Risk Warnings
No Dealing Desk and Dealing Desk
In the interest of providing our clients with the best possible trading experience, we feel it is imperative for all traders, regardless of their previous experience, to be as well informed about the execution risks involved with trading.
Here you will find information detailing the execution risks associated with different types of Broker’s and their forex execution types.
No Dealing Desk Forex Execution Trading Risks
HIGH RISK INVESTMENT
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade products offered by your broker. You should carefully consider your objectives, financial situation, needs and level of experience. US brokers have to be registered with the NFA and you can check their registration information with the National Futures Association. PREMIERETRADE and or AFFILIATES (PREMIERE) provide general advice that does not take into account your objectives, financial situation or needs. The content of this website must not be construed as personal advice. The possibility exists that you could sustain a loss of some or all of your funds and therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. PREMIERE recommends you seek advice from an independent financial advisor.
PREMIERE MARKET OPINIONS
Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. PREMIERE will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
INTERNET TRADING RISKS
There are risks associated with utilizing an internet-based deal-execution trading system including, but not limited to, the failure of hardware, software, and internet connection. Since PREMIERE does not control signal power, its reception or routing via the internet, configuration of your equipment or reliability of its connection, we cannot be responsible for communication failures, distortions or delays when trading via the internet. PREMIERE employs backup systems and contingency plans to minimize the possibility of system failure, which includes allowing clients to trade via telephone.
NO DEALING DESK EXECUTION MODEL
Some forex trading customers will use Brokers who provide forex execution via a straight through processing, or No Dealing Desk execution model. In this model Brokers pass on to its clients the best prices that are provided by one of their liquidity providers (which include global banks, financial institutions, prime brokers and other market maker) with a fixed mark-up for each currency pair. In this model, Brokers do not act as a market marker in any currency pairs. As such, Brokers are reliant on these external providers for currency pricing. Although this model promotes efficiency and competition for market pricing, there are certain limitations to liquidity that can affect the final execution of your order.
SLIPPAGE
Brokers aim to provide clients with the best execution available and to get all orders filled at the requested rate. However, there are times when, due to an increase in volatility or volume, orders may be subject to slippage. Slippage most commonly occurs during fundamental news events or periods of limited liquidity. Instances such as trade rollover (5pm EST) is a known period in which the amount of liquidity tends to be limited as many liquidity providers settle transactions for that day. For more information on why rollover occurs, see the section on ‘Rollover Costs’. During periods such as these, your order type, quantity demanded, and specific order instructions can have an impact on the overall execution you receive.
Examples of specific order instructions include:
Good ‘Til Cancelled (“GTC”) Orders – Your entire order will be filled at the next available price(s) at the time it is received.
Immediate or Cancel (“IOC”) Orders – All or part of your order will be filled at the next available price with the remaining amount cancelled should liquidity not exist to fill your order immediately.
Fill or Kill (“FOK”) Orders – The order must be filled in its entirety or not at all.
The volatility in the market may create conditions where orders are difficult to execute. For instance, the price you receive in the execution of your order might be many pips away from the selected or quoted price due to market movement. In this scenario, the trader is looking to execute at a certain price but in a split second, for example, the market may have moved significantly away from that price. The trader’s order would then be filled at the next available price for that specific order. Similarly, given some Brokers No Dealing Desk model for forex execution, sufficient liquidity must exist to execute all trades at any price.
Some Brokers provide a number of basic and advanced order types to help clients mitigate execution risk. One way to mitigate the risk associated with slippage is to utilize the Market Range (Max Deviation for MT4 users) feature on some of the Brokers Platforms. The Market Range feature allows traders to specify the amount of potential slippage they are willing to accept on a market order by defining a range. Zero indicates that no slippage is permitted. By selecting zero on the Market Range, the trader is requesting his order to be executed only at the selected or quoted price, not any other price. Traders may elect to accept a wider range of permissible slippage to raise the probability of having their order(s) executed. In this scenario the order will be filled at the best price available within the specified range. For instance, a client may indicate that he is willing to be filled within 2 pips of his requested order price. The system would then fill the client within the acceptable range (in this instance, 2 pips) if sufficient liquidity exists. If the order cannot be filled within the specified range, the order will not be filled. Please note, Market Range orders specify a negative range only. If a more preferential rate is available at the time of execution traders are not limited by the specified range for the amount of positive price improvement they can receive.
