Forex Dealing Key Points

Dealing Hours

The dealing desk is open between Sunday 16:00 to Friday 16:30 Eastern Standard Time (GMT-5).

Margin

To most forex beginners, Margin is often a magic and sophisticated word. In FXPrice, we try to use the simplest language to explain those terminologies. Margin is simply how much money you need to do a trade or how much you have left in your trading account.

For example: we often see this sentence, one lot requires a margin of $1,000. What that means is that you need $1,000 to trade a contract size (usually 100,000 unit size).

Why Use Margin

Forex and commodity trading is always conducted on Margin. This means that a cash deposit usually much smaller than the underlying value of the currency or commodity contract, is required in order to trade. Of course, this makes trading in the cash/spot forex market a double-edged sword.

Rollover / Interest Policy (Premium)

Every currency and commodity has a "cost of carry" associated with holding the position for more than one day. In currencies, this cost is a function of the "interest rate differential" of the two currencies that comprise the exchange rate.

For example, in USD/JPY, the interest rate differential is the difference between short-term U.S. interest rates and short-term Japanese interest rates. If, for example, U.S. interest rates are 5.0% and Japanese interest rates are 1.0%, the interest rate differential is 4.0% (5.0% - 1.0%). This means that if a trader was to sell USD/JPY, he would have to pay 4.0% of the notional amount of the contract per year to hold the position. On one lot, the notional amount is $100,000, so the trader would have to pay approximately $4,000 to hold the position for one year. This translates to approximately $11.00 per day per lot for holding the USD/JPY position ($4,000/365).