Forex trading guide
The local foreign currency market is intensively developing, as of now, thus, many local investors decide to join it. Yet, there are multiple prejudices concerning its legalization and regulation, which require explanations. To start with, let us explain to you how such trading works. As a trader, you are supposed to buy a certain foreign currency in exchange for another one and generate profits from frequent price fluctuations. Certainly, to understand which currency to buy and when, you must watch market conditions and predict possible price movements, based on charts, financial news, expert forecasts, and your personal experience. As you have probably heard, Pakistan is acknowledged to be one of the Next Eleven countries.
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9 Forex Trading Tips
August revisions: Updated to include reference to Notice to Members I in the Security Deposits section of the guide. Under the CEA, only certain regulated entities may be counterparties to these off-exchange trades with retail customers.
All other off-exchange futures and options transactions with U. A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities authorized counterparties are:. No Member may be approved as a forex firm unless at least one of its principals is registered as an AP and approved as a forex AP.
Except for otherwise regulated U. A person exercising trading authority over a customer's account may not receive or hold the customer's funds. See Exemptions available to CPOs. All Members that engage in forex activities with customers are subject to NFA's forex requirements, although some of those requirements apply only to forex dealer members FDMs.
A Member is an FDM if it acts as counterparty to or offers to act as counterparty to at least one customer. See NFA Bylaw Members that engage in forex activities with customers but do not act as counterparties are subject to various anti-fraud, ethical conduct, and supervision requirements if they solicit customers, introduce customers to a counterparty or manage accounts on behalf of customers. Additionally, Members that manage forex accounts on behalf of customers or offer pools that trade forex must provide prospective clients and pool participants with a disclosure document and file it with NFA prior to use.
This disclosure document must include the disclosure language proscribed by the CFTC. Additionally, any trading program or pool that includes forex trading must provide certain disclosures and provide periodic monthly or quarterly account statements and an annual report to the pool participants. Members or their Associates are required to obtain certain personal and financial information from a customer.
At a minimum, Members or their Associates must obtain the customer's true name, address, principal occupation or business, and previous investment, futures trading and forex trading experience. For customers who are individuals, the Member or Associate must obtain the customer's net worth or net assets and current estimated annual income or the previous year's annual income. Based on this information, Members or their Associates must determine the appropriate risk disclosure to provide the customer.
At a minimum, FDMs and IBs must provide retail customers with understandable and timely written risk disclosure on essential features and risks of forex trading prior to opening the account. In addition, immediately following the prescribed disclosure, the risk disclosure statement must also include: 1 the total number of non-discretionary retail forex customer accounts maintained by the FDM, 2 the percentage of such accounts that were profitable in the quarter and 3 the percentage of such accounts that were not profitable during the quarter.
IBs are required to provide this information for the FDM to whom they are introducing the account. Members are required to obtain a signed and dated acknowledgment from the retail customer that the customer received and understood the disclosure statement prior to opening the account.
Members must update this disclosure prior to entering into new forex transactions with current customers if failing to update the information would make it misleading. Members or their Associates may decide that additional risk disclosure for a particular customer is appropriate. For example, if a customer does not have experience trading forex, the Member or Associate must determine what additional information the customer needs to make an informed decision on whether to enter into forex transactions.
In some circumstances e. A Member, however, is not required to reject the account if a customer, after receiving the additional disclosure, still insists on trading forex. Members and Associates, however, are prohibited from making individualized recommendations to any customer for which the Member or Associate has or should have advised that forex trading is too risky for that customer. NFA does not require Members to provide their Associates with any grid-like formula to identify those customers who require additional risk disclosure.
Your firm should, however, be able to articulate the general factors its Associates consider when deciding whether to give additional risk disclosure. Each Member must make a record containing the customer information obtained.
