New to Forex
Forex and ‘FX’ are shortened terms used for ‘foreign exchange’. The forex market is available 24 hours a day, five days a week,where currencies of nations are traded, typically via brokers. It’s the largest financial market in the world. Its daily average turnover is approximately US$4 trillion.
Forex is the conversion of one country’s currency into that of another.The value of one country’s currency is constantly changing against the value of another country’s currency. In other words, the world’s currencies are on a floating exchange rate and always traded in pairs. For example Euro/Dollar.
Unlike stocks, futures or options, currency trading does not take place on a regulated exchange. It is not controlled by any central governing body, there are no clearing houses to guarantee the trades and there is no arbitration panel to adjudicate disputes. All members trade with each other based on credit agreements. Essentially, business in the largest, most liquid market in the world depends on nothing more than a metaphorical handshake.
At first glance, this ad-hoc arrangement must seem bewildering to investors who are used to structured exchanges. However, this arrangement works exceedingly well in practice, because participants in FX must both compete and cooperate with each other, self regulation provides very effective control over the market. Furthermore, reputable retail FX dealers in the United States become members of the National Futures Association (NFA), and by doing so they agree to binding arbitration in the event of any dispute. Therefore, it is critical that any retail customer who contemplates trading currencies do so only through an NFA member firm. In the UK, brokers are regulated by the FCA, the Financial Conduct Authority.
Before we leave you with the impression that FX is the Wild West of finance, we should note that this is the most liquid and fluid market in the world. It trades 24 hours a day, and it rarely has any gaps in price. Its sheer size and scope (from Asia to Europe to North America) makes the currency market the most accessible market in the world.
Account related questions
Once your account has been opened, you will receive an email from the broker with instructions for logging in, as well as instructions on how to fund your account. Once your account has been funded, we will receive a signal from the broker and trades will start to get copied on your account. The first trade will start when market conditions are optimal.
WhiteRavenFX does not receive any funds. The funding and withdrawals need to be done on the brokers website.
WhiteRavenFX does not manage your account, this also means we do not manage funding nor withdrawals. To request a withdrawal from your Account, simply go to the brokers website and sign in in the Client Area. Click the Withdraw tab and fill in the required amount to be withdrawn. If you have any further questions, please kindly contact the brokers’ support team and they will kindly assist you.
Forex related questions
In the foreign exchange market, currency is traded in pairs. Pairs have meaning in relation to each other so must always stay together.
In a currency pair, the first currency is called the “base currency”; the second currency is called the “quote currency” or “counter currency”. The majority of the trading volume in the FX market is represented by these 18 pairs:
There are many official currencies that are used all over the world, but there only a handful of currencies that are traded actively. In currency trading, only the most economically/politically stable and liquid currencies are demanded in sufficient quantities. The majority trades the seven most liquid currency pairs in the world.
The four majors:
- EUR/USD (euro/dollar)
- USD/JPY (dollar/Japanese yen)
- GBP/USD (British pound/dollar)
- USD/CHF (dollar/Swiss franc)
The three commodity pairs:
- AUD/USD (Australian dollar/dollar)
- USD/CAD (dollar/Canadian dollar)
- NZD/USD (New Zealand dollar/dollar)
These currency pairs, along with their various combinations, account for more than 95% of all trading in FX.
The two currencies in a pair are traded one against the other. The rate at which they are traded is called the exchange rate and is affected by currency supply and demand.
Volatility describes the level of fluctuations (moves) of an exchange rate. A currency pair that is more volatile is likely to increase or decrease in value more than one that is less volatile. Volatility of a currency pair changes over time. There are some periods when prices go up and down quickly (high volatility), while during other times they might not seem to move at all (low volatility). Commonly, the higher the volatility, the riskier the trading of the currency pair is.
PIP stands for ‘Percentage In Point’ and represents the smallest movement that a currency pair can make. A PIP is a number value. In the Forex market, the value of currency is given in pips. For example, one PIP equals 0,0001. Most currencies are priced to four numbers after the point. For example, a five pip spread for EUR/USD is 1,2530/1,2535. In the major currencies, the price of the Japanese yen does not have four numbers after the point, but two.
The spread is the difference between the buy (also called bid) price and the sell (also called ask) price. The bid price is the rate at which you can sell a currency pair, and the ask price is the rate at which you can buy a currency pair. These two prices are always given for a currency pair.
This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. A stop-loss order is designed to limit an investor’s loss on a position in a security.
Also known as ‘margin’. The required collateral that an investor must deposit to hold a position.
Also known as ‘leverage’. The required collateral that an investor must deposit to hold a position.
A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.
Risk Warning: You should know that trading foreign exchange (forex) and contracts for difference (cfds) carries a high level of risk to your capital including losing more than your initial deposit. Forex and cfds are leveraged products and the effect of leverage is that both gains and losses are magnified. The past performance of a financial instrument is no guarantee or indicator of future performance. Trading forex and cfds may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent financial advice if necessary. You should only trade forex if you have sufficient investing experience and knowledge, a thorough understanding of the risks involved and if you are dealing with money that you can afford to lose.
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