What is Foreign Exchange?
The Foreign Exchange market, also referred to as the 'Forex' or 'FX' market, is the largest financial and investment market in the world. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen. Foreign exchange investors use various methods of analysis (both technical and fundamental) in an effort to predict future price movement and thus profit from well timed transactions. *Trading currencies is a very risky form of investing. Any funds used when speculating on the values of currency prices should be considered as risk capital.

Where is the Central Location of the FX Market?
FX Trading is not centralized on an exchange; rather it is a true network of global banks, FCMs (Futures Commissions Merchants, or brokers similar) and private traders like yourself. As is the case with the stock and futures markets, the FX market is considered an Over the Counter (OTC) market. Transactions are conducted between two counterparts over the telephone or via an electronic network.

Who are the Participants in the FX Market?
The Forex market is called an 'Interbank ' market due to the fact that historically it has been dominated by banks; including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.

When is the FX Market open for trading?
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center; first to Tokyo, then London, and finally New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night. Most Forex brokerages allow clients to begin trading late in the day Sunday afternoon (US Sunday afternoon is Japan Monday market open) until late in the day Friday afternoon. Retail trading is typically suspended from the time of Friday close until Sunday open, creating a two day weekend. Each broker’s dealing hours may vary slightly. IBFX is open for trading from 6 PM EST on Sunday until 4 PM EST on Friday.

What are the Most Commonly Traded Currencies in the FX markets?
The most often traded or 'liquid' currencies are those of countries with stable governments, respected central banks, and low levels of inflation. Today, over 85% of all daily transactions involve trading of the major currencies, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar.

Is Forex Trading Capital Intensive?
No. Interbank FX requires a minimum deposit of $2,500 for a standard account and a minimum deposit of $250 for a mini account. IBFX allows customers to execute margin trades at up to 100:1 leverage in a standard account. This means that investors can execute trades or contract sizes of $100,000 with an initial margin requirement of only $1000. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally as great. Forex traders, using leverage, often accept risk of $100.00, $200.00 or $400.00 positions for as little as one dollar. Leverage allows traders to control positions much larger than their deposit; This is why we state that Forex trading is not capital intensive.

What is Margin?
The amount of cash or other Eligible Collateral that Interbank FX requires a customer to deposit or maintain in the Customer's Account in connection with the Customer's trading activity. Interbank FX's initial margin requirement is .5% for mini accounts and 1% for standard accounts. The system performs an automatic pre-deal check for margin availability, and will only execute trades if the client has sufficient margin funds in his or her account. Additional margin is required when a client's initial margin drops in value by 50% based on the value of any open positions. Interbank FX reserves the right to liquidate any open positions should a client's initial margin drop below 50%. This is an important risk management strategy for both Interbank FX and our clients.

What does it Mean Have a 'long' or 'short' Position?
In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the investor benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the investor benefits from a declining market. However, it is important to remember that every FX position requires an investor to go long in one currency and short the other.

How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to 'drive' the market for any length of time.

How do I Manage Risk?
The most common risk management tools in FX trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received when entering a position. A stop loss order is placed to close a position when a pre-determined price is reached. It is important to note that stop loss orders do not guarantee a particular closing price. The price specified in a stop loss order is merely a trigger point; if this price is met or exceeded the broker is instructed to close the position at market price. Stop loss orders attempt to limit potential losses should the market move against a trader’s position.

What kind of Trading Strategy should I use?
Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities. Fundamentalists on the other hand, predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor. The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.

How often are Trades Made?
Market conditions dictate trading activity on any given day. As a reference, the average small to medium trader might trade as often as 10 times a day.

How Long Are Positions Maintained?
As a general rule, a position is kept open until one of the following occurs: 1) realization of sufficient profits from a position; 2) the specified stop-loss is triggered; 3) another position that has a better potential appears and additional margin is needed. There are essentially two categories of traders in the FX market, the ‘swing trader’ and the ‘day trader’. Swing traders are those who tend to hold long term positions and who are looking to slowing realize profits, perhaps over days, weeks, or even months. Day traders are just the opposite and are those who prefer to open and close a position in a 24 hour period or less. Often, day traders hold positions for as little as a few minutes.

What is the Minimum Deposit to Open An Account?
To open an account, a minimum margin deposit of $2,500 for a standard account or a minimum margin deposit of $250 for a mini account is required by wire transfer, credit card, bank check, money order, certified check, or personal check. Personal checks may take up to ten business days to clear depending on the bank, state of origin, and amount.

What is the Minimum Trade Size?
Typically the standard minimum transaction size in the FX market is 1 lot, or 100,000 of the base currency, with a minimum margin deposit of 1%. For example, a US $100,000 position would require an initial margin deposit of US $1,000. IBFX also offers the option of trading ‘micro lots’, lot sizes that can be as small as .01 or 1% of either a standard or mini lot.

