This FAQ was prepared by the forum moderators on the basis of analyzing the questions most frequently asked by beginners. This section is going to be further extended, updated and developed, so please do not be hard on it.
Greetings, beginner!
Where you are and why it is interesting and useful.
You are on one of the largest and most attractive forums for traders. Just like other traders, we derive money from everything, from communication as well. Under the auspices of our general partner InstaForex broker our forum accrues bonuses for socializing which can be employed in trading. Thus, you will be able to plunge into the world of real trading while not risking a cent! Please find more information here.
So, let us introduce ourselves, tell you about our occupation, dwell upon the points discussed on the forum and explain you why it is helpful to you. We are traders, i.e. people earning from fluctuations of currencies', stocks', precious metals' rates and those of other assets. We do not have any top managers or directors regulating us and we enjoy the opportunity to work at any part of the world – the only thing necessary is access to the Internet. We decide on our working time ourselves: we can work either round-the-clock or just 1 hour a day, not on Sundays and Saturdays however. These days we, as all people, have fun and relax.
Our work is very simple: we buy some asset (for example, some euros for dollars), wait until the euro rate gets higher and then sell this asset, making profit thus. As you can see, the scheme is just the same, as in most business: to buy for the least price possible, to sell for the highest price possible. Yet in our case the scheme may well be the other way round – to sell first (if you think the price has hit its high) and then buy it out later, for a lower price with some profit. Most of us operate on Forex; currencies move both daily and nightly and their movements are rather amplifying which makes it possible to earn more.
Let us move to our working terms and their definitions.
FOREX (ForEx – foreign exchange) is a global financial market on which contracts are unceasingly made on currency supplies. In other words, this market is comparable to a giant currency exchange point, yet functioning in compliance with the same principles as the one round the corner from you.
For instance, you exchanged you honestly earned 4000 ****** rupees for 100 US dollars, expecting the US dollar to go up, and in some time (a week, a month, a year) your 100 US dollars will already cost 4400 rupees. The difference is obvious.
The same happens on Forex with the only difference: all these processes (one currency growing against another) are more explicit and faster thanks to a marginal leverage you employ in your work. For example, if today you buy 10000 euros for USD 1.26 per one euro and then sell it, you will have a profit of USD 200. It is quite clear that no exchange point would ever yield such a result.
The profit you get on Forex is calculated on the basis of points one currency gains (loses) versus the other. These points are called pips: PIP = Percentage In Point. A pip is the least possible change in a currency rate, as a rule 0,0001 of the whole. Thus, the rate of the euro against the US dollar can be expressed as 1.2758.
The final amount you earned depends also on a lot you opened a deal with: the bigger the lot is, the more profit you get.
2. What is the working schedule of Forex? Are there days-off?
Forex functions round-the-clock. There are days-off of course - usually starting at 01:00-03:00 (GMT+4) Friday to Saturday night and ending at 00:00-03:00 Sunday to Monday night. Time of regular work on Forex may differ excluding the abovementioned periods. Yet it should be remembered that there are several trading sessions on Forex as this is an international market.
1. Asian: from midnight to noon
2. European: from 9:00 to 18:00
3. American: from 16:00 to 01:00
So, in this connection, there are sometimes periods when due to some internal national factors a session either stands still of is half functional. Such periods include Christmas and the US Independence Day.
Additionally, trading sessions partially overlap, which is the source of some discrepancies on the one hand, but an opportunity to earn in the tipping points (for instance, at Asian session moving to European one or at European session moving to American one) on the other hand.
But the only thing that can be stated undoubtedly is that you should work when you want to do it. Remember, the market is always there for you…
3. What is lot, margin, leverage, spread, swap etc.?
Strictly speaking, a lot is money you risk at making a deal. For example, if you buy up to 1000 pounds for 1520 American dollars you do not risk but several dollars and you can earn nothing but several dollars as well. This is 1:1 leverage.
As to 1:1000 marginal leverage, you can then buy with your 1520 dollars as much as 100 000 pounds and consequently your potential profit (as well as your potential loss) is several hundreds dollars.
So, putting it all in simple terms, the more the leverage is, the bigger lot you can operate, the more you can earn and the more you can lose.
Spread – you want to buy something for 1000 US dollars, but your buyer bids just 900 US dollars. And these 100 dollars are what spread is: the difference between the buy and sell prices. You can buy a pound for 1.5290 dollars only to sell it just for 1.52987 dollars. Spread is considered to be the profit of the broker you chose to trade with.
Spread – the difference between the Ask price and the Bid price. Both prices are shown in the terminal.
Swap is a charge taken from you for dragging your opened position into the following working day over midnight in accordance with the spot market specific character. Let us take an example. You bought euros for dollars, but you closed your deal only the following day. Logically, to prolong your deal to the following day your broker is to give you a credit at some bank in US dollar at the US bank rate and also to take debit in euros (that you bought) at the ECB rate.