Additionally, when triggered, stop orders become a market order available for execution at the next available market price. Stop orders guarantee execution but do not guarantee a particular price.
LIQUIDITY
During the first few hours after the open, the market tends to be thinner than usual until the Tokyo and London market sessions begin. These thinner markets may result in wider spreads, as there are fewer buyers and sellers. This is largely due to the fact that for the first few hours after the open, it is still the weekend in most of the world. Liquidity may also be impacted around trade rollover (5PM EST) as many of our multiple liquidity providers momentarily come offline to settle the day’s transactions which may also result in wider spreads around that time due to a lack of liquidity. In illiquid markets, traders may find it difficult to enter or exit positions at their requested price, experience delays in execution, and receive a price at execution that is a significant number of pips away from your requested rate.
In addition to the order type, a trader must consider the availability of a currency pair prior to making any trading decision. As in all financial markets, some instruments within that market will have greater depth of liquidity than others. Ample liquidity allows the trader to seamlessly enter or exit positions, near immediacy of execution, and minimal slippage during normal market conditions. However, certain currency pairs have more liquid markets than others.
The following are considered examples of Exotic Currencies which may have limited liquidity:
EUR/HUF SGD/JPY USD/HUF USD/SGD
EUR/PLN TRY/JPY USD/MXN USD/TRY
EUR/TRY USD/CZK USD/PLN USD/ZAR
HKD/JPY USD/HKD USD/RUB ZAR/JPY
These pairs have a level of risk associated with them that may not be inherent. The market for these currencies is very illiquid, with liquidity being maintained and provided by one, or few external sources. These liquidity concerns include but are not limited to, the inability to exit positions based on lack of market activity, differences in the prices quoted and final execution received, or a delay in execution while a counterparty for your specific transaction is identified. With these considerations in mind it is imperative that any trader factor this into any trading decision. For this reason we strongly encourage all traders to utilize advanced order types to mitigate these risks.
DELAYS IN EXECUTION
Delays in execution may occur using No Dealing Desk execution model for various reasons, such as technical issues with the trader’s internet connection; a delay in order confirmation from a liquidity provider; or by a lack of available liquidity for the currency pair that the trader is attempting to trade. Due to inherent volatility in the markets, it is imperative that traders have a working and reliable internet connection. There are circumstances when the trader’s personal internet connection may not be maintaining a constant connection with Brokers servers due to a lack of signal strength from a wireless or dialup connection. A disturbance in the connection path can sometimes interrupt the signal and disable the customers Trading Station, causing delays in the transmission of data between the trading station and the Brokers server.
RESET ORDERS
Market volatility creates conditions that make it difficult to execute orders at the given price due to an extremely high volume of orders. By the time orders are able to be executed, the bid/ask price at which a liquidity provider is willing to take a position may be several pips away.
In cases where the liquidity pool is not large enough to fill a Market Range order, the order will not be executed. For Limit Entry or Limit orders, the order would not be executed but instead reset until the order can be filled. Remember, both Limit Entry and Limit orders guarantee price but do not guarantee execution. Depending on the underlying trading strategy and the underlying market conditions traders may be more concerned with execution versus the price received.
WIDENED SPREADS
There may be instances when spreads widen beyond the typical spread. Spreads are a function of liquidity and in periods of limited liquidity, at market open, or during rollover at 5:00 PM ET at most US forex Brokers, spreads may widen in response to uncertainty in the direction of prices or to an uptick in market volatility, or lack of available liquidity. It is not uncommon to see spreads widen particularly around rollover. Trade rollover is typically a very quiet period in the market, since the business day in New York has just ended, and there are still a few hours before the new business day begins in Tokyo. Being cognizant of these patterns and taking them into consideration while trading with open orders or placing new trades around these times can improve your trading experience. This may occur during news events and spreads may widen substantially in order to compensate for the tremendous amount of volatility in the market. The widened spreads may only last a few seconds or as long as a few minutes. XPRESS strongly encourages traders to utilize caution when trading around news events and always be aware of their account equity, usable margin and market exposure. Widened spreads can adversely affect all positions in an account (discussed below).
