CFD Trading Conditions

With Finotec, you can trade CFDs on 7 major stock indices from 5 different countries (USA, France, Germany, United Kingdom and Israel). To learn about the CFD Trading conditions offered at Finotec – including spreads, trading hours, leverage and margin requirements, minimum and maximum size contract – take a look at the table below.

Leverage

Please note that with Finotec, CFDs on indices may be traded on a 5% margin basis (20:1 leverage). This means that you need only invest 5% of the transaction size as collateral.
* Refers to the minimum/maximum size contract available at Finotec.
** Refers to the cost of 1 pip for a minimum transaction.
*** Time is according to GMT (EST=GMT-5)
CFD (Contract for Difference) is a contract defined as an agreement for the difference between the opening and the closing price of a financial instrument of a traded asset – in this case stock indices. CFDs allow investors to trade stock indices on margin and are a great way to take part in the financial market. With CFDs, short selling stock indices is as easy as buying stock indices.
This type of contract gives you access to real-time price variations and values of world indices without having to actually own them. CFDs are an ideal instrument for hedging as well as for speculating with low margin requirements.

Rollover

On the day of the rollover, the transaction is closed out at a middle rate between the last bid/ask prices and immediately reopened for a new middle rate. This entails that on rollover days, the client pays half of the spread.

Cashing in on Price Movements

Trading Forex is exciting business. The market is always on the move, and every
tiny shift in currency rates can mean profits and losses of hundreds and even
thousands of dollars!
 
Let’s demonstrate how that can happen:
In general, the eight most traded currencies on the Forex market are:
 
USD U.S. Dollar
EUR Euro
GBP British Pound
JPY Japanese Yen
CAD Canadian Dollar
CHF Swiss Franc
NZD New Zealand Dollar
AUD Australian Dollar

Forex trading is always done in pairs, since any trade involves the simultaneous
buying of a currency and selling of another currency. The trading revolves around
18 main currency pairs. These pairs are:

USD/CAD EUR/JPY
EUR/USD EUR/CHF
USD/CHF EUR/GBP
GBP/USD AUD/CAD
NZD/USD GBP/CHF
AUD/USD GBP/JPY
USD/JPY CHF/JPY
EUR/CAD AUD/JPY
EUR/AUD AUD/NZD
 
When buying or selling a currency pair, each pair has its own Bid/Ask rate, for
example:
 
Pair               Bid  Ask
EUR/USD 1.5420 1.5422

Bullionguru.com

Forex Bsic (Update 2)

Intro: Why Forex?


If you are reading this guide, you have most likely taken some sort of interest in
the Forex market. But what does the Forex market have to offer you?
Accessibility – It’s no wonder that the Forex market has the trading
volume of 3 trillion a day ‐ all anyone needs to take part in the action is a
computer with an internet connection.


24 Hour Market ‐ The Forex market is open 24 hours a day, so that you can
be right there trading whenever you hear a financial scoop. No need to
bite your fingernails waiting for the opening bell.


Narrow Focus – Unlike the stock market, a smaller market with tens of
thousands of stocks to choose from, the Forex market revolves around
more or less eight major currencies. A narrow choice means no rooms for
confusion, so even though the market is huge, it’s quite easy to get a clear
picture of what’s happening.


Liquidity ‐ The foreign exchange market is the largest financial market in
the world with a daily turnover of just over $3 trillion! Now apart from
being a really cool statistic, the sheer massive scope of the Forex market is
also one of its biggest advantages. The enormous volume of daily trades
makes it the most liquid market in the world, which basically means that
under normal market conditions you can buy and sell currency as you
please. You can never be in a jam for currency to buy or stuck with
currency that you can’t unload.


The Market Can’t Be Cornered ‐ The colossal size of the Forex market also
makes sure that no one can corner the market. Even banks don’t have
enough pull to really control the market for a long period of time, which
makes it a great place for the little guy to make a move.

Bullionguru.com

What is Forex Trading?

Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going Long on the EUR/USD.

How Does Forex Trading Work?

Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain.

Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.

 

Forex Basics: Introduction

Introduction

Foreign Exchange
The simultaneous transaction of one currency for another.

Foreign Exchange Market
The Foreign exchange market is a large, growing and liquid financial market that operates 24 hours a day. It is not a market in the traditional sense because there is no central trading location or “exchange". Most of the trading is conducted by telephone or through electronic trading networks. The primary market for currencies is the “interbank market” where banks, insurance companies, large corporations and other large financial institutions manage the risks associated with fluctuations in currency rates.

Spot Market
The market for buying and selling currencies at the current market rate.