If the customer declines to provide the required information, the Member or Associate must make a record that the customer declined. A record does not need to be made in the case of a non-U. Members must keep copies of all information records for the period of time set forth in CFTC Regulation 1. For all active customers who are individuals, Members who act as the counterparty are required to contact the customer annually to verify that the information remains materially accurate and provide the customer with the opportunity to update the information.
If the customer notifies the Member who is acting as the counterparty of any material changes to the information, the Member must determine whether the Member must provide the customer with additional risk disclosure based on the changed information. Members should adopt and enforce written procedures regarding communications with the public.
For example, you may not represent that forex funds deposited with a Member are "segregated" or given special protection under the bankruptcy laws. If an FDM or an IB represents that its services are commission free, it must prominently disclose how it is compensated in near proximity to this representation.
Additionally, an FDM may not represent that a customer will have direct access to the interbank market since the FDM is actually the counterparty to every customer's forex transition. Similarly, no FDM that utilizes straight-through processing can suggest that they are not the counterparty to a customer's trade. Additionally, an FDM or an IB may not represent that it offers "no-slippage" or can guarantee fills unless it can demonstrate that all orders on its platform have been executed at the price initially quoted when the order was placed on the platform and it does not have the authority to adjust customer accounts so as to have the effect of changing the price at which the order was executed.
In other words, if an FDM "re-quotes" prices or has the contractual right to make adjustments that directly or indirectly change the price of an order after it is executed, it cannot claim to have no slippage. Any reference to hypothetical performance results that could have been achieved using your trading system must comply with NFA Compliance Rule c and the related Interpretive Notice as if the performance results were for on-exchange transactions.
Finally, promotional materials may never guarantee against loss. Members remain responsible for meeting their regulatory obligations in situations where they utilize or promote forex trading systems developed by third parties.
Specifically, an FDM has direct responsibility for misleading promotional material if the FDM prepares or distributes it; has agency responsibility if the trading system developer is an agent of the FDM under established principles of agency law; and has supervisory responsibility if the Member fails to supervise its own employees in its activities with a third-party system developer. Members must maintain all promotional material for five years from the date of last use and must keep it readily accessible for the first two years.
Furthermore, Members must maintain supporting documentation for all statements, claims and performance results included in promotional materials. FDMs, and their Associates, may not exercise trading authority over a customer account for which the FDM is, or is offering to be the counterparty. An FDM may not carry offsetting positions in a customer account and must offset the positions on a first-in, first-out basis.
A customer may, however, direct the FDM to offset same-size transactions even if there are older transactions of a different size, but the transaction must be offset against the oldest transaction of that size.
An FDM is prohibited from directly or indirectly canceling or adjusting the price of executed customer orders, with two exceptions. The first exception is where the adjustment is done to settle a customer complaint in the favor of the customer.
An FDM may also adjust orders even in the absence of individual customer complaints if the customer were adversely affected by a technical problem with the Member's trading platform. However, an FDM may not adjust prices on customer orders that benefitted from the error and may not cherry-pick which account to adjust. The second exception is where the FDM uses exclusively "straight-through processing" such that it automatically executes without human intervention and without exception an offsetting position to a customer order with another counterparty prior to providing an execution to the customer order.
An FDM that adjusts an executed customer order based on an adjustment by a counterparty must provide notice to the affected customer within fifteen minutes of the customer order having been executed. The notice must state that the Member intends to cancel or adjust the price of the order to reflect the adjusted price provided by the Member's counterparty and must include documentation of the cancelation or price adjustment from the counterparty. The Member must either cancel or adjust all customer orders executed during the same time period and in the same currency pair or option regardless of whether they were buy or sell orders.
All cancellations or adjustments of executed customer orders must be reviewed and approved in writing by a listed principal of the Member who is also an AP. Such review must include the documentation from the counterparty and must be provided to NFA. Finally, any Member that may elect to cancel or adjust executed customer orders based upon liquidity provider price changes must provide customers with written notice of that fact prior to the time the customer first engages in forex transactions with the Member.