HANGING ORDERS
During periods of high volume, hanging orders may occur. This is a condition where an order is in the process of executing but execution has not yet been confirmed. The order will be highlighted in red, and the “status” column will indicate “executed” or “processing,” in the “orders” window. In these instances, the order is in the process of being executed, but is pending until Broker receives confirmation from the liquidity provider that the quoted prices is still available. During periods of heavy trading volume, it is possible that a queue of orders will form. That increase in incoming orders may sometimes create conditions where there is a delay from the liquidity providers in confirming certain orders.
Depending on the type of order placed, outcomes may vary. In the case of a Market Range order that cannot be filled within the specified range, or if the delay has passed, the order will not be executed. In the case of an At Market order, every attempt will be made to fill the order at the next available price in the market. In both situations, the “status” column in the “orders” window will typically indicate “executed” or “processing.” The trade will simply take a few moments to move to the “open positions” window. Depending upon the order type, the position may in fact have been executed, and the delay is simply due to heavy internet traffic.
Keep in mind that it is only necessary to enter any order once. Multiple entries for the same order may slow or lock your computer or inadvertently open unwanted positions.
GREYED OUT PRICING
Greyed out pricing is a condition that occurs when forex liquidity providers that supply pricing to Brokers are not actively making a market for particular currency pairs and liquidity therefore decreases. Brokers do not intentionally “grey out” prices; however, at times, a severe increase in the difference of the spread may occur due to a loss of connectivity with a provider or due to an announcement that has a dramatic effect on the market that limits liquidity. Such greying out of prices or increased spreads may result in margin calls on a traders account. When an order is placed on a currency pair affected by greyed out prices, the P/L will temporarily flash to zero until the pair has a tradable price and the system can calculate the P/L balance.
ROLLOVER COSTS
Rollover is the simultaneous closing and opening of a position at a particular point during the day in order to avoid the settlement and delivery of the purchased currency. This term also refers to the interest either charged or applied to a trader’s account for positions held “overnight,” meaning after 5 p.m. ET at most US forex Brokers Platforms. The time at which positions are closed and reopened, and the rollover fee is debited or credited, is commonly referred to as Trade Rollover (TRO). It is important to note that rollover charges will be higher than rollover accruals. Spreads during rollover may be wider when compared to other time periods because of liquidity providers’ momentarily coming offline to settle the day’s transactions. Please manage positions accordingly around rollover and understand the implications of spreads widening in regard to execution with existing/open positions or new positions/orders.
EXCHANGE RATE FLUCTUATIONS (PIP COSTS)
Exchange rate fluctuations, or pip costs, are defined as the value given to a pip movement for a particular currency pair. This cost is the currency amount that will be gained or lost with each pip movement of the currency pair’s rate and will be denominated in the currency denomination of the account in which the pair is being traded. On some Brokers Platforms, the pip cost for all currency pairs can be found by selecting “View,” followed by “Dealing Views,” and then by clicking “Simple Rates” to apply the checkmark next to it. If “Simple Rates” already has a check mark next to it, viewing the dealing rates in the simple view is as easy as clicking the “Simple Dealing Rates” tab in the dealing rates window. Once visible, the simple rates view will display the pip cost on the right-hand side of the window.
INVERTED SPREADS
When you trade forex with Brokers using a No Dealing Desk execution model, you are trading on price feeds that are being provided by multiple liquidity providers, plus Brokers mark-up. In rare cases, these feed can be disrupted. This may only last for a moment, but when it does, spreads become inverted. During these rare occasions, Brokers advises that clients avoid placing At Market orders. While it may be tempting to place a “free trade,” keep in mind that the prices are not real and your actual fill may be many pips away from the displayed price. In the event that trades are executed at rates not actually offered by Brokers liquidity providers, Brokers reserves the right to reverse such trades, as they are not considered valid trades. By placing Market Range orders or not trading during these moments, traders can avoid the risk associated with the above scenarios.
HOLIDAY/WEEKEND EXECUTION
TRADING DESK HOURS
The quoted hours for some Brokers Trading Desk are from Sunday 5:15 p.m. ET to Friday at 4:55 p.m. ET. Please note that orders placed prior may be filled until 5:00 p.m. ET and that traders placing trades between 4:55 p.m. and 5:00 p.m. ET may be unable to cancel orders pending execution. In the event that a Market GTC Order is submitted right at market close, the possibility exists that it may not be executed until Sunday at market open. Please use caution when trading around Friday’s market close and factor all the information described above into any trading decision.
