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FX Frequently Asked Questions

These are the most commonly asked questions about our FX service.

 

What is Foreign Exchange / Forex / FX?
Foreign exchange is the exchange of one currency for another. For example: exchanging Sterling for Euros or Euros for US Dollars. Currencies are always traded in pairs. The foreign exchange market is also known as the "Forex," (comes from the words Foreign and Exchange or "FX" market. 

Is FX traded on a central market?
No. FX trading is not conducted through an exchange. A transaction is settled between two counterparties and this is known as "over the counter" (OTC).

How big is the FX market?
The FX market is the largest financial market in the world. The average daily trade in the global forex market is currently over US$ 3 trillion with the UK handling the majority of global FX trades. Retail traders (individuals) make up a small, but growing proportion of this market. (source: Bank for International Settlements Survey of FX and derivative market activity, April 2007)

Is the FX market really 24/6?
Yes. The FX market is the only financial market in the world that is truly open 24 hours a day, 6 days a week. As one market goes to sleep another opens offering great liquidity for the FX trader - trading starts in New Zealand followed by Sydney, and moves around the world to Tokyo, London and New York.

How do retail investors access the FX market?
In order to trade FX you need an FX trading account with a broker like Barclays Stockbrokers. Unlike traditional share dealing - your broker will require you to deposit money into an account which some of which will be used to fund the trade

What is 'margin' and why is it important to FX trading?
A key feature of trading foreign exchange is that you trade using a margin, or deposit a fraction of the overall value of the trade you place. Fluctuations in the underlying currency pair can quickly lead to profits or losses. It is possible that you could lose some or all of your initial investment. You may be subject to daily margin calls if you leave your position open overnight. However you cant lose more than the funds within your account because the broker will automatically close positions while there is some margin available in your account.

What is Leverage?
Leverage, also referred to as gearing, is a key factor in currency. Leverage can accelerate your gains, or losses, even when there are relatively small movements in the currency price. For example when 100:1 leverage is offered and there is £20,000 in your account, you could buy or sell currency pairs up to a value of £2million.

While providing the potential for greater returns, leveraging can also lead to greater losses - movements in the value of investments lead to much greater movements in the value of the overall position, which could lead to sudden and large losses.

What is 'the spread'?
Just like trading traditional stocks and shares - the spread is the difference between the Bid (sell) and Offer (buy) price.

What is a Pip?
For most currencies prices are  quoted to 4 decimal places.  Each .0001 movement in the price is called a pip. For example if the value of the GBP/USD changes from 1.90001 to 1.90002 this would be a movement of 1 pip.

Do you guarantee to fill my order at the price on the screen?
On most occasions what you see is what you get

On what occasions might my ordered be filled at a different price?
Under certain prevailing market conditions pricing in the FX markets may be volatile, as FX on BARXdirect refreshes pricing many times per second it is possible that the latest price streamed into the platform may differ from the price you selected on screen, this may work to your advantage as well as against you

Is this normal in the FX market - I dont get this when I trade equities?
Yes - it is known as price slippage. With live streaming prices on the FX market prices move very quickly, particularly during economic and news events, FX on BARXdirect minimises the exposure to this slippage by refreshing its prices up to 8 times per second.

Will I pay Stamp Duty when I trade FX?
No. Unlike traditional share dealing there is no Stamp Duty levied on FX trades. Please note tax rules may change and depend upon individual circumstances.

Is Spot FX trading subject to Capital Gains Tax?
Yes. Just like traditional share dealing FX trades are subject to Capital Gains Tax at your usual rate. Please tax treatment will depend upon individual circumstances and tax rules can change in the future.

What is Spot FX?
Spot FX is the exchanging of one currency for another at a pre-agreed rate. For example buying Euros and selling Dollars at XX £/$ . Standard settlement for Spot FX trading is two days.

What are currency pairs?
Each currency pair is made up of a  base currency and a quote currency. So in the example of GBP/USD  the GBP is the  base currency and the USD is the quote currency. The base currency is what you are buying or selling and the quote currency is how much you will pay for one unit of the base currency.

What is the difference between Major and Minor currency pairs?
Often referred to as FX crosses in some cases major currency pairs can be more liquid than minor currency pairs.

Major currency pairs are the most liquid. For example:
USD/EUR (US $ v Euro)
GBP/USD (GB £ v US $) also refer to as Cable
USD/JPY (US $ v Japanese Yen)
GBP/CHF (GB £ v Swiss Franc)

Minor currency pairs are the less well known currencies, For example
AUD/USD (Australian $ v US $)
NZD/USD (New Zealand $ v US $)
Eastern European currencies

How do I trade Spot FX? Do I go long or short?
The easiest way to explain this is with an example - consider a client who wants to trade GBP/USD

  • If you think GBP is going to rise or USD going to fall you would Buy (go long) GBP
  • If you thought GBP was going to fall or USD going to rise you would Sell (go short) GBP

Every Pip (move in the exchange rate) will make or lose you money.

 

 

FX on BARXdirect from Barclays Stockbrokers is a trading name of Barclays Stockbrokers Ltd (the "Company").

Please note that BARXdirect via Barclays Stockbrokers may not be available in certain jurisdictions, especially the US and Japan. The products offered by Barclays Stockbrokers under the BARXdirect brand differ from products offered by Barclays Capital.

Barclays Stockbrokers is part of the Barclays Bank plc Group and is the Group name for the businesses of: Barclays Stockbrokers Limited, a member of the London Stock Exchange and PLUS. Registered No. 1986161; Barclays Sharedealing, Registered No. 2092410; Barclays Bank Trust Company, Registered No. 920880. Registered VAT No 243 8522 62. All companies are registered in England and the registered address is: 1 Churchill Place, London E14 5HP. All companies are authorised and regulated by the Financial Services Authority.