Tradable Instruments & Margins

Currency trading (or foreign exchange) involves ‘buying’ one currency and ‘selling’ another simultaneously to profit from an anticipated movement in the exchange rate. The global foreign exchange market is the largest and most liquid in the world and trades around the clock. Market participants include banks, corporates and other institutions for the purposes on international trade or hedging, as well as traders – or speculators – attempting to profit from price movements.

Contracts for differences (CFDs) offer the opportunity to gain exposure to anticipated price movements in an underlying asset class such as a currency, commodity, stock or index. CFDs are leveraged financial derivatives offering a large exposure to an underlying asset for a small outlay. When trading CFDs with Fortrade, you are not buying (or selling) the underlying asset, but instead opening a “long” (buy) or “short” (sell) position on that asset’s spot price.

CFDs offer a number of advantages over other alternatives, including leveraged exposure offering the potential of large returns for minimal outlay, around-the-clock trading, and easy and swift access to the market.

Fortrade offers a wide range of financial instruments: currency pairs, stocks, indices, energy products, precious metals, US bonds and more.

Please contact your Representative (or email [email protected]) to find out more about Fortrade’s ECN offer.

Click here for Fortrade’s ECN trading conditions.

CFD stands for ‘Contract for Difference’, the ‘difference’ being between your trade’s open and closing points.

Fortrade creates a CFD contract based on current market conditions, enabling you to trade on the price movement of underlying financial assets. We offer CFDs on a wide range of global markets and our CFD instruments include shares, treasuries, currency pairs, commodities, and stock indices, such as the UK 100.

The contract will have both a ‘buy’ and ‘sell’ price and you have the option of choosing to either ‘buy’, also known as going long, or ‘sell’, known as ‘going short’. It’s important to remember you’re trading CFD contracts, not physically trading in the underlying market. While CFD product is very flexible, giving you the ability to use stop losses and limits. It also requires a high level of risk management by using STOP orders.

CFDs use leverage and margins. This means you only have to put down a small deposit for a much larger market exposure. This is called ‘trading on margin’. You only need to deposit a small percentage of the full value of the trade in order to open a position.

While trading on margin allows you to magnify your returns, losses will also be magnified. Leverage comes with significant risks. Although your investment capital can go further, if the markets move in the other direction to your trade you will make a loss and the money you lose can exceed the amount you placed to make the trade. You could also lose more than your initial deposit.

Short-selling CFDs in a falling market

CFD trading enables you to sell (short) an instrument if you believe it will fall in value, with the aim of profiting from the predicted downward price move. If your prediction turns out to be correct, you can buy the instrument back at a lower price to make a profit. If you are incorrect and the value rises, you will make a loss.

To ensure you can cover any losses you might incur on your positions, Fortrade requires sufficient collateral. This collateral is typically referred to as margin. The margin available in your account will limit the size of the positions you can open.

The term leverage is often used to describe the margin requirements. For example, leverage of 50:1 corresponds to a margin requirement of 2% (1 divided by 50 is 0.02 or 2%). A 2% margin requirement means that, if you wish to open a new position, then you must have 2% of the size of that position available as margin.

For example: If a client’s Equity is currently 1,000 GBP, and he decides to open a Buy position of 100,000 GBP/USD, which the offered leverage on is 1 to 100 that reflects a margin req. of 1%.

In that case, the client must have an equity of at least 1% of 100,000 GBP (1,000 GBP) in order to open that position – if he has that amount, the trade will be opened successfully.

In case that client has less than 1,000 GBP in his equity while trying to open the same position, the transaction would not be opened, i.e., failed.

Fortrade requires a specific margin to be available in your account for each trade you enter in.

You can see Fortrade’s Margin Rates list here: trading-conditions.

When a company’s stock price increases to unusual levels, one option is to split the stock thereby reducing the price of individual shares, making them for affordable, by increasing the overall number of shares. It is important to note this well-established practice in no way affects the underlying value of the company.
An example:

• A company with a market capitalization of $1,000,000 has 10,000 outstanding shares at $100 per share (10,000 X $100 = $1,000,000).
• With a 1:4 stock split, the outstanding shares would be multiplied by 4 meaning the 10,000 outstanding shares would become 40,000 shares and the share price would be decreased to $25 per share thereby maintaining the market capitalization of $1,000,000 (40,000 X $25 = $1,000,000).

For a variety of reasons, a company may choose to perform a reverse stock split increasing the price of each individual share by consolidating the overall number of shares. It is important to note this well-established practice in no way affects the underlying value of the company.
An Example:

• A company with a market capitalization of $1,000,000 has 1,000,000 outstanding shares at $1 per share (1,000,000 X $1 = $1,000,000).
• With a 4:1 reverse stock split, the outstanding shares would be consolidated by 4 meaning the 1,000,000 outstanding shares would become 250,000 shares and the share price would be increased to $4 per share thereby maintaining the market capitalization of $1,000,000 (250,000 X $4 = $1,000,000).

If the stock underlying a Fortrade stock is split/reverse split, Fortrade will issue an email outlining the following:

The name of the company and stock, the type of split and the effective date of the split.

All OPEN CFD orders affected by the split will be:

1. Closed by Fortrade at last, pre-split closing market price
2. New positions will be opened at the new split amount X 1/4 (divided by four)
3. The new price will be Friday’s closing price x 4 (times four)

• All pending orders affected by the split will be deleted, including Stop Loss and Take Profit orders.
• Clients will be able to open new trades with the new market post-split price.

The name of the company and stock, the type of split and the effective date of the split.

All OPEN CFD orders affected by the split will be:

4. Closed by Fortrade at last, pre-split closing market price
5. New positions will be opened at the new split amount X 4 (times four)
6. The new price will be Friday’s closing price x 