The open or close times may be altered by the Trading Desk because it relies on prices being offered by liquidity providers to Brokers. Outside of these hours, most of the major world banks and financial centers are closed. The lack of liquidity and volume during the weekend impedes execution and price delivery.
PRICES UPDATING BEFORE THE OPEN
Shortly prior to the open, the Trading Desk refreshes rates to reflect current market pricing in preparation for the open. At this time, trades and orders held over the weekend are subject to execution. Quotes during this time are not executable for new market orders. After the open, traders may place new trades, and cancel or modify existing orders.
GAPPING
Sunday’s opening prices may or may not be the same as Friday’s closing prices. At times, the prices on the Sunday open are near where the prices were on the Friday close. At other times, there may be a significant difference between Friday’s close and Sunday’s open. The market may gap if there is a significant news announcement or an economic event changing how the market views the value of a currency. Traders holding positions or orders over the weekend should be fully comfortable with the potential of the market to gap.
ORDER EXECUTION
Limit orders are often filled at the requested price or better. If the price requested (or a better price) is not available in the market, the order will not be filled. If the requested price of a Stop order is reached at the open of the market on Sunday, the order will become a Market order. Limit Entry orders are filled the same way as Limit orders. Stop Entry orders are filled the same way as Stops.
WEEKEND RISK
Traders who fear that the markets may be extremely volatile over the weekend, that gapping may occur, or that the potential for weekend risk is not appropriate for their trading style, may simply close out orders and positions ahead of the weekend. It is imperative that traders who hold open positions over the weekend understand that the potential exists for major economic events and news announcements to affect the value of your underlying positions. Given the volatility expressed in the markets it is not uncommon for prices to be a number of pips away at market open from market close. We encourage all traders to take this into consideration before making a trading decision.
MARGIN CALLS AND CLOSE OUTS
Please note that Brokers handle Margin calls differently in some cases, most do not provide a margin call warning to clients prior to liquidating open positions. Margin calls are triggered when your usable margin reaches zero. This occurs when your floating losses reduce your account equity to a level that is less than or equal to your margin requirement. Therefore, the result of any margin call is subsequent liquidation unless otherwise specified.
The idea of margin trading is that your margin acts as a good faith deposit to secure the larger notional value of your position. Margin trading allows traders to hold a position much larger than the actual account value. Brokers Trading Station has margin management capabilities, which allow for the use of leverage. Of course, trading on margin comes with risk as leverage may work against you as much as it works for you. If account equity falls to a level that is less than or equal to your margin requirement, the Brokers Trading Station will trigger an order to close all open positions. When positions have been over-leveraged or trading losses are incurred to the point that insufficient equity exists to maintain current open positions, a margin call will result and all open positions will be closed out (liquidated).
Please keep in mind that when the account’s useable margin reaches zero, all open positions are triggered to close. The liquidation process is entirely electronic, and there is no discretion on Brokers part as to the order in which trades are closed.
Although the margin call feature is designed to close positions when account equity falls below the margin requirements, there may be instances when liquidity does not exist at the exact margin call rate. As a result, account equity can fall below margin requirements at the time orders are filled, even to the point where account equity becomes negative. This is especially true during market gaps or volatile periods. Brokers will not hold traders responsible for deficit balances in this scenario, but clients should be cognizant that all funds on deposit in an account are subject to loss. Brokers also recommends that traders use Stop orders to limit downside risk in lieu of using a margin call as a final stop.
It is strongly advised that clients maintain the appropriate amount of margin in their accounts at all times. You may request to change your margin requirement by going to myfxcm.com and filling out the “Margin Change Request Form,” which is subject to approval by Brokers. Margin requirements may be changed based on account size, simultaneous open positions, trading style, market conditions, and at the discretion of Brokers.
Please note that different software trading platform users are or may be subject to different margin call procedures. When a margin call is triggered on the account, trades will be closed one by one until “Free Margin” is greater than zero. Some Brokers close all positions when a margin call is generated.
CHART PRICING VS. PRICES DISPLAYED ON THE PLATFORM
It is important to make a distinction between indicative prices (displayed on charts) and dealable prices (displayed on the Brokers Trading Station and or direct access software provider). Indicative quotes are those that offer an indication of the prices in the market, and the rate at which they are changing. These prices are derived from a host of contributors such as banks and clearing firms, which may or may not reflect where Brokers liquidity providers are making prices. Indicative prices are usually very close to dealing prices, but they only give an indication of where the market is. Executable quotes ensure finer execution and thus a reduced transaction cost. Because the spot forex market lacks a single central exchange where all transactions are conducted, each forex dealer may quote slightly different prices. Therefore, any prices displayed by a third party charting provider, which does not employ the market maker’s price feed, will reflect “indicative” prices and not necessarily actual “dealing” prices where trades can be executed.
