FAQs: Foreign Exchange Trading

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The Foreign Exchange market is also referred to as "FOREX," "Forex," "Retail forex," or "FX". Visit "What is Forex Trading Online?" for more information.

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

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The Forex market is a true 24-hour market - at any time of day, somewhere in the world a financial center is open for business.

A benefit of Forex trading, unlike other financial markets, is that investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - 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 most traded currency, being on one side of 86.3% of all transactions. The Euro's share is second at 37%, while that of the Yen is at 16.5%.

The most popular currencies along with their symbols are shown below:

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Bid/Ask prices are affected by fluctuations caused by economic, social and political events, including interest rate changes, inflation, and political instability. FX Solutions leverages its proprietary interbank market price feed for price discovery and risk exposure. Our price feed uses algorithms to respond to changes in the marketplace within milliseconds, allowing us to maintain fixed spreads so trading clients know the transaction costs they will be paying at all times during normal market conditions.

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Margin is the collateral for a position. It allows traders to take on a loan or "leverage" their positions with a fraction of the equity needed to fund the trade. It is important to note that higher margins can increase your risk.

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A "long" position is when a trader has bought a currency at one price with the intent to sell later at a higher price. With this strategy, the trader benefits from a rise in the market. A "short" position is one in which the trader sells a currency, anticipating that it will decline in price. This strategy allows the trader to gain from the decline in the price of the currency pair.

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For a full explanation of trading terms, please visit our Forex and CFD Glossary.

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Intraday positions are positions opened anytime during a given 24-hour period and closed by the close of the trading day (17:00 Eastern Time). An overnight position is a position which stays open past the end of normal trading hours (17:00 Eastern Time). FX Solutions automatically rolls overnight positions at competitive rates to the next day's price.

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Trades held open at the end of the trading day (17:00 Eastern Time) remain open but are subject to a daily "cost-of-carry" adjustment as per standard interbank market protocol. The adjustment is based on the interest rate differential between the two currencies in the pair being traded and on the movement of spot value dates.

A trader who is long (has bought) the currency bearing the higher interest rate will generally receive a credit to their account at 17:00 Eastern Time. If they are short (have sold) the higher yielding currency, their account will be debited.

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To manage risk, traders must have position limits. This number is set relative to the money in a trader's account. Risk is minimized with FX Solutions because the trading platform will automatically generate a margin call if your equity falls below the margin required to maintain all existing positions. All open positions will be closed immediately, regardless of the size or the nature of positions held within the account.