So, you have your dollars charged an interest – you sold them, i.e. you borrowed them to sell. At the same time the interest is credited onto your euros – you bought them.
Swap is the difference between the interests + percent charged by the broker for his work; the amount taken for dragging an opened position into another day. In this case the swap is positive, as the interest rate of the ECB exceeds that of the US Bank. Yet if you sold euro for dollars, you would have a vice versa result…
To conclude: Swap (Roll-Over, Over-Night) is accrued or charged when an opened position is carried to the following working day in accordance with the difference between the bank interest rates of the base currency and the second currency in the pair. Every day. 7 days a week. Due to Sunday and Saturday being non-working days, a tripled swap for them is credited on Wednesday-Thursday night.
You can see the history for swap accrual in the terminal: Market review – Symbols – Parameters. Swap sizes and ways of calculating them are represented there.
Most spreads are accrued in percentage points. Calculate the cost of one point with the chosen lot size and multiply it by the value in the table. This is the sum for 24 hours.
3.1. How does trading on cent account differ from trading on usual accounts? What cent accounts are meant for?
Cent accounts (those with funds reflected in US cent or euro cent) are practically the same as traditional accounts. The only otherness is the minimum lot volume.
It is a well known fact that 0.01 lot (the standard lot is 100 000) yields on average 10 cent per point. It is really much for a deposit of just USD 1-10. That is why cent accounts where 1 point equals 1 cent were created.
In other words, your 10 dollars will be reflected in your account as 1000 cent which is more than enough for perfecting your technique or just having fun… Do not forget about InstaForex bonus program.
Additionally, one should take into account that InstaForex Company has always been beginners-friendly and so it restricted the market lot to 10 000.
Taking into consideration favourable trading terms InstaForex Company offers for traditional accounts, there is no need to open cent account with it... Unless that you want more confidence in operating big sums.
You can download the terminal and open a demo account not risking a cent of your money. Open demo account.
Once you opened a real account you start earning (or losing) your own funds. Open real account.
Take advantage of a training video, revealing many important aspects of trading.
You can have as many accounts, both real and demo, as you wish. But make sure you meet the requirement: your real trading account cannot be referally linked to your another real account (or that of your relative) with the same broker (within the framework of the Partnership programme). In such case the accounts are blocked without any grounding.
It is quite clear that a trader should start with trading on a demo account to get familiar with the terminal.
InstaForex Company, just like many other data centres, offers its clients MetaTrader 4.0 by MetaQuotes Software Corp. Please find the documentation of the terminal here or press F1 button for terminal help.
5. Opened a real account, downloaded and installed the terminal? What's next??
After you installed the terminal (MetaTrader 4.0, same as InstaTrader 4.00), please log in to your trading account:
Main menu –> File –> Log in –> Enter login and password sent to your after the account registration –> Choose the preferred server (usually, any server from the list is suitable except for Demo Server: it is not for real accounts).
If No Connection error message emerges, press the Scan button in Open account –> Trading servers and examine the result. "n/a" means that the server is unavailable, so choose another one.
And remember, servers for real trading accounts and for demo accounts are different! So make sure you set the correct server opening an account.
With just a dollar one has every chance to boost it to a figure with 3-4 zeroes for rather short time. However, risks are quite high.
Moreover, being supported by InstaForex Company, this forum provides a great opportunity to start trading on Forex without any investments with bonuses which are credited to your real trading account for conversing on this forum. So, there is no need to deal with a demo account.
The details of the bonus programme are on the following page: Bonus for posting FAQ.
If you lack time to carefully examine the information represented on the abovementioned page, you can take into consideration the following criteria of choosing a broker:
Registration documents and references to regulating bodies;
Precise quotations and competitive spreads (commissions);
Trading with guaranteed execution of pending orders (so-called Instant Execution);
A modern trading platform, a wide range of trading tools, convenient working conditions;
A free (demo) account;
A possibility to carry out the technical analysis or export data to external technical analysis systems;
Reliable functioning and mild requirements for the computer/Internet connection speed;
Round-the-clock news support for clients available in their trading terminals;
Daily analytical reviews of currency, stock, indices and metals markets;
8. How to interpret the price that is declining in the graph?
It means that the rate of the base currency of a pair (for example, EURUSD) is dropping in comparison to the quote currency. So, the euro (single European currency) is getting cheaper as compared to the US dollar.
Base currency is the one which is the first in a pair – EURusd;
Quote currency is the second in a pair – eurUSD.
And on the contrary, when the price line is up, the rate of the base currency versus the quote currency is growing.
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Q&A for the ones just starting their way
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1. What is FOREX?