MOBILE TRADING PLATFORMS
There are a series of inherent risks associated with the use of the mobile trading technology such as the duplication of order instructions, latency in the prices provided, and other issues that are a result of mobile connectivity. Prices displayed on the mobile platform are solely an indication of the executable rates and may not reflect the actual executed price of the order.
PREMIERE shall not be liable for any and all circumstances in which you experience a delay in price quotation or an inability to trade caused by network circuit transmission problems or any other problems outside the direct control of Brokers. Transmission problems include but are not limited to the strength of the mobile signal, cellular latency, or any other issues that may arise between you and any internet service provider, phone service provider, or any other service provider.
It is strongly recommended that clients familiarize themselves with the functionality of Brokers Mobile Trading Station prior to managing a live account via portable device.
Dealing Desk Forex Execution Trading Risks
DEALING DESK FOREX EXECUTION MODEL
Some Brokers also offer forex execution via a Dealing Desk execution model. Brokers will act as a dealer and is the counterparty to any trades that you undertake. In this model, Brokers compensation may not be limited to our standard markup and our interests may be in direct conflict with yours. Additionally, we face market risk as a result of entering into trades with you. Brokers may take steps to mitigate its risk arising from market making more effectively by, at our sole discretion and at any time and without previous consent, transferring your underlying account to your Brokers NDD execution offering. Brokers may also choose to transfer your account to their No Dealing Desk (NDD) offering should the balance in your account exceed the maximum.
Dealing Desk execution offers competitive spreads that may be up to one pip lower than some Brokers NDD spreads. In its Dealing Desk offering, some Brokers will not always act as the dealer and may utilize NDD execution for any currency pairs it offers. When Brokers do not act as the dealer, Brokers employ backup liquidity providers that will fill in during these times. Please note that Brokers Dealing Desk employs fewer liquidity providers than the No Dealing Desk (NDD) execution option. XPRESS Brokers does not guarantee that quotes, prices, or spreads will always be better on one form of execution as compared to the other. Customers should consider many factors when deciding which execution type best suits their needs (e.g., conflict of interest, trading style or strategy, etc.).
EUR/USD EUR/JPY USD/CHF GBP/JPY
EUR/CHF AUD/USD USD/CAD GBP/USD
EUR/GBP AUD/JPY USD/JPY NZD/USD
SLIPPAGE
Brokers aim to provide clients with the best execution available and to get all orders filled at the requested rate. However, there are times when, due to an increase in volatility, orders may be subject to slippage. Slippage most commonly occurs during fundamental news events or periods of high volatility. Instances such as trade rollover (5pm EST) is a known period in which the amount of liquidity tends to be limited as many liquidity providers settle transactions for that day. For more information on why rollover occurs, see the section on ‘Rollover Costs’. During periods such as these, your order type, quantity demanded, and specific order instructions can have an impact on the overall execution you receive.
The volatility in the market may create conditions where orders are difficult to execute. For instance, the price you receive in the execution of your order might be many pips away from the selected or quoted price due to market movement. In this scenario, the trader is looking to execute at a certain price but in a split second, for example, the market may have moved significantly away from that price. The trader’s order would then be filled at the next available price for that specific order. Brokers provide a number of basic and advanced order types to help clients mitigate execution risk.
LIQUIDITY
During the first few hours after the open, the market tends to be thinner than usual until the Tokyo and London market sessions begin. These thinner markets may result in wider spreads, as there are fewer buyers and sellers. This is largely due to the fact that for the first few hours after the open, it is still the weekend in most of the world. Liquidity may also be impacted around trade rollover (5PM EST) as many of our multiple liquidity providers momentarily come offline to settle the day’s transactions which may also result in wider spreads around that time due to a lack of liquidity. In illiquid markets, traders may find it difficult to enter or exit positions at their requested price, receive wider spreads, experience delays in execution, and/or receive a price at execution that is a significant number of pips away from your requested rate.
