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Trading

Who trades in the Forex Market?

The Forex market, unlike the stock market, is decentralised with many participants. Until relatively recently, forex trading was largely the exclusive preserve of central banks, large financial institutions, multinational firms, investment managers, hedge funds, insurance companies and brokerage firms. The emergence of the internet, combined with the introduction of technologically advanced retail trading platforms has vastly changed the forex trading landscape, opening up this potentially lucrative marketplace to a growing number of individual retail traders.

What is a CFD?

A CFD is a Contract for Difference, meaning when trading you will not be physically purchasing any on the instruments, you activate a contract with the company in trading on the difference in value from the strike price to the closing price in which you may take either a Long or Short position.

What is a Commodity?

A commodity is mostly Raw Materials that can be Bought or Sold, for example Gold, Silver or Oil.

What is Forex?

Foreign Exchange market (Forex, FX, currency market) is an over the counter (OTC) or decentralized global market for buying and selling currencies at current or determined prices.

What is an Index (Indices)?

An Index is a collection of Stocks in one index, giving a total value on the collective stocks, as the stocks values inside the index fluctuate so does the overall value of the Index itself.

What is a pip?

A pip is the smallest unit of change in a financial instrument’s price ratio (rate of a currency pair).

What is a spread?

The spread is the difference between Bid and Ask prices.

Are there any disadvantages to trade on leverage?

While leverage enables you to control a large amount of capital with a small deposit margin, it may also expose you to outsized negative price movement.

What do "long" and "short" positions mean?

Long position – when the client is buying the asset and a short position when the client is selling the asset.

What happens to my open positions at the end of the trading day?

ProbusFX automatically rolls forward all open currency positions to the next day’s value date at the end of each business day at 23:59 GMT. Trading is typically suspended for up to one minute during the roll process.Depending on the currency pairs involved, trades will either earn or pay a small premium, depending on the interest rate differential between the two currencies.

What is a slippage?

Slippage may occur during periods of high market volatility, usually caused by important economic news. It results in your position being executed at a different rate than that you specified; closing at the next available price.

What is Margin?

Margin is an amount of the equity in your account delegated as Margin Deposit. Your trade size will determine the amount of margin needed to hold open a position. Your Margin Requirements increase as your Trade Size does.

What is leverage?

Leverage is a consequence of Margin, allowing you to place larger trades on the market. It can help you to maximise your returns but also works the same way with losses. Understanding and controlling your leverage is extremely important.

What is Swap?

A Swap is a rollover (overnight) interest for keeping your positions open overnight that can be both positive or negative.

What is a Pivot Point?”

A Pivot Point is an Indicator of potential market movement at a specific Price Level. It is calculated by an average of significant prices.

How can I manage risk in volatile markets?

Some ways to manage your risk during volatile markets is to ensure your account is sufficiently margined at all times. Several precautionary measures are recommended:
✔ Monitor the status of your open positions.
✔ Specify a stop-loss to limit downside risk.
✔ Keep your account funded in excess of your required margin.

What is "Take Profit" and "Stop Loss"?

Stop losses and take profits are both orders, which are placed in the market to close an open position. “Stop Loss” is to prevent further adverse price movement and “Take Profit” is to gain from advantageous price movement.

How do I set a stop loss or take profit?

Access the Edit Position pop up dialog: Create a Take Profit position by selecting Close at profit and specifying a triggering Rate or Amount.

Why should I place a Stop Loss (S/L)?

A Stop Loss protects you on trades that go against you, and therefore also protects your overall account balance. Markets can be volatile and it is recommended to always use Stop Loss to limit any losses.

How much money is required to open a position?

The minimum contract size that you can trade is 0.01 of a standard lot which requires a $10 margin requirement for most of the instruments. Other products might require higher margins. For full details, please see our Contract Specifications for the required margins on all our products on our website under the Trading section.

Can I go long and short at the same time?

Absolutely. ProbusFX wants to maximise its client’s flexibility to hold positions for different durations or as part of different strategies.

What is the difference between an "intraday" and "overnight" position?

Intraday positions are those positions opened anytime during the 24-hour period AFTER the close of Probus’s normal trading hours at 23:59 GMT. Overnight positions are positions that are still open at the end of normal trading hours, which are automatically rolled over by ProbusFX at competitive rates (based on the currencies’ interest rate differentials) and applied as roll points.

What is an Expert Advisor?

An EA or Expert Advisor is a custom made Algorithmic Trading Program that is pre-programed to look for certain market conditions that you run through your trading platform to either allow you to have an automated trading account or signal you when certain market conditions are met.

How do I calculate Margin?

1 / Account Leverage = Margin or Margin Percentage
1 / 50 = 0.02 or 2%

How do I calculate Leverage?

1 / Account Margin = Leverage
1 / 0.02 = 50

How do I calculate Equity?

Balance +- P/L (open positions) +- Swaps/Commotions = Equity
Ex: 10000$ + 1000$ – 50$ = 10950$

How do I calculate a value of 1 pip?

Amount of Base Currency * Pips = Value in Quote Currency
Value of 1 pip in EUR/USD= 1 Lot (100 000 €) * 0.0001= 10 USD
Value of 1 pip in USD/CHF= 1 Lot (100 000$) * 0.0001=10 CHF
Value of 1 pip in EUR/JPY=1 Lot (100 000 €) * 0.01= 1000 JPY

How do I calculate margin requirements?

Assuming Account Balance is in USD and you are trading EUR/USD

  • 1 standard lot size * Trade Size * Margin = Margin Required in Base Currency
  • 100,000 * 0.1 (10,000€) * 0.01 = 100€
  • Margin Required * Exchange Rate of Base Currency vs Account Currency = Margin Required in Account Currency
  • 100 * 1.15151 = 115.151$
How do I calculate Margin Level?

Equity / Margin (used) * 100 = Margin Level
Ex: 10,950$ / 115.15 * 100 = 9509.34%

How do I calculate Free Margin?

Equity – Margin (used) = Free Margin
Ex: 10950$ – 115.151$ = 10834.849$

How do I calculate swaps?

If Swaps are given in Points
• Pip Value * Swap Rate * Number of Nights / 10 = Swaps
• 11.5 * -8.3 * 5 / 10 = 47.725$
• If swaps are given in Pips
• Pip Value * Swap Rate * Number of Nights = Swaps
• 11.5 * -0.83 * 5 = 47.725$

How do I calculate spreads?

Bid Price – Ask Price = Spread
Ex: 1.15140 – 1.15151 = 0.00011 = 1.1 pip spread

How do I calculate Commissions?

Commission per 1 lot * Contract size = Commission in Base Currency
• 4.5 * 0.10 = 0.45€
• Commission * Base Currency vs Account Currency = Commission is Account Currency
• 0.45€ * 1.15151 = 0.52$

How do I know how much P/L will be gained by my Stop loss and Take profit before I place them?

• Strike Price = 1.15151
• Take Profit = 1.16151 = 100 Pip movement
• Stop Loss = 1.14151 = 100 Pip movement
• Pip value * Pip Movement = P/L when Stop Loss or Take Profit is triggered
• 11.5 * 100 = +-1150$

CFDs and FX are leveraged products which carry a high level of risk which can result in the loss of all capital invested.
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