Forex FAQ - General Concepts & Basics of FX

We do not offer fixed spreads and cannot accurately predict the real spreads on the market. Unlike a dealing desk, we do not control the spread. However, in general, you will find that the spreads on our system are far better than anything you will find on a traditional dealing desk Forex broker. The "spread" (difference between the bid and ask) is a product of the best bid (the best price someone is willing to buy at) and the best ask/offer (the best price someone is willing to sell at). On a dealing desk broker, that "someone" is always your broker. In the quotes you see on our system, that "someone" could be any of the liquidity providers connected to us through Integral's FX Grid® aggregated liquidity. For example, if LP1 is willing to buy at 1.02451 or lower and is willing to sell at 1.02462 or higher; and LP2 is willing to buy at 1.02455 or lower and is willing to sell at 1.02468 or higher; then, in a hypothetical scenario in which these two are the only two liquidity providers currently quoting on this particular currency pair, then the best bid would be 1.02455 and the best ask would be 1.02462. As a result, you would see a better (tighter) spread than you would if you had only one of the two liquidity providers to provide quotes to you. While this will typically create a better trading environment for you, it also means that we cannot control nor predict these factors.

Please note: The above scenario is an example to illustrate and simplify the concept of a double-auction market process and should not be taken literally. Also, depending on your account type, you may see a padded quote in lieu of a commission charge such as in the case of STP account types.

We currently offer the following pairs for live trading accounts:

Major Pairs:
EUR/USD
GBP/USD
USD/JPY
USD/CHF
AUD/USD
NZD/USD
USD/CAD

Crosses:
AUD/CAD
AUD/CHF
AUD/JPY
AUD/NZD
CAD/CHF
CAD/JPY
CHF/JPY
EUR/AUD
EUR/CAD
EUR/CHF
EUR/GBP
EUR/JPY
EUR/NZD
GBP/AUD
GBP/CAD
GBP/CHF
GBP/JPY
NZD/JPY

The term ECN in finance refers to "electronic communications network". While the actual definition sounds vague and general, the actual meaning as it is understood within the finance world (including in the stock market and futures markets) refers to an electronic system that provides quotes from liquidity providers (parties who post bids and offers at prices that are not immediately executable, aka. "non-marketable orders") and matches their orders against those of liquidity takers or removers (parties who enter orders which are immediately executable, such as a buy order for a price equal to or higher than the best offer or a sell or short sell order for a price equal to or lower than the best bid, aka. "market orders"). While the exact features of an ECN may vary between companies, the main factor that differentiates an ECN within the currency trading world from other alternatives is that "raw" quotes are typically provided and the brokerage is compensated with a commission charge.

In the FX industry, STP refers to "Straight-Through Processing". The primary difference between ECN and STP is that an STP account would compensate the broker by adding a spread-padding to the quotes rather than charging a commission. Otherwise, the function of the broker is similar to that of an ECN in that trades are still passed through to liquidity providers. STP is also often known as NDD (No Dealing Desk) as the term originated in the early period of the retail Forex industry when the concept was introduced as an alternative to the traditional dealing desk business model in which brokers would simply bet against their clients by effectively holding positions opposite the trader. (If trades are not passed on to a liquidity provider, then a broker would naturally have taken a position against the trader as any profits the trader makes will come straight out of the broker's pocket and any losses the trader suffers will be profits for the broker.) NDD/STP and ECN are the concepts which were introduced when such behaviour had been exposed. In effect, NDD/STP and ECN brokers are also more stable as market risk is automatically hedged away and profits for the broker originate from spread paddings or commissions.

STP accounts: None. ECN accounts: $0.30 per Mini lot per side ($0.60 per round-turn). Please note that each "trade ticket" in MetaTrader is actually a round-turn as the ticket is used to open and close a particular round-turn trade.

Every week, the currency markets open at the start of bank business hours in Australia on Monday mornings (in Australia's time zone) and close at the end of bank business hours in the United States (in New York's time zone) on Fridays. In effect, this translates to an opening time of Sunday at 5:00 PM in New York time (22:00 in London) and a closing time of Friday at 5:00 PM in New York time (22:00 in London). Depending on the current status of daylight savings time in the US and the rest of the world (which does not switch on the same day), Forex market hours are typically 11:00 AM on Monday until 11:00 AM on Saturday in New Zealand local time. The appearance of a 24-hour market in foreign exchange is actually the result of the time zone differences between the world's largest interbank market participants' respective financial centres: Sydney, Australia; Tokyo, Japan; Frankfurt, Germany; London, England; New York, NY, USA. As a general rule of thumb, most of the banks' FX trading desks are open from 08:00 (8:00 AM) to 17:00 (5:00 PM) in each of their local time zones. (While other global financial centres also participate in the interbank market, these particular cities' institutions cause the most noticeable patterns of volatility changes and trading volume shifts over the course of each currency trading day.)