In the context of FDM trading systems, price slippage sometimes occurs between the time a customer first submits an order and the time the order reaches the FDM's system. When this occurs, some FDMs immediately requote the customer the current price and require the customer to confirm that it still wants to place the order at the requoted price. Other FDMs have built in slippage parameters that permit execution of the order if the slippage is within the established parameters.
FDMs that use slippage parameters must apply the slippage settings uniformly regardless of the direction the market has moved.
If the FDM requotes prices when the market moves against it, it must requote prices when the market moves in its favor. FDMs are prohibited from permitting customers to fund their commodity interest accounts with a credit card or other electronic funding mechanisms that draw funds from a credit card. FDMs may accept customer deposits from electronic payment mechanisms that draw funds directly from a customer's account at a financial institution provided that the FDM is able to distinguish, prior to accepting funds, between an electronic funding method that draws funds from a customer's account at a financial institution and a traditional credit card, and be able to reject the credit card before accepting customer funds.
See Notice to Members I Each Member must maintain books and records necessary to conduct its business and FDMs must provide forex customers with timely and accurate notice of the status of their accounts. Account activity includes offsetting transactions, rollovers, deliveries, option exercise, option expirations, trades that have been reversed or adjusted, and monetary adjustments. In those cases where a customer's account had either no open positions at the end of the monthly statement or any changes to the account balance since the prior statement, the Member is must still provide a monthly statement at least once every three months.
Each FDM must, not later than the next business day after any retail forex or forex option transaction, furnish the retail customer with the following:. Upon the request of an FDM's customer with respect to a particular executed forex transaction of that customer, an FDM must provide the customer, within 30 minutes of the customer's request, with certain transaction data for the 15 forex transactions that occur immediately before and after in the same currency pair of the customer's transaction.
Members and their Associates that have supervisory responsibilities must diligently supervise the Member's forex business. This includes supervising the activities of the Member's employees and agents. The annual report must include a certification by the FDM's CCO or chief executive officer that to the best of his or her knowledge and reasonable belief, and under penalty of law, the information contained in the annual report is accurate and complete.
Members must establish, maintain, and enforce written supervisory procedures reasonably designed to detect and prevent violations of NFA rules. While these interpretive notices do not directly apply to forex transactions, the principles included in them are equally applicable to those transactions.
NFA recognizes that, given the differences in the size and complexity of the operations of Members, there must be some degree of flexibility in determining what constitutes "diligent supervision" for each firm. Firms should tailor their procedures to their unique circumstances as long as they meet certain minimum requirements. An adequate supervisory program includes on-site visits to branch offices and guaranteed IBs that conduct forex business on behalf of the Member.
Your firm should consider the characteristics of the branch office or guaranteed IB when deciding how often to visit it and what the visit should cover. How formal the training program is will depend on the size of the firm and the nature of its business. CFTC Regulation 5. The requirements also apply to an FDM that uses another entity's trading system through a "white-labeling" agreement. An FDM must adopt and enforce written procedures to address security, capacity, credit and risk management controls, recordkeeping, and trade integrity with regard to its electronic trading platform.
Each year, a principal who is also registered as an AP of the Member must certify that the firm has met the relevant standards for their electronic trading system. Members must protect the reliability and confidentiality of customer orders and account information, and the procedures must assign responsibility for overseeing the process to one or more individuals who understand how it works and who are capable of evaluating whether the process complies with the firm's procedures.
Members must maintain adequate personnel and facilities for the timely and efficient delivery of customer orders and reporting of executions and for the timely and efficient execution of customer orders. In addition, the procedures must be designed to handle customer complaints about order delivery, execution, and reporting and to handle those complaints in a timely manner.
Members must have procedures reasonably designed to prevent customers from entering into trades that create undue financial risks for the Member or the Member's other customers. FDMs who have trading platforms that claim to automatically liquidate positions before an account goes into a deficit must set the automatic liquidation levels high enough so that positions will be closed out at prices that will prevent the account from going into a deficit position under all but the most extraordinary market conditions.