DELAYS IN EXECUTION
A delay in execution may occur using Brokers Dealing Desk execution model for various reasons, such as technical issues with the trader’s internet connection to Brokers or by a lack of available liquidity for the currency pair that trader is attempting to trade. Due to inherent volatility in the markets, it is imperative that traders have a working and reliable internet connection. There are circumstances when the trader’s personal internet connection may not be maintaining a constant connection with the Brokers servers due to a lack of signal strength from a wireless or dialup connection. A disturbance in the connection path can sometimes interrupt the signal and disable the Brokers Trading Station, causing delays in the transmission of data between the trading station and the Brokers server.
RESET ORDERS
Market volatility creates conditions that make it difficult to execute orders at the given price due to an extremely high volume of orders. By the time orders are able to be executed, the bid/ask price at which XPRESS Brokers Trading Desk is willing to take a position may be several pips away.
WIDENED SPREADS
There may be instances when spreads widen beyond the typical spread. Spreads are a function of liquidity and in periods of limited liquidity, at market open, or during rollover at 5:00 PM ET, spreads may widen in response to uncertainty in the direction of prices or to an uptick in market volatility, or lack of available liquidity. It is not uncommon to see spreads widen particularly around rollover. Trade rollover is typically a very quiet period in the market, since the business day in New York has just ended, and there are still a few hours before the new business day begins in Tokyo. Being cognizant of these patterns and taking them into consideration while trading with open orders or placing new trades around these times can improve your trading experience. This may occur during news events and spreads may widen substantially in order to compensate for the tremendous amount of volatility in the market. The widened spreads may only last a few seconds or as long as a few minutes. Brokers strongly encourages traders to utilize caution when trading around news events and always be aware of their account equity, usable margin and market exposure. Widened spreads can adversely affect all positions in an account.
HANGING ORDERS
During periods of high volume, hanging orders may occur. This is a condition where an order is in the process of executing but execution has not yet been confirmed. The order will be highlighted in red, and the “status” column will indicate “executed” or “processing,” in the “orders” window. In these instances, the order is in the process of being executed, but is pending. During periods of heavy trading volume, it is possible that a queue of orders will form. That increase in incoming orders may sometimes create conditions where there is a delay in confirming certain orders.
GREYED OUT PRICING
Greyed out pricing is a condition that occurs when forex liquidity providers that supply pricing to Brokers are not actively making a market for particular currency pairs and liquidity therefore decreases. Brokers do not intentionally “grey out” prices; however, at times, a severe increase in the difference of the spread may occur due to a loss of connectivity with a provider or due to an announcement that has a dramatic effect on the market that limits liquidity. Such greying out of prices or increased spreads may result in margin calls on a traders account. When an order is placed on a currency pair affected by greyed out prices, the P/L will temporarily flash to zero until the pair has a tradable price and the system can calculate the P/L balance.
ROLLOVER COSTS
Rollover is the simultaneous closing and opening of a position at a particular point during the day in order to avoid the settlement and delivery of the purchased currency. This term also refers to the interest either charged or applied to a trader’s account for positions held “overnight,” meaning after 5 p.m. ET at most US forex Brokers Platforms. The time at which positions are closed and reopened, and the rollover fee is debited or credited, is commonly referred to as Trade Rollover (TRO). It is important to note that rollover charges will be higher than rollover accruals. Spreads during rollover may be wider when compared to other time periods because of liquidity providers’ momentarily coming offline to settle the day’s transactions. Please manage positions accordingly around rollover and understand the implications of spreads widening in regard to execution with existing/open positions or new positions/orders.
EXCHANGE RATE FLUCTUATIONS (PIP COSTS)
Exchange rate fluctuations, or pip costs, are defined as the value given to a pip movement for a particular currency pair. This cost is the currency amount that will be gained or lost with each pip movement of the currency pair’s rate and will be denominated in the currency denomination of the account in which the pair is being traded. On some Brokers Platforms, the pip cost for all currency pairs can be found by selecting “View,” followed by “Dealing Views,” and then by clicking “Simple Rates” to apply the checkmark next to it. If “Simple Rates” already has a check mark next to it, viewing the dealing rates in the simple view is as easy as clicking the “Simple Dealing Rates” tab in the dealing rates window. Once visible, the simple rates view will display the pip cost on the right-hand side of the window.
