What is forex?
Forex (Foreign Exchange) is the name given to the "direct access" trading of foreign currencies. With an average daily volume of $2 trillion U.S., forex is 46 times larger than all the futures markets combined and is the world's most liquid market. In the past, forex trading was limited largely to enormous money center banks and other institutional traders. But in just the past few years, technological innovations and the development of online trading platforms, such as that used by Friedberg Direct, allow small traders to take advantage of the significant benefits of trading foreign currencies with forex.
You can get started trading right now
If you're a trader now, or would like to become one, trading foreign currencies through Friedberg Direct has significant advantages over other types of trading.
For one thing, it's remarkably easy to get started. This is what you do. You open up a demo account with $50,000 worth of "virtual money" right now (just click here), and you can begin trading immediately, with zero risk, with live quotes and the same real-time profits and losses you would have if you were trading with real account money.
Significant advantages of forex over other types of trading
Forex is similar to the futures markets in that investors are able to control large amounts of an asset for a relatively small deposit, or margin -- but with substantial advantages. For one thing, the leverage in forex is greater than that of a typical futures contract. For an initial margin deposit of just $3,000 U.S., an investor can typically control $100,000 U.S. worth of a foreign currency (account opening minimum is $6,000 U.S. for regular account & $600 for mini). Secondly, because you access the market directly through electronic online trading you pay zero exchange fees and $0
Direct is compensated for its service through the spread between the
bid/ask prices). Thirdly, unlike futures, in forex your risk of loss is strictly limited. Trading with Friedberg Direct, you can never lose more than you have in your account. You can never have a negative equity balance. And like futures, you can roll over forex positions indefinitely.
Finally, forex is a 24-hour-a-day market that literally follows the sun around the world, from the U.S. to Australia and New Zealand to Hong Kong, the Far East, Europe and then back again to the U.S. The huge number and diversity of investors means that the Forex market is truly a global market which is generally not subject to governmental controls that may impact on more regional markets.. The unmatched liquidity, extremely low commission trading, and around-the-clock global activity make forex the ideal market for an active trader like you.
How it works
Trading forex through Friedberg Direct is remarkably easy. Everything you need to trade can be found right on the Trading Station provided by Friedberg Direct. (Open up a live trading account right now by clicking here… or a FREE demo account with $50,000 worth of virtual money by clicking here.)
In the forex market, currencies are always priced and traded in pairs. You simultaneously buy one currency and sell another, but you can determine which pair of currencies you wish to trade. For example, if you believe the value of the euro is going to increase vis a vis the U.S. dollar, then you would buy the Euro in the U.S. dollar/Euro pair. Obviously, the objective of forex currency trading is to exchange one currency for another in the expectation that the market rate or price will change so that the currency you bought has increased its value relative to the one you sold. If you have bought a currency and the price appreciates in value, then you must sell the currency back in order to lock in the profit. An open trade or position is one in which a trader has either bought/sold one currency pair and has not sold/bought back the equivalent amount to effectively close the position.
The first currency in the pair is referred to as the base currency, and the second currency is the counter or quote currency. The U.S Dollar, as the world's dominant currency, is usually considered the base currency for quotes, and includes USD/JPY, USD/CHF, and USD/CAD. This means that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The exceptions are the Euro, Great Britain pound, and Australian dollar. These currencies are quoted as foreign currency per dollars.
As with all financial products, forex quotes include a "bid" and "ask." The bid is the price at which a market maker broker/dealer is willing to buy (and you can sell) the base currency in exchange for the counter currency. The ask is the price at which a market maker broker/dealer will sell (and you can buy) the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread.
You get much lower margin requirements
The margin deposit is not a down payment on a purchase. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows you to hold a position much larger than your actual account value. The online trading platform provided by Friedberg Direct has margin management capabilities that allows you to get as much as four times the leverage of a typical futures contract. The trading platform performs an automatic pre-trade check for margin availability, and will only execute the trade if you have sufficient margin funds in your account. The system also calculates the funds needed for current positions and displays this information to you in real time.
In the event that funds in your account fall below margin requirements, the Friedberg Direct Trading Station will close all open positions. This prevents your account from ever falling below the available equity even in a highly volatile, fast moving market.
Click here to view new IDA margin
Rollovers are automatic
In the spot (cash) forex market, trades must be settled in two business days. For example, if you sell 100,000 euros on Tuesday, you must deliver 100,000 euros on Thursday, unless the position is liquidated or rolled over. As a service to you, Friedberg Direct automatically rolls over all open positions -- that is, exchanges the trade forward to the next settlement date (two business days) at 5:00 PM New York time. The swap rates are determined at the Interbank
level. In any spot rollover transaction there is a difference in
interest rates between the two currencies that will be reflected in
the overnight "loan." If the trader is long the currency with the
higher interest rate in the pair, you should gain on the spot
rollover through the premium relationship of that currency relative
to the short currency. The converse would of course be true if you
were long the currency with the lower interest rate in the pair. The
amount of the gain is determined by the interest rate differential
between the two currencies, and fluctuates day to day with the
movement of prices. Rollover fees are shown in U.S. dollars, and are
posted in the "interest column" on the Friedberg Direct Trading
Station every day at 3:00 pm New York time. For day traders that
never hold a position overnight, rollover will not affect trading.
Note: For positions that are open on Wednesday and held through 5:00
PM New York time, the amount added or subtracted to an account as a
result of rolling over a position tends to be around three times the
usual amount. This "3-Day" rollover accounts for settlement of
trades through the weekend period.
In order to receive interest, you account must be on 2% maintenance margin; otherwise you are charged on your open positions, whether long or short.
You can always request that your account be set up to have your open positions automatically liquidated at 5:00 pm, New York time, each day instead of automatically rolled over.