a central location?
A: Unlike the equities market, the Forex market does not have a central location. Transactions take place over the internet or phone which is why the market is available 24 hours a day.
Q: How are prices determined?
A: There are various ways prices can change. Economic and political conditions usually affect the value of an asset, along with interest rates, inflation, and supply and demand.
Q: Are orders executed even if the underlying market is closed?
A: No. iFOREX does not execute orders during off-hours.
Q: Are there any conditions that can affect the rate at which my Market Orders are executed?
A: Yes, during market conditions that are characterized by high volatility or communication latency, and due to the time it takes for an order to be executed, market orders may sometimes be executed at a different rate than requested.
Q: Can I place Limit Orders when the market is closed?
A: Yes. Even when the market is closed, it is possible to add, change and remove Limit Orders on all instruments.
Q: What are the costs for opening & closing deals on CFDs thru iFOREX?
A: iFOREX does not charge any fee or commission for opening & closing deals on CFDs. The clients’ costs are derived from the spread - this is the difference between the buy price and the sell price, which is always displayed on your trading screen. Overnight financing applies where applicable.
Q: What is the validity of a Spot transaction and what is Rollover in the Forex markets?
A: CFD are exposed to overnight financing. When you hold a CFD position overnight your CFD position may consequently be subject to a credit or debit, calculated on the basis of the relevant Inter-Bank Offer Rate for the currency in which the underlying instrument is traded, plus or minus a mark-up, depending on the type of position you hold (Long/Short). For more information you can check our Trading Conditions.
Q: What happens if a CFD position is held open overnight?
A: CFD products such as Future based Indices and/or Commodities are open until the expiration date of its underlying asset, and are closed upon expiration. CFDs based on these products are not rolled over and iFOREX doesn’t charge any rollover premiums or other overnight fees for these products. Unlike the Index/Commodity based CFDs, CFDs of Shares (Stocks) are exposed to overnight financing. When you hold a Stock CFD position overnight your CFD position may consequently be subject to a credit or debit, calculated on the basis of the relevant Inter-Bank Offer Rate for the currency in which the underlying share is traded, plus or minus a mark-up, depending on the type of position you hold (Long/Short). For more information you can check our Trading Conditions
Q: What are Binary Options?
A: Binary Options are a simple and exciting method of trading the financial markets, based on the determination of whether the price of an asset (such as a currency pair, commodity, stock index or share) will close ABOVE or BELOW the current price within a set time period. Binary options are easy to execute, fun to trade and potentially highly profitable.
Q: What is a CALL option?
A: You want to buy a CALL option if you think the price of an asset will close ABOVE the current rate upon expiration.
Q: What is a PUT option?
A: You want to buy a PUT option if you think the price of an asset will close BELOW the current rate upon expiration.
Q: What does ‘in-the-money’ mean?
A: You are ‘in-the-money’ if your speculation of an asset’s price is correct at the time of expiry.
Q: What does ‘out-of-the-money’ mean?
A: You are ‘out-of-the-money’ if the market moves in the opposite direction from your prediction of an asset’s price at the time of the expiry.
Q: How much can I lose if the investment I made turns out wrong (out-of-the money)?
A: You cannot lose more than the amount you chose to invest. In addition, some options pay you back 10% of your investment even if you were wrong.
Q: What happens if my option expires at the Option Rate (Strike Price)?
A: If the expiration rate of your option is exactly the same as your option rate, you are considered “At-the-money”. In this specific situation you will be refunded 100% of your initial investment.
Q: How much do I need to invest on a trade?
A: You can trade any amount between $10 and $1000 depending on your confidence level and risk tolerance.
Q: What return will I receive for a successful investment?
A: If your prediction is correct (‘in-the-money’) you will receive the payout established for that particular asset and time period—generally 70%-92% of the value of the trade.
Q: What options can I trade?
A: iFOREX offers over 100 assets that you can open binary option trades on. This includes: EUR/USD, GBP/USD, USD/CHF, GBP/JPY, AUD/USD, EUR/JPY, Gold, Oil, US 500 and many more.
Q: What is an underlying asset?
A: The underlying asset is the financial instrument (e.g. shares index, commodity or Forex pair) on which an option's price is based.
Q: What is the expiry time?
A: The expiry time is the time and date at which an option expires. The time to expiration varies between the different options. Fixed Expiration Options are the standard High/Low options which offer expirations in the coming hours, while Turbo Options offer a very short time expirations of 5 minutes, 2 minutes or 60 seconds, to be chosen according to each trader’s preferences. Binary Options’ transactions are executed “in Market Rates”, meaning in the price in effect available on the market as indicated on our servers at the time the order is placed, provided that it is similar to the price displayed in the platform, or otherwise declined. After the expiration, our trading systems calculate your return according to the last rate which was available prior to the expiration time and if required, your account is automatically credited accordingly.
Q: What is the Time Zone of the expiry time?
A: The time zone of the expiry time is set at GMT.
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