INVERTED SPREADS
When you trade forex with Brokers using a No Dealing Desk execution model, you are trading on price feeds that are being provided by multiple liquidity providers, plus Brokers mark-up. In rare cases, these feed can be disrupted. This may only last for a moment, but when it does, spreads become inverted. During these rare occasions, Brokers advises that clients avoid placing At Market orders. While it may be tempting to place a “free trade,” keep in mind that the prices are not real and your actual fill may be many pips away from the displayed price. In the event that trades are executed at rates not actually offered by Brokers liquidity providers, Brokers reserves the right to reverse such trades, as they are not considered valid trades. By placing Market Range orders or not trading during these moments, traders can avoid the risk associated with the above scenarios.
HOLIDAY/WEEKEND EXECUTION
TRADING DESK HOURS
The quoted hours for some Brokers Trading Desk are from Sunday 5:15 p.m. ET to Friday at 4:55 p.m. ET. Please note that orders placed prior may be filled until 5:00 p.m. ET and that traders placing trades between 4:55 p.m. and 5:00 p.m. ET may be unable to cancel orders pending execution. In the event that a Market GTC Order is submitted right at market close, the possibility exists that it may not be executed until Sunday at market open. Please use caution when trading around Friday’s market close and factor all the information described above into any trading decision.
The open or close times may be altered by the Trading Desk because it relies on prices being offered by liquidity providers to Brokers. Outside of these hours, most of the major world banks and financial centers are closed. The lack of liquidity and volume during the weekend impedes execution and price delivery.
PRICES UPDATING BEFORE THE OPEN
Shortly prior to the open, the Trading Desk refreshes rates to reflect current market pricing in preparation for the open. At this time, trades and orders held over the weekend are subject to execution. Quotes during this time are not executable for new market orders. After the open, traders may place new trades, and cancel or modify existing orders.
GAPPING
Sunday’s opening prices may or may not be the same as Friday’s closing prices. At times, the prices on the Sunday open are near where the prices were on the Friday close. At other times, there may be a significant difference between Friday’s close and Sunday’s open. The market may gap if there is a significant news announcement or an economic event changing how the market views the value of a currency. Traders holding positions or orders over the weekend should be fully comfortable with the potential of the market to gap.
INVERTED SPREADS
When trading with Brokers using Dealing Desk execution model, all quotable prices are provided by their Trading Desk. Brokers Trading Desk may rely on various third party sources for the prices that it makes available to clients. In the event that a manifest (misquoted) price is provided to us from a source that we generally rely on, all trades executed on that manifest (misquoted) price may be revoked, as the manifest (misquoted) price is not representative of genuine market activity. These manifest (misquoted) prices can lead to an inversion in the spread.
HOLIDAY/WEEKEND EXECUTION
TRADING DESK HOURS
The quoted hours for the Trading Desk are from Sunday 5:15 p.m. ET to Friday at 4:55 p.m. ET. Please note that orders placed prior may be filled until 5:00 p.m. ET and that traders placing trades between 4:55 p.m. and 5:00 p.m. ET may be unable to cancel orders pending execution. In the event that a Market GTC Order is submitted right at market close, the possibility exists that it may not be executed until Sunday market open. Please use caution when trading around Friday’s market close and factor all the information described above into any trading decision.
The open or close times may be altered by the Trading Desk because it relies on prices being offered by third party sources. Outside of these hours, most of the major world banks and financial centers are closed. The lack of liquidity and volume during the weekend impedes execution and price delivery.
PRICES UPDATING BEFORE THE OPEN
Shortly prior to the open, the Trading Desk refreshes rates to reflect current market pricing in preparation for the open. At this time, trades and orders held over the weekend are subject to execution. Quotes during this time are not executable for new market orders. After the open, traders may place new trades, and cancel or modify existing orders.
GAPPING
Sunday’s opening prices may or may not be the same as Friday’s closing prices. At times, the prices on the Sunday open are near where the prices were on the Friday close. At other times, there may be a significant difference between Friday’s close and Sunday’s open. The market may gap if there is a significant news announcement or an economic event changing how the market views the value of a currency. Traders holding positions or orders over the weekend should be fully comfortable with the potential of the market to gap.
ORDER EXECUTION
Limit orders are often filled at the requested price or better. If the price requested (or a better price) is not available in the market, the order will not be filled. If the requested price of a Stop order is reached at the open of the market on Sunday, the order will become a Market order. Limit Entry orders are filled the same way as Limit orders. Stop Entry orders are filled the same way as Stops.
