Leverage | Online Forex Guide

As rates change so rapidly, any Forex software must display the most up-to-date rates. To accomplish this, the Forex software is continuously communicating with a remote server that provides the most current exchange rates. The rates quoted, unlike traditional bank exchange rates, are actual tradable rates. A trader may choose to “lock in” to a rate (called the “freeze rate”) only as long as it is displayed.

Save Transactions

As soon as a transaction is executed, the relevant data is processed securely and sent to the data server where it is stored. A backup is created on a different server farm, to ensure data integrity and continuity. All of this happens in real time, with no human intervention.

Trading Platforms

Leverage

Leveraged financing is a common practice in Forex trading, and allows traders to use credit, such as a trade purchased on margin, to maximize returns. Collateral for the loan/leverage in the margined account is provided by the initial deposit. This can create the opportunity to control USD 100,000 for as little as USD 1,000.

There are five ways private investors can trade in Forex, directly or indirectly:

The spot market
Forwards and futures
Options
Contracts for difference
Spread betting

Please note that this book focuses on the most common way of trading in the Forex market, “Day-Trading” (related to “Spot”). Please refer to the glossary for explanations of each of the five ways investors can trade in Forex.

A spot transaction

A spot transaction is a straightforward exchange of one currency for another. The spot rate is the current market price, which is also called the “benchmark price”. Spot transactions do not require immediate settlement, or payment “on the spot”. The settlement date, or “value date”, is the second business day after the “deal date” (or “trade date”) on which the transaction is agreed by the trader and market maker. The two-day period provides time to confirm the agreement and to arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.

Risks

Although Forex trading can lead to very profitable results, there are substantial risks involved: exchange rate risks, interest rate risks, credit risks and event risks.

Approximately 80% of all currency transactions last a period of seven days or less, with more than 40% lasting fewer than two days. Given the extremely

short lifespan of the typical trade, technical indicators heavily influence entry, exit and order placement decisions.

Online foreign exchange trading occurs in real time. Exchange rates are constantly changing, in intervals of seconds. Quotes are accurate for the time they are displayed only. At any moment, a different rate may be quoted. When a trader locks in a rate and executes a transaction, that transaction is immediately processed; the trade has been executed.

Trading on Forex platforms

The internet revolution caused a major change in the way Forex trading is conducted throughout the world.
Until the advent of the internet-Forex age at the end of the 1990’s, Forex trading was conducted via phone orders (or fax, or in-person), posted to brokers or banks. Most of the trading could be executed only during business hours. The same was true for most activities related to Forex, such as making the deposits necessary for trading, not to mention profit taking. The internet has radically altered the Forex market, enabling around the clock trading and conveniences such as the use of credit cards for fund deposits.

The trading platform operates 24 hours a day just as the global Forex market runs around the clock. Etoro News
However, many online Forex market makers require the download and installation of software specific to their own trading platform. Consequently, accessibility is limited to those terminals that have the software. Since Forex trading is borderless, and may be performed at any given time, it is obviously advantageous to have access to trading from as many locations as possible.