Yes. As a registered financial service provider, we are regulated by the Financial Markets Authority.

Yes. We have no reason to limit the style of trading that may suit you.

Yes. Automated trading algorithms, Forex robots, and any other term referring to automated trading systems that can be run using the trading software is allowed. Please be aware of the risks of automated trading systems as you will be responsible for all profits and losses regardless of your method of order entry.

Yes. "Hedging", which is defined by most individual currency traders as opening two opposite positions (a buy and a sell) simultaneously on the same instrument (aka. "locked trades") are allowed by default as a feature of MetaTrader. As we prefer to offer freedom of choice, this feature has not been disabled. Please note, however, that the offer of freedom is not a recommendation. Any net position held with such "hedged" positions can be created using a single transaction to avoid double-charged overnight swap. Please note that real hedging as defined by professionals in the finance industry involves risk reduction using different instruments (for example, taking opposite trades on two pairs that are highly inverse-correlated but not 100% correlated), not holding opposite open positions on the same instrument. While we realise that this practice is common and popular among individual FX traders as a psychological comfort tool and sometimes used simply due to the simplicity of using the MetaTrader interface as is, we feel it is our responsibility to warn you that such patterns of trading are not actually necessary to achieve the same net result and our systems are currently not configured to avoid double-charging overnight swap rates on your account if you choose to "hedge" in this manner.

Yes. Please note, however, that day trading during major economic news announcements (at least five minutes before and after such times of day) can be extremely dangerous due to the extreme volatility and inconsistent liquidity available during such periods. While many individual FX traders are accustomed to blaming traditional dealing desk brokers for slippage, please be aware that slippage is a real factor on all double-auction markets including centralised markets such as stock exchanges and futures exchanges, where no such accusations are typically lodged at retail brokerage firms. Unfortunately, artificial slippage controlled by retail FX dealers has given the concept a bad name in this industry and has coloured many traders' views of the event as being a form of manipulation. In a real ECN or STP environment, slippage may still happen at times due to actual market factors (ie. a market participant who previously posted a bid has cancelled the other or was taken out by a market order of equal or larger size prior to the entry of your order, and other such events.) While such events tend to happen much less often in a real ECN/STP environment, they remain a very real possibility as part of any double-auction market. The likelihood is much higher during times of extreme volatility such as the periods surrounding a major economic news announcement. There are many free web sites on the internet which provide calendars of upcoming economic news announcements that may affect the currency pairs that you trade. Trade the news at your own risk if you choose to do so.

Yes. Please contact our Client Support Department if you would like to become a fund manager using our percentage-allocation money management system. Your clients will then be able to sign up for managed account by designating you as their fund manager.

Yes. While we presently do not advertise the services of any fund managers, there are a number of fund managers on our system using a percent-allocation money management model. By becoming a client of a fund manager with a managed account, the manager's trades will be automatically allocated to your trading account on a percentage-adjusted basis. For example, if your fund manager gains 10% on the overall assets under his or her management, your managed account will also gain 10%.

No.

Yes, we offer swap-free accounts on Integral Power Trader. However, please note that we only do so on an individual approval basis. After you have applied for a Power Trader account type, please contact client support and tell us the reason you need a swap-free account. In general, if you are a resident of an Islamic country or can otherwise prove that you are of Islamic faith, approval will not be difficult.

Please note, however, that due to our true ECN brokerage business model, we will often incur losses by offering these accounts if positions are regularly held past rollover time. We offer swap-free accounts as a courtesy to those who cannot be charged or credited for swaps or rollovers for religious reasons. As a result, please be aware that we cannot honour all requests. Additionally, a commission of $0.50 USD per 10,000 (0.1 Lot) traded (which is $1.00 per 10,000 roundturn) will be added to the commission charge for swap-free Power Trader ECN accounts.

Swap-free accounts are offered for religious purposes only. We will regularly monitor swap-free accounts for abuse (including attempts to gain arbitrage profit on rollover credits by holding counter positions in a swap free account).

(We currently offer swap-free accounts on the Integral Power Trader platform only. Our MetaTrader accounts are not yet available without rollover charges. However, if there is enough demand, we may offer them on MT4 in the future as well so let us know.)