Rollover
A spot transaction is generally due for settlement within two business days (the value date). The cost of rolling over a transaction is based on the interest rate differential between the two currencies in a transaction. If you are long (bought) the currency with a higher rate of interest you will earn interest. If you are short (sold) the currency with a higher rate of interest you will pay interest. Most brokers will automatically roll over your open positions allowing you to hold your position indefinitely.

Exchange Rate
The value of one currency expressed in terms of another. For example, if EUR/USD is 1.3200, 1 Euro is worth US$1.3200.

Currency Pair
The two currencies that make up an exchange rate. When one is bought, the other is sold, and vice versa.

Base Currency
The first currency in the pair. Also the currency your account is denominated in.

Counter Currency
The second currency in the pair. Also known as the terms currency.

ISO Currency Codes
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar

Currency Pair Terminology

EUR/USD = "Euro"
USD/JPY = "Dollar Yen"
GBP/USD = "Cable" or "Sterling"
USD/CHF = "Swissy"
USD/CAD = "Dollar Canada" (CAD referred to as the "Loonie")
AUD/USD = "Aussie Dollar"
NZD/USD = "Kiwi"
FCM
Futures Commission Merchant. An individual or organisation licensed by the U.S. Commodities Futures Trading Commission (CFTC) to deal in futures products and accept monies from clients to trade them.

Dealing Desk
A dealing desk provides pricing, liquidity and execution of trades.

Market Maker
A market maker provides pricing and liquidity for a particular currency pair and stands ready to buy or sell that currency at the quoted price. A market maker takes the opposite side of your trade and has the option of either holding that position or partially or fully offsetting it with other market participants, managing their aggregate exposure to their clients. If a market maker chooses to keep the trader's position without offsetting it in the market, the trader's profit is the market maker's loss and vice versa, leading to a possible conflict of interest between the trader and his market maker. A market maker earns their commission from the spread between the bid and offer price.

NDD
An acronym for 'No Dealing Desk'. A no-dealing desk broker does not have a dealing desk but instead uses external liquidity providers to provide pricing and liquidity for its clients. The liquidity providers send in competing bids and offers into the platform, resulting in the best bid and offer being displayed to the client. Some no-dealing desk brokers may display the market depth which is the amount of liquidity available at each price. A greater number of liquidity providers providing pricing to the no-dealing desk broker leads to tighter spreads. A no-dealing desk broker may increase the spread to earn its commission.

Forex ECN Broker

ECN is an acronym for Electronic Communications Network. A Forex ECN broker does not have a dealing desk but instead provides a marketplace where multiple market makers, banks and traders can enter in competing bids and offers into the platform and have their trades filled by multiple liquidity providers in an anonymous trading environment. The trades are done in the name of your ECN broker, thereby providing you with complete anonymity. A trader might have their buy order filled by liquidity provider "A", and close the same order against liquidity provider "B", or have their trade matched internally by the bid or offer of another trader. The best bid and offer is displayed to the trader along with the market depth which is the combined volume available at each price. A greater number of marketplace participants providing pricing to the ECN broker leads to tighter spreads. ECN's typically charge a small fee for matching trades between their clients and liquidity providers.

Counterparty

One of the participants in a transaction.

Sell Quote / Bid Price

The sell quote is displayed on the left and is the price at which you can sell the base currency. It is also referred to as the market maker's bid price. For example, if the EUR/USD quotes 1.3200/03, you can sell 1 Euro at the bid price of US$1.3200.

Buy Quote / Offer Price

The buy quote is displayed on the right and is the price at which you can buy the base currency. It is also referred to as the market maker's ask or offer price. For example, if the EUR/USD quotes 1.3200/03, you can buy 1 Euro at the offer price of US$1.3203.

Spread

The difference between the sell quote and the buy quote or the bid and offer price. For example, if EUR/USD quotes read 1.3200/03, the spread is the difference between 1.3200 and 1.3203, or 3 pips. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to the spread.

Pip

The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.

Pip Value

The value of a pip. Pip value can be either fixed or variable depending on the currency pair. e.g. The pip value for EUR/USD is always $10 for standard lots, $1 for mini-lots and $0.10 for micro lots.

Lot

The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, 10,000 units if it's a mini, or 1,000 units if it's a micro. Some dealers offer the ability to trade in any unit size, down to as little as 1 unit.

Standard Account
Trading with standard lot sizes, generally 100,000 units of the base currency. e.g. The pips value  is $10 for EUR/USD.


Mini Account
Trading with mini lot sizes, generally 10,000 units of the base currency. e.g. The Pips value is $1 for EUR/USD.

Micro Account
Trading with micro lot sizes, generally 1,000 units of the base currency. e.g. ThePips valueis $0.10 for EUR/USD.

