FOREX TRADING OPENING ACCOUNT AND REMITTING MARGIN MONEY

As aretail investor you need to become client of some registered broking entity offering spot forex trading. Majority of the entities offering Forex trading facilities to their clients are either registered with National Futures Association, and CFTCin USA, FSA in UK, or other applicable regulatory bodies. (you should be very careful in selecting a broking company for forex trading. The companies that are not regulated by any federal agency are fly-night kind.your interest is best protected with regulated entities). The regulations governing Spot Forex Trading are generally not excessive or rigid.

The above regulated entities usually tie up with some reputed financial services firms to expand their business across physical boundaries.These tie ups enable them to service thir clients in a cost effective and timely manner.
Almost all the briker-dealers have some minimum criteria specified under the applicable regulations that an applicant needs to folfill before he/she is allowed to become a full fledged client. these criteria may be related to the applicant's previous trading experience, net worth, risk capital, education etc.,
An approved client is allowed to trade only after he/she remits the minimum margin amount required to make the account active. these minimum amounts should not be confused with minimum deposits. Most of the market players offer ''zero-minimum balance'' accounts. What ever you remit, is all tradable i.e., you can use all the transferred moneys to place trades.

On successful opening of Forex account, aclient can place trades either through a Trading plat form or through a ''call and trade center'' set up the service provider.

A forex trading plat form looks similar to an equity trading platform, only, it's much simpler to place trades. placing atrade usually is a three click business on most avilable trading platform. Several add-on features like charting, news and analysis is provided on the trading platform itself to aid the clients in taking informed trading decisions.

Whrn you choose to place your trade through the call-and-trad center, your identity is verified and the Forex dealer places the desired trade on your behalf, using his login I.D., and pass word. To maintain additional security and possible dispute resolution your telephonic conversation is recorded.

In Forex trading margin can be understood as collateral against an open position. It is the amont that is bloked from your existing trading equity when you place a trade. Different broker-dealers offer different margin requirements to their clients. Generally, margin requirement may vary from 0.5% to5%. i.e., clients may be allowed to take a position of US dollars 10,000 by committing some where between US dollars 50to 500.

For examole, imagine that you have remitted US dollars 1000 to your Forex Trading account as the fist step to start trading and your service provider offers you a margin requirement of 1%. You may want yo take a position of USD 10,000 by buying 10,000 USD/JPY at the market rate. For the above position 1% value of the total trade would be locked from your total account equity. The total value of the above trade is US dollars 10,000. So US dollars 100 would be locked from your total account equity of US dollars 1000. Hence, after the trade, you will have US dollars 900 (1000-100) is available in your account to take additional position.

So effectively, a margin of US dollars 100 allows you to trade value worth US dollars 10,000. this translates into a leverage hundred times.

Almost all trading platform allow their clients to view their account valuuation, account equity and margin requirements on a live basis.

Margin Trading enables a trader to leverage his position and trade considerably higher values than they would have done without leverage. But this is not without inherent risks. Margin trading gears up profit as magnifier losses. Hence a Trader should be disciplined while placing trades in Forex Market using Margin facility.

MARGIN CALLS:In case of running losses in their open position, a trader's account equity may fall below the margin requirement for the said position. In such a case, the trading system generates margin calls to be sent electronically to the trader so that he/she may top up the account by remitting additional funds.

Margin calls will be sent to traders if their account equity drops down to a level where the required margin is exactly equal to the account equity. A margin call would be generated as soon as Margin Required>Account Equity. The frequency of the margin calls vary from one service provider to another.

FOREX TRADING PLATFORM:

ORDER FUNTION: Order funtions provides traders with the ability to ''Auto Excute'' traders ''pre-specified'' price levels. Orders may be put to use forexecuting atrade, limiting down-side, booking profit when a particular price is reached, and so on. With the underlying tacnology getting more efficient day by day, trading platforms around the globe are providing their clients with aslew of ''order-choices''. Out of them the most relevant to retail traders are:

MARKET ORDERS: A market order is an order to buy or sell at the current market price.Traders can click on the buy or sell button after having specified their deal size. the execution of the order is intantaneous.This means that the price seen at the exact time of the click will be given to the trader. Placing amarket order by phone is quite similar but usually takes a few seconds more time.

ENTRYORDERS: Entry order constitute of pre-specified price and duration-essestially used to initiate a fresh position when the currency-pair reaches at acertain level.

Traders usually use entry orders when Tecnical analysis suggests srong support or resistance at certain price levels. for example, a trader might want to go long in a falling EUR/USD market when the rates have touched bottom/near bottom. In this case, the trader may place entry order to buy close to the suggested support level.

LIMIT ORDERS/TAKE PROFIT ORDERS: A limit order is an order placed to buy or sellatacertain price. The order essestially contains two variable, price and duration.
The trader specifies the price at which he wishes to buy/sell acertain currency pair and also specifies the duration over which the order should remain active. The specified duration time of the next trading day. When limit orders are used to book profit on an exiting position they are called ''Take profit Order'.

GTC (Good till cancelled): A GTC order remains active in the market untill the trader decides to cancel it. The dealer will not cancel the order at any time therefore it is the traders responsible to remember that he possesses the order.

GFD (G ood for the day): A GFD order remains active in the market until the end of the trading day. Since forgin exchange is an ongoing market the end of day must be a set hour.

STOP ORDERS/STOP LOSS ORDERS: A stop order is also an order placed to buy or sell at a certain price. The order contains the same three variables,price, amount and duration. The main difference between a limit order and a stop order is that stop orders are usually used to limit loss potantial on a transaction whilst limit orders are used to enter the market, add to a pre- existing position and profit taking. A stop loss order can be either GTC or GFD.

OCO( Order cancels other) ORDER: An OCO order is a mixture of both limit and stop orders. Two orders with identical amount and duration but different target prices (one take profit and/or one stop loss) are placed above and below the current traded price. When one of the orders is executed the other order is automatically cnacelled. OCOs are usually placed when the trader expects that currency movement may take either direction up or down, and he wishes to book profit at a certain level, while covering his possible downside.

PUTTING A MARKET ORDER THROUGH PHONE:

1. A trader specifies the currency pair and the deal size to the dealer.

2. The dealer gives a two way price (BID and ASK price{.

3. The customer his the dealer on Either the BIDor the OFFER. (He may ask for a re-quote).

4. The dealer confirms the trade. Under normal market conditions, dealers usually respond to market orders in about 5 to 10 seconds at most. Assuming the trader deals immediatly on the offered prices a phone deal can be made in 10 to 15 seconds on average.

You should be aware that it is a correct market practice for institutions to quote two way prices to a trader who wishes to trade. A firm that dose not do so is almost certainly taking advantage of their customer's ignorance as far trading procedures are concerned.