WEEKEND RISK
Traders who fear that the markets may be extremely volatile over the weekend, that gapping may occur, or that the potential for weekend risk is not appropriate for their trading style, may simply close out orders and positions ahead of the weekend. It is imperative that traders who hold open positions over the weekend understand that the potential exists for major economic events and news announcements to affect the value of your underlying positions. Given the volatility expressed in the markets it is not uncommon for prices to be a number of pips away at market open from market close. We encourage all traders to take this into consideration before making a trading decision.
MARGIN CALLS AND CLOSE OUTS
Please note that Brokers handle Margin calls differently in some cases, most do not provide a margin call warning to clients prior to liquidating open positions. Margin calls are triggered when your usable margin reaches zero. This occurs when your floating losses reduce your account equity to a level that is less than or equal to your margin requirement. Therefore, the result of any margin call is subsequent liquidation unless otherwise specified.
The idea of margin trading is that your margin acts as a good faith deposit to secure the larger notional value of your position. Margin trading allows traders to hold a position much larger than the actual account value. Brokers Trading Station has margin management capabilities, which allow for the use of leverage. Of course, trading on margin comes with risk as leverage may work against you as much as it works for you. If account equity falls to a level that is less than or equal to your margin requirement, the Brokers Trading Station will trigger an order to close all open positions. When positions have been over-leveraged or trading losses are incurred to the point that insufficient equity exists to maintain current open positions, a margin call will result and all open positions will be closed out (liquidated).
Please keep in mind that when the account’s useable margin reaches zero, all open positions are triggered to close. The liquidation process is entirely electronic, and there is no discretion on Brokers part as to the order in which trades are closed.
Although the margin call feature is designed to close positions when account equity falls below the margin requirements, there may be instances when liquidity does not exist at the exact margin call rate. As a result, account equity can fall below margin requirements at the time orders are filled, even to the point where account equity becomes negative. This is especially true during market gaps or volatile periods. Brokers will not hold traders responsible for deficit balances in this scenario, but clients should be cognizant that all funds on deposit in an account are subject to loss. Brokers also recommends that traders use Stop orders to limit downside risk in lieu of using a margin call as a final stop.
It is strongly advised that clients maintain the appropriate amount of margin in their accounts at all times. You may request to change your margin requirement by going to myfxcm.com and filling out the “Margin Change Request Form,” which is subject to approval by Brokers. Margin requirements may be changed based on account size, simultaneous open positions, trading style, market conditions, and at the discretion of Brokers.
Please note that different software trading platform users are or may be subject to different margin call procedures. When a margin call is triggered on the account, trades will be closed one by one until “Free Margin” is greater than zero. Some Brokers close all positions when a margin call is generated.
CHART PRICING VS. PRICES DISPLAYED ON THE PLATFORM
It is important to make a distinction between indicative prices (displayed on charts) and dealable prices (displayed on the Brokers Trading Station). Indicative quotes are those that offer an indication of the prices in the market, and the rate at which they are changing. These prices are derived from a host of contributors such as banks and clearing firms, which may or may not reflect where Brokers liquidity providers are making prices. Indicative prices are usually very close to dealing prices, but they only give an indication of where the market is. Executable quotes ensure finer execution and thus a reduced transaction cost. Because the spot forex market lacks a single central exchange where all transactions are conducted, each forex dealer may quote slightly different prices. Therefore, any prices displayed by a third party charting provider, which does not employ the market maker’s price feed, will reflect “indicative” prices and not necessarily actual “dealing” prices where trades can be executed.
MOBILE TRADING PLATFORMS
There are a series of inherent risks associated with the use of the mobile trading technology such as the duplication of order instructions, latency in the prices provided, and other issues that are a result of mobile connectivity. Prices displayed on the mobile platform are solely an indication of the executable rates and may not reflect the actual executed price of the order.
PREMIERE shall not be liable for any and all circumstances in which you experience a delay in price quotation or an inability to trade caused by network circuit transmission problems or any other problems outside the direct control of Brokers. Transmission problems include but are not limited to the strength of the mobile signal, cellular latency, or any other issues that may arise between you and any internet service provider, phone service provider, or any other service provider.
It is strongly recommended that clients familiarize themselves with the functionality of Brokers Mobile Trading Station prior to managing a live account via portable device.