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Overview of trading Forex online

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How a Forex system operates in real time

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.

Up-to-date exchange rates

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 , inlike 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.

Trading online 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 1990s,  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 deposit 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.

Forex on the internet: basic steps

In general,  the individual  Forex trader is required to fulfill two steps prior to trading:

  • Register at the trading platform
  • Deposit funds to facilitate trading
Requirements vary with each trading platform, but these steps bear further discussion:

Registering

Registration is done online by the individual trader.  There are various forms used in the industry.  Some are quite simple ,  where others are longer and more time-consuming.  In part , this can be attributed to governmental or other authorities' requirements, though some Forex platforms require more information than is actually needed.  Some even require a face-to-face meeting, or to obtain hard copies of required documents such as a passport, or driver's license.

The key requirement for registration are the trader's full name, telephone, e-mail address, residence, and sometimes also the trader's yearly income or capital (equity) and an ID number (passport / driver's license / SSN / etc.).  Typically, the Forex platform is not required to run a thorough check, but rely on the registrant to be truthful.  Nevertheless, each Forex platform conducts certain routines, in order to check and verify the authenticity of the details provided.
Registrants are required to declare that funds used for trading are not in question, and are not the result of any criminal act or money laundering activity.  This is mandatory as part of a global anti-money laundering effort.

It is advised that the reader becomes familiar with Anti-Money Laundering regulations,  and the procedures associated with the prevention of this criminal activity.

Depositing funds

New registrants must deposit funds to facilitate trading.  However,  the majority of the Forex platforms today require that, in addition to funds used for actual trading, an additional amount be deposited.   Often called "maintenance margin" or "activity collateral" , its purpose is for the platform to have an additional guarantee.  Some of the platforms that require an additional deposit do pay interest on the collateral, which is "frozen" under the trader's name.
Trading Platform does NOT require any additional guarantee, and allows trading with 100% of the amount deposited. This site is able to provide these advantages because it assures "guaranteed rates and Stop-Loss". That means that there will never be any additional requirement for funds as a result of a "gap" that causes you to surpass the Stop-Loss.

Trading online

The trading platform operates 24 hours a day just as the global Forex market runs around the clock.
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.   Trading platform is a fully web-based system, which means trading can be conducted from any computer connected to the internet.   Traders are only required to log-in , ensure they have available funds to rate, or make new deposits, and commence trading.

The Trading Platform: real-time software

The main feature of any Forex trading platform is real time access to exchange rates, to deal and order making, to deposits and withdrawals, and to monitoring the status of positions and one's account.
Trading platform system user web services to continuously fetch the most current exchange rates.   The most recent data displays without the need for a page refresh.   This includes account status screens such as "My Position" , which updates continually to reflect changes in rates and other real time elements.

Transaction processing and storage

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 via brokers and dealing rooms (by phone)

Performing Forex trading via Dealing Room dealers (over the phone) requires knowledge about the way dealing rooms work , and the terminologies used in the course of trading.
At start, the client should specify whether he/she is interested in obtaining a QUOTE (in order to make a deal) or just an INDICATION.   In the case of an indication, the price given does not bind the dealer, but rather provides information about market conditions.

When asking for QUOTE , the trader must specify the currency pair and the deal amount (volume).  For example :  "Need a quote for EUR/USD  in EUR100,000"

It is wise to withold from the dealer the intended direction of the deal, specifying the pair only.   Accordingly, the dealer then provides a quote compirising two prices, buy and sell ("both sides quote"). The quote binds the dealer for the very second it is given.   If the trader does not immediately ask for execution, then the price is no longer in force.   The dealer would then tell the customer "risk" or "change" , meaning - the price quoted is no longer in force.   In such case, the trader should ask for a new price.

On the other hand , in order to make a deal, the trader must proclaim "buy" or "sell", together with the currency (orthe price).

An example:

  • The trader asks for a quote for EUR/USD
  • The dealer says "1.5010/15".
  • If the trader wants to sell EUR , he / she says "buy" (or "buy EURO", or "15").
  • If the trader wants to sell EUR , he / she says "sell" (or "sell EURO", or "10").
The moment the trader says "buy" (or "sell") he/she is bound to the deal, regardless of the market situation.