This is the TimeToTrade help wiki. Use the TimeToTrade Trigger Trading Technology™ to execute your trades when Price, Candle Stick, Trend Line, Volume and Technical Analysis chart conditions are met - no coding required. Trade directly in the world’s global markets. Backtest your Trading Strategies. Calculate your UK HMRC Capital Gains Tax liabilities. Manage your Investment Club.
An Introduction To Forex Trading
What is Forex?
The Foreign Exchange market, also known as “Forex”, “FX”, “Spot FX” or just “Spot” is the oldest, largest and most liquid financial market in the world, tracing its history back centuries to Babylonian times. While the global financial markets were collapsing in 2008, the FX market experienced tremendous growth, reaching more than 1.78 million transactions per day - an average daily trade volume of $3 trillion. That’s three times the stock and futures markets combined. With so many investors and so much money changing hands each day, it is the perfect market for traders who use technical analysis tools. Forex trading offers investors an excellent way to diversify their portfolios, lower volatility and reduce market risk, and being a Global market it is possible to trade Forex 24 hours a day.
How Does Forex Work?
Forex trading is the simultaneous buying of one currency and selling of another, as traders speculate the value of one currency will strengthen or weaken against the other. As such, trading is always conducted in currency pairs. The first currency in the pair is known as the ‘base’ or ‘transaction’ currency and the second is known as the ‘quote’ or ‘counter’ currency. For example, the pound and the US dollar (GBP/USD) or the US dollar and the Japanese Yen (USD/JPY). The price that is quoted corresponds to the number or quote currency that is required to buy a unit of the base currency.
You buy a currency pair if you expect the exchange rates to increase in value; you sell a currency pair if you expect the exchange rates to fall in value.
If a trader buys GBP/USD, they effectively buy British Pounds and sell US Dollars; if the trader sells GBP/USD, they sell British Pounds and buy US dollars.
Movement of currency is expressed as percentage in point, or ‘pip’ also known as ‘point’. The pip size depends on what is being traded. A pip on currency pairs is typically 0.0001, however on Japanese Yen currency pairs a pip is 0.01. For precious metals a pip on Silver is 0.0001 and a pip on Gold is 0.01.
Ways to trade currency
Unlike equity trading, Forex doesn’t take place via a centralised exchange and is instead conducted over-the-counter (OTC). Buyers and sellers trade directly with one another or through brokers, dealers and market makers, rates can therefore vary.
You can trade currencies via:
- Forex broker - “Spot Forex”
- Spread betting
- CFDs
- Currency Futures
- Options
Forex Trading Account
You trade Forex in lots. Mini lots typically start at $10,000 and increment by $10,000 typically up to $100,000. Maxi lots are based on $100,000 increments.
To buy and sell lots, you need a percentage of the lot size as a cash deposit to cover the margin requirements.
When you buy and sell a currency pair, you need a minimum margin requirement typically between 1% and 2.5% of the lot size e.g. $10,000 requires $100 cash deposit at a margin rate of 1%.
Even though you only require a small percentage to trade a Forex lot, you realistically need a cash deposit of between 5% and 10% of the lot size to cover volatility and avoid a margin call on open positions held over days or weeks.
A margin call is where the broker will ask you to deposit more money to cover the margin on a losing position.
With a minimum trade on a $10,000 GBPUSD lot you make or lose $1 for every 0.0001 change in the exchange rates; it is essential to understand the inherent leverage that comes with varying lot sizes and therefore consider carefully your lot size and the associated risk and margin requirement before opening a position.
Forex Spread Betting Account
With Spread betting, you typically bet on exchange rates increasing or decreasing with a minimum bet of £1 per 0.0001 movement; for some currencies the unit size is 0.01.
The minimum bet is typically £1 for every 0.0001 point movement in the exchange rate, therefore if you take recent volatility that saw the pound swing between 1.4300 and 1.4600 against the dollar within 24 hours, it would have resulted in a gain or loss of £300 if a minimum bet of £1 per point was placed.
Futures & CFDs
Futures and CFDs typically require about 5% to 10% of the contract size and are normally cash settled.
Options
Forex Options are typically settled by exchanging Forex Futures.
Forex Trading & Interest
If you buy a currency you get paid interest; if you sell a currency you have to pay interest. To trade a currency pair you have to buy one currency and then sell another, therefore for long term positions, you will receive interest on the currency bought and pay interest on the currency sold.
The interest rates on each currency varies; for example, if you buy Pound and Sell US Dollars, the interest rate on the Pound is higher than the Dollar, therefore you will receive more interest than you have to pay out; this can be used to generate an income on a difference between the two rates.
It has never been easier to execute your trading strategy. Our Trigger Trading Technology ® means you can now automatically execute your trades directly in the world’s global markets.
You need never miss a trading opportunity again!
Do you want to:
- buy when your technical analysis chart conditions are met? Really buy, not just get an email or sms alert?
- or sell when a support trend line is broken?
- or back-test your strategy going back as far as 30 years?
TimeToTrade's Trigger Trading Technology™ is truly game changing. It gives you a trading advantage. The power to take your trading to a new level.
Open a FREE TimeToTrade account today to:
- Trade UK, US and European Shares - apply now
- Execute trades when your Price, Candlestick, Trend Line, Volume and Technical Analysis chart conditions are met using the Trigger Trading Technology® - learn more - help video
- Email and SMS Trigger Trading™ Alerts - learn more
- Trade Off The Chart - learn more
- Back Test Trading Strategies with up to 30 years of historical data - learn more
- Create Simulated Trading Accounts to test your Trigger Trading™ Strategies - learn more
- Real time Forex, UK, European and US stock market data - learn more
- 170+ Technical Analysis and Candlestick Pattern Indicators - learn more
- All the tools you need to set up and run a successful investment club - learn more
- Manage your Portfolio and calculate UK HMRC Capital Gains liabilities and SA 108 CGT Tax Returns - learn more
- Create Trading Competitions for you and your friends - learn more
- Apply for a trading account today to get the Live Account Features - apply now
Apply now to try our superb platform and get your trading advantage.
The information and data provided is for educational and informational purposes only. Interpretation and use of the information and data provided is at the user's own risk. All information and data on this website is obtained from sources believed to be accurate and reliable. However, errors or omissions are possible due to human and/or mechanical error. All information and data is provided "as is" without warranty of any kind. We make no representations as to the accuracy, completeness, or timeliness of the information and data on this site and we reserve the right, in its sole discretion and without any obligation, to change, make improvements to, or correct any errors or omissions in any portion of the services at any times. Past performance is not a guarantee of future results. Trading carries a high level of risk to your capital and can result in losses that exceed your deposits. It may not be suitable for everyone so please ensure you fully understand the risks involved.
All services are provided by TigerWit Limited. TimeToTrade is a trading name of TigerWit Limited (a company registered in England and Wales under number 9479466). Our Registered address is TigerWit, 7th Floor, Augustine House, 6A Austin Friars, London, EC2N 2HA, England. TigerWit Limited is authorised and regulated by the Financial Conduct Authority number 679941.
The trading services offered by TigerWit Limited are not available to residents of the United States and are not intended for the use of any person in any country where such services would be contrary to local laws or regulations. Subscriptions to TimeToTrade products are available if you are not eligible for trading services.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investor accounts lose money when trading spread bets with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. All clients should be aware that trading involves risk.
TimeToTrade is a Sensatus product.