5 in-Depth Questions on Forex Trading

Discussion in 'Forex' started by Multi, Jul 4, 2007.

  1. Multi


    Hi Everyone.

    I do know a bit about trading the currency market but I have some real detailed questions which I am hoping some one here can help me with.

    I know most of these questions and related answers are not needed to trade successfully but I need to know the EXACT answers to these questions. Don't ask me why I need to know. I just do.

    The questions I am about to ask are in-depth and you can only answer them if you have an in-depth knowledge to the workings of the Forex market yourself.
    The problem is, I'm not looking for opinions. I desparately need the facts as to how these things work. If you can give your reasons why the point you are making is indeed a fact, I'd appreciate it.

    I hate to sound so commanding. I don't mean to be. But I really do need the EXACT detailed answers to these intricate questions.

    If you know the answers, I'd love to hear from you.

    Question 1

    When you buy a currency against another, are you trading one against another or are you buying one and selling the other?
    If you are buying one and selling the other, how can you sell a currency you don't have in your possession? If you're trading one against another, what does that mean?

    Question 2

    When trading on Margin where if I were to buy one standard lot of a particular currency, this would mean that I would have to put up 1% of the total amount.

    Where does the rest of the money come from?
    Does the broker lend this money to me?
    If this is the case, how can he afford to lend each of his clients $99,000 (e.g) who trade with standard lots?

    Just this fact alone tells me that they don't lend you money at all but there must be some other system in place which will allow you to trade without that extra 99% in your trading account. The leverage has to come from somewhere!

    Question 3

    When I make money by trading, is that money deposited into my account straight away? If so...

    Question 4

    Why is it the Spot Forex market has a settlement period of 2 days.
    (a) Shouldn't a spot transaction have the money put into my trading account straight away? So why 2 days?
    (b) I know I can see the results in my trading account straight away but if it's my money, can I go to my brokers office and withdraw that money straight away? If not, why not? Isn't it my money? How does this relate to the 2 day settlement period?
    (c) Or is there a delay in handing that money over to me? If there is a delay, why the delay?

    Question 5

    (a) What is going on to stop me taking delivery of the money I bought or sold?
    (b) Why can't I take delivery?
    (c) If I took delivery, how would that work when trading on margin?
    (d) What would I need to do to take full delivery?

    I know these questions seem a bit silly but I really need to know the detailed correct answers for each of these.

    Appreciate any help you can give,

  2. Surdo


  3. Multi


    Thanks for the links.
    I have read some of that before I posted here but I don't know if that is the interpretation of some trader in the company or if it is actually the way it works.

    It also doesn't answer some of the questions which I have in relation to their answer.

    Is there any way I can get the authority answer on these questions?

  4. Surdo


    ALL of the answers are on those sites, If you are too LAZY to read/search, what can I tell ya?.

    el surdo
  5. Multi


    I've read all of that and I've even listened to the videos but I cant find the detailed answers I'm looking for.

  6. rayl


    Assuming we're talking spot FX


    You are buying one and selling the other. If you don't have the other to sell, you incur a loan in the other. Note that you receive interest on the currency you bought and pay interest on the one you sold, so the difference is what you collect/pay. Note also that most brokers charge a different rate to lend than they will pay. Some places state rates explicitly as that, others summarize it down to an overnight rollover charge. (Some bucket shops may offer "continuous interest" but this is not the bank standard. There are also slight difference in interest conventions in different currencies but they're minor.... like the # of days in a year.)


    The broker loans you the money and charges you interest if you don't have it. Note that you also collect interest on your lot, so the differential (positive or negative) is what you pay or receive.


    Hmm -- this I don't recall off the top of my head, whether it's at settlement or immediately. You get the equity immediately but as to whether you can withdraw it, earn interest on it....


    2 day settlement is just the convention.


    That's between you and your broker/bank. Many brokers, particularly those who cater to institutions, will let you deposit in and wire out in any of the currencies.
  7. I just started trading Forex,


    I have grabed a nice 100 pip move with 400. I have grossed over 4000 in the last few days, Shorting the AUD, and going long short the USD/JPY, but then reversing buying at 22.32

    All i can say is the method makes no sense to me. I have 9 years of trading experience. I decided to open up an account with 5000k with 50:1 margin.

    I follow chart patterns, with Resistance and support levels and piviots.

    So far its working but the questions you ask, I should have asked.
    All I know is the money is avaliable 2 days after you close your position, ready for with draw.

    I know when you go long the USD/jpy, you short the jpy and go long the USD. You do receieve intrest and have to pay intrest in the Leverage.

    Other than that....Stick around.... I'm not sure how long my winning streek will last, I hear you blow out easy in Forex. .. Time will tell. HOURS ARE HELL......2am is the best time to trade, eastern time. Of course you really get movement when the London is open, along with US and Japan. Early am 5am til 10am moves are big.

    The rest of the time, you have to play the odds on the range.

    Best of luck.