Margin

The deposit required to open or maintain a position. Margin can be either "free" or "used". Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions. With a $1,000 margin balance in your account and a 1% margin requirement to open a position, you can buy or sell a position worth up to a notional $100,000. This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1. If a trader's account falls below the minimum amount required to maintain an open position, he will receive a "margin call" requiring him to either add more money into his or her account or to close the open position. Most brokers will automatically close a trade when the margin balance falls below the amount required to keep it open. The amount required to maintain an open position is dependent on the broker and could be 50% of the original margin required to open the trade.

Leverage

Leverage is the ability to gear your account into a position greater than your total account margin. For instance, if a trader has $1,000 of margin in his account and he opens a $100,000 position, he leverages his account by 100 times, or 100:1. If he opens a $200,000 position with $1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses.
To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For example, if you have $10,000 of margin in your account and you open one standard lot of USD/JPY (100,000 units of the base currency) for $100,000, your leverage ratio is 10:1 ($100,000 / $10,000). If you open one standard lot of EUR/USD for $150,000 (100,000 x EURUSD 1.5000) your leverage ratio is 15:1 ($150,000 / $10,000).

Manual Execution
An order which is executed by dealer intervention.

Automatic Execution
The order is executed automatically without dealer intervention or involvement.

Slippage
The difference between the order price and the executed price, measured in pips. Slippage often occurs in fast moving and volatile markets, or where there is manual execution of trades.

Drawdown

The decline in account balance from peak to valley, measured until a new high is reached, usually reported in percentage terms.

Support

Support is a technical price level where buyers outweigh sellers, causing prices to bounce off a temporary price floor.

Resistance
Resistance is a technical price level where sellers outweigh buyers, causing prices to bounce off a temporary price ceiling.

Common Order Types

Market Order
An order to buy or sell at the current market price.

Limit Order
An order to buy or sell at a pre-specified price level.

Stop-Loss Order
An order to restrict losses at a pre-specified price level.

Limit Entry Order
An order to buy below the market or sell above the market at a pre-specified level, believing that the price will reverse direction from that point.

Stop-Entry Order
An order to buy above the market or sell below the market at a pre-specified level, believing that the price will continue in the same direction.

OCO Order
One Cancels Other. An order whereby if one is executed, the other is cancelled.

GTC Order
Good Till Cancelled. An order stays in the market until it is either filled or cancelled.

Common Trade Types

Long Position
A position in which the trader attempts to profit from an increase in price. i.e. Buy low, sell high.

Short Position
A position in which the trader attempts to profit from a decrease in price. i.e. Sell high, buy low.

Common Trading Styles

Technical Analysis
A style of trading that involves analysing price charts for technical patterns of behaviour.

Fundamental Analysis
A style of trading that involves analysing the macroeconomic factors of an economy underpinning the value of a currency and placing trades that support the trader's long or short-term outlook.

Trend Trading
A style of trading that attempts to profit from riding short, medium or long term trends in price.

A style of trading that attempts to profit from buying and selling currencies between a lower level of support and an upper level of resistance. The upper level of resistance and the lower level of support defines the range. The range forms a price channel where the price can be seen to oscillate between the two levels of support and resistance.

News Trading
A style of trading whereby a trader attempts to profit from fundamental news announcements on a country's economy that may affect the value of a currency, usually seeking short term profit immediately after the announcement is released.

Scalping
A style of trading that involves frequent trading seeking small gains over a very short period of time. Trades can last from seconds to minutes.

Day Trading
A style of trading that involves multiple trades on an intra-day basis. Trades can last from minutes to hours.

Swing Trading
The style of trading that involves seeking to profit from short to medium term swings in trend. Trades can last from hours to days.

Carry Trading
A style of trading whereby the trader attempts to profit from holding a currency with a higher rate of interest and selling a currency with a lower rate of interest, profiting from the daily interest rate differential of the position.

Position Trading
A style of trading that involves taking a longer term position that reflects a longer term outlook. Trades can last from weeks to months.

Discretionary Trading
A style of trading that uses human judgement and decision making in every trade.

Automated Trading
A style of trading that involves neither human decision making nor involvement, but uses a pre-programmed strategy based on technical or fundamental analysis to automatically execute trades via an automated software programme.

Example Trade

Assume you have a trading account at a broker that requires a 1% margin deposit for every trade. The current quote for EUR/USD is 1.3225/28 and you want to place a market order to buy 1 standard lot of 100,000 Euros at 1.3228, for a total value of US$132,280 (100,000 * $1.3228). The broker requires you to deposit 1% of the total, or $1322.80 to open the trade. At the same time you place a take-profit order at 1.3278, 50 pips above your order price. In taking this trade you expect the Euro to strengthen against the U.S. dollar.
As you expected, the Euro strengthens against the U.S. dollar and you take your profit at 1.3278, closing out the trade. As each pip is worth US$10, your total profit for this trade is $500, for a total return of 38%.