Marketiva FAQs
What is Foreign Exchange?
The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is
the largest financial market in the world, with a daily average turnover of
approximately US$1.5 trillion. Foreign Exchange is the simultaneous bu ying of
one currency and selling of another. The world's currencies are on a floating
exchange rate and are always traded in pairs, for example Euro/Dollar or
Dollar/Yen.
Where is the central location of the FX Market?
FX Trading is not centralized on an exchange, as with the stock and futures
markets. The FX market is considered an Over the Counter (OTC) or 'Interbank'
market, due to the fact that transactions are conducted between two counterparts
over the telephone or via an electronic network.
Who are the participants in the FX Market?
The Forex market is called an 'Interbank' market due to the fact that
historically it has been dominated by banks, including central banks, commercial
banks, and investment banks. However, the percentage of other market
participants is rapidly growing, and now includes large multinational
corporations, global money managers, registered dealers, international money
brokers, futures and options traders, and private speculators.
When is the FX market open for trading?
A true 24-hour market, Forex trading begins each day in Sydney, and moves around
the globe as the business day begins in each financial center, first to Tokyo,
then London, and New York. Unlike any other financial market, investors can
respond to currency fluctuations caused by economic, social and political events
at the time they occur - day or night.
What are the most commonly traded currencies in the FX markets?
The most often traded or 'liquid' currencies are those of countries with stable
governments, respected central banks, and low inflation. Today, over 85% of all
daily transactions involve trading of the major currencies, which include the US
Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the
Australian Dollar.
Is Forex trading capital intensive?
No. AlaronFX requires a minimum deposit of $5,000. AlaronFX allows customers to
execute margin trades at up to 100:1 leverage. This means that investors to
execute trades up to $100,000 with an initial margin requirement of $2000.
However, it is important to remember that while this type of leverage allows
investors to maximize their profit potential, the potential for loss is equally
great. A more pragmatic margin trade for someone new to the FX markets would be
5:1 or even 10:1, but ultimately depends on the investor's appetite for risk.
What is Margin?
Margin is essentially collateral for a position. If the market moves against a
customer's position, AlaronFX will request additional funds through a "margin
call." If there are insufficient available funds, AlaronFX will immediately
close out the customer's open positions.
What does it mean have a ' long' or 'short' position?
In trading parlance, a long position is one in which a trader buys a currency at
one price and aims to sell it later at a higher price. In this scenario, the
investor benefits from a rising market. A short position is one in which the
trader sells a currency in anticipation that it will depreciate. In this
scenario, the investor benefits from a declining market. However, it is
important to remember that every FX position requires an investor to go long in
one currency and short the other.
What is the difference between an "intraday" and "overnight position"?
Intraday positions are all positions opened anytime during the 24 hour period
AFTER the close of AlaronFX's normal trading hours at 4:30pm EST. Overnight
positions are positions that are still on at the end of normal trading hours
(4:30pm EST), which are automatically rolled by AlaronFX at competitive rates
(based on the currencies interest rate differentials) to the next day's price
What is the difference between liquidity and volatility?
Volatility is a statistical measure of a market's price movements over time.
Volatility is high if prices change dramatically in a short period of time.
Liquidity is a market condition that allows large transactions to be absorbed by
the marketplace with little or no effect on price stability. With a daily
trading volume that is 50x larger than the New York Stock Exchange, there are
always broker/dealers willing to buy or sell currencies in the FX markets,
thereby assuring liquidity.
How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions,
most importantly interest rates, inflation and political stability. Moreover,
governments sometimes participate in the Forex market to influence the value of
their currencies, either by flooding the market with their domestic currency in
an attempt to lower the price, or conversely buying in order to raise the price.
This is known as Central Bank intervention. Any of these factors, as well as
large market orders, can cause high volatility in currency prices. However, the
size and volume of the Forex market makes it impossible for any one entity to
"drive" the market for any length of time.
How do I manage risk?
The most common risk management tools in FX trading are the limit order and the
stop loss order. A limit order places restriction on the maximum price to be
paid or the minimum price to be received. A stop loss order ensures a particular
position is automatically liquidated at a predetermined price in order to limit
potential losses should the market move against an investor's position*. The
liquidity of the Forex market ensures that limit order and stop loss orders can
be easily executed.
What kind of trading strategy should I use?
Currency traders make decisions using both technical factors and economic
fundamentals. Technical traders use charts, trend lines, support and resistance
levels, and numerous patterns and mathematical analyses to identify trading
opportunities, whereas fundamentalists predict price movements by interpreting a
wide variety of economic information, including news, government-issued
indicators and reports, and even rumor.
The most dramatic price movements however, occur when unexpected events happen.
The event can range from a Central Bank raising domestic interest rates to the
outcome of a political election or even an act of war. Nonetheless, more often
it is the expectation of an event that drives the market rather than the event
itself.
How often are trades made?
Market conditions dictate trading activity on any given day. As a reference, the
average small to medium trader might trade as often as 10 times a day. Most
importantly, by not charging commission, AlaronFX customers can take positions
as often as necessary without worrying about excessive transaction costs. How
long are positions maintained?
As a general rule, a position is kept open until one of the following occurs: 1)
realization of sufficient profits from a position; 2) the specified stop-loss is
triggered; 3) another position that has a better potential appears and you need
these funds. FOREX
|
|
|