The Member's trading system must record and maintain essential information regarding customer orders and account activity. The Member's trading system must also produce daily exception reports showing price adjustments and orders filled outside of the price range displayed by the system when the customer order reached the platform.
Complete Guide to Forex Trading
Forex for Beginners
You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. The foreign exchange market dubbed forex or FX is the market for exchanging foreign currencies. Forex is the largest market in the world, and the trades that happen in it affect everything from the price of clothing imported from China to the amount you pay for a margarita while vacationing in Mexico. At its simplest, forex trading is similar to the currency exchange you may do while traveling abroad: A trader buys one currency and sells another, and the exchange rate constantly fluctuates based on supply and demand. A vast majority of trade activity in the forex market occurs between institutional traders, such as people who work for banks, fund managers and multinational corporations. A forex trader might buy U. Meanwhile, an American company with European operations could use the forex market as a hedge in the event the euro weakens, meaning the value of their income earned there falls.
The foreign exchange Forex market is the biggest and most liquid market in the world. You may not know it, but you may have already participated in the forex market by buying imported products or buying foreign currency for travel. Forex trading for beginners can seem complicated. However, the forex market provides numerous investment opportunities. Forex market is an international over-the-counter market with no centralization.
The MYTS Forex Trading Guide
Forex trading is a huge market. Trillions are traded in foreign exchange on a daily basis. But where do you start? Whether you are an experienced trader or an absolute beginner to online forex trading, finding the best forex broker and a profitable forex day trading strategy or system is complex. So learn the fundamentals before choosing the best path for you.
Tips for Forex Trading Beginners
But it only gets harder from here. Just like learning how to walk, you have to take baby steps, and in between, you will fall, but you get back up and press forward. Find quality forex education sources like our The School of Pipsology. Before risking real money, make sure to study the different currency pairs and understand what makes their prices go up and down. Creating a trading plan is a critical component of successful trading. The same applies to your trading plan. Fortunately, traders can test out each platform using a demo account , which means no real money is at risk.
Forex Trading: A Beginner’s Guide
The risk of online foreign exchange forex trading is high. We regularly receive complaints and enquiries from consumers who have lost money in online forex trading. Forex trading is the buying and selling of foreign currencies. Returns can come from purchasing foreign money that will need to be held in a foreign currency bank account with the hope that the currency will increase in value against the NZ dollar.
Forex Trading Tutorial
This guide explains all you'll need to know about currency trading, how the market works, who trades on it and how to trade currency CFDs on online platforms. Currency or foreign exchange trading — often known as forex, or simply FX — is the buying and selling of international currencies with the objective of making a profit. While assets such as equities and commodities are traded on regulated exchanges, currencies are bought and sold over the counter OTC — meaning that trades are conducted largely between institutional counterparties in major financial centres around the world. This is called the interbank market. The biggest and most liquid of these forex trading centres is London, followed by New York, although Tokyo, Hong Kong, Frankfurt and Singapore are also important currency trading centres.
The Advanced Forex Trading Guide
Humanity has evolved quite a bit from the days when bartering was the primary form of commerce. Back then, the mere thought of almost every country in the world having its own set of objects used for payments would have sounded preposterous, let alone the idea of those objects being exchanged for profit over an invisible network of devices. Yet, here we are. But how to start forex trading when even the abbreviation for the market sounds confusing? Have no fear, our beginner's guide is here to provide you with all the clarifications and instructions you may need. These transactions are conducted simultaneously. A currency pair represents the estimated value of a currency unit against a unit of another currency.
Learn Forex Trading
Forex trading is the exciting world of trying to profit from the price changes between the currencies of powerful countries, such as the USA, the European Union, the UK, Japan, Australia, and Canada. Do you think economic activity in the USA will outperform the Euro areas? Then you can buy dollars against the Euro, and if you are right, you stand to make a healthy return.