Forex Trading Mechanics
Making a Trade
First, the trader should determine whether they want to buy or sell. If they want to enter a short order - whereby they will profit if the exchange rate falls - they simply need to click on the SELL rate. The opposite holds true for traders who enter buy orders: they can simply click on the BUY rate, and thus will profit if the exchange rate goes up.
Spreads
Just like in all markets, there are two prices for every currency pair. The difference between these two prices is the spread, or the cost of the trade. In this example, the spread is 2.5 pips. On an FXCM Asia account, a pip on the EUR/USD currency pair is worth US$1. See typical spreads offered by FXCM Asia
Margin
The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit. The margin requirement allows traders to hold positions much larger than the account value. FXCM Asia's online trading platform has margin management capabilities, which allow for variable leverage up to regulatory limits. Learn more about margins
Rollover Interest
Traders holding positions for more than one day will receive or pay the interest difference between the two currencies in the pair they are trading. For example, if the current interest rate in the UK is 2.5% and in the US it is 1.7%, then if a trader has bought GBP/USD he will receive rollover interest equivalent to a daily equivalent of the 0.8% difference. If he has sold GBP/USD he will have to pay a similar rate. Though daily interest is tiny, leverage can make this interest significant. More on rollover