What is a Margin Requirement?
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. For example, a broker might require only $1,000 in the trader's account in order to trade a $100,000 currency position. The $1,000 is referred to as 'margin'. This amount is essentially collateral to cover any losses that you might incur. Since nothing is actually being purchased or sold for delivery, the only requirement, and indeed the only real purpose for having funds in your account, is for sufficient margin.

Margin should reflect some rational assessment of potential risk in a position. For example, if a currency is very volatile, a higher margin requirement would normally be justified. One common rule of thumb is a worst-case one day move in the market. So if a $100,000 currency position is unlikely to move by more than 1% (or $1,000) in a 24 hour period, a $1,000 margin requirement is probably reasonable. If, however, the currency or commodity in question is highly volatile and is likely to move by, say, $3,000 or more (or 3%, as is often the case with certain NASDAQ stocks and some commodities) it would put the broker at increased credit risk to require only a $1,000 margin deposit. Note that margin available in your trading account is based on account equity, not account balance. The equity is the most accurate measure of the value of your account, as it takes into account unrealized gains or losses.

How are Pip Values Calculated?
A pip is the smallest increment in any currency pair. In EUR/USD, a movement from 1.0066 to 1.0067 is one pip, so a pip is .0001. In USD/JPY, a movement from 120.45 to 120.46 is one pip, so a pip is .01. How much in dollars is this movement worth, for example, per 100,000 Euros in EUR/USD? How much is one pip worth per 100,000 Dollars in USD/JPY? We will refer to the size, in this case 100,000 units of the base currency, as the 'Notional Amount'. The formula for calculating a pip value is therefore: (one pip, with proper decimal placement/currency exchange rate) x (Notional Amount). Using USD/JPY as an example, this yields: (.01/120.46) x USD100,000 = $8.30 or $8.30 cents per pip. Using EUR/USD as an example, we have: (.0001/1.0066) x EUR 100,000 = EUR 9.93. But we want the pip value in USD, so we then must multiply EUR 9.93 x (EUR/USD exchange rate): EUR 9.93 x 1.0066 = $10.00. This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EUR/USD, GBP/USD, or AUD/USD): the pip value is always $10.00 per 100,000 currency units. This is why pip (or 'tick') values in currency futures, where the currency is quoted first, are always fixed. Approximate pip values for the major currencies are as follows, per 100,000 units of the base currency: USD/JPY: 1 pip = $8.30; In other words a change from 120.45 to 120.46 is worth about $8.30 per $100,000. EUR/USD: 1 pip = $10.00; 1.0066 to 1.0067 is worth $10.00 per 100,000 Euros. GBP/USD: 1 pip = $10.00; 1.5765 to 1.5766 is worth $10.00 per 100,000 Pounds. USD/CHF: 1 pip = $6.87; 1.4555 to 1.4556 is worth $6.87 per $100,000.

What are the Major Trading Sessions?
The FOREX currency market is an integral part of the rapidly expanding financial, business and political landscape. The FOREX Interbank market has three sessions of trading. The first begins Sunday at 7:00 P.M. NYT, which is the Asia session. The second is the European session, which begins at 3:00 A.M. The third and final is the New York, which begins at 8:00 A.M. The majority of the trading occurs between 3:00 a.m. and 1:00 p.m. EST

I have 5 different accounts. Can I open all of them at the same time?
The Interbank FX Trader allows you to switch between multiple accounts, live or demo. This is done within the navigator window of your platform. Within the same instance of the platform, only one account can be logged into at any one time. As a work around, many traders have installed the platform a second or third time into different directories or folders. In this manner multiple instances of the platform can be opened at once, each of which could then be logged into a separate live or demo account.

What happens if my computer is shut down for a few seconds because of a power failure?
You may be logged off of any accounts you have running and all Expert Advisors will stop running until you are logged back into your account. If you have live trades running that will need adjusting, it is recommended that you contact IBFX right away and we can assist you over the phone or chat with you trades.

When I open the FX Trader, it automatically logs me in. Can I secure it so that I have to use a password?
Yes. We have it automatically log you on for your convenience, but if you would like to enable the password follow these steps: 1. On the menu bar go to Tools. 2. From the dropdown menu click Options. 3. Click the box next to - 'Keep personal settings and data at startup'. 4. The check mark will then disappear. From then on every time you restart the FX Trader you'll need to enter your password. Make sure you have your Login number and Password recorded before you do this.

What is Pip?
Pip (or Points) is the term used in currency market to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).

What is Contract Size?
Contract or Lot is the standard unit of trading on certain exchanges.

What is a lot?
In the currency market, contract sizes are referred to as ‘lots’. A standard contract is equal to $100,000 USD. A trader placing a 4 lot trade is thus trading $400,000 dollars in the market. Because most traders are using margin, standard lots are typically controlled with $1,000 (100:1 leverage). The above contract sizes are listed in order to determine Pip values based on the contract size you are trading. As you likely know, many currency brokers now offer ‘mini’ or even ‘micro’ lots. Mini contracts are simply 10% the size of a standard lot, a micro contract would thus be 10% the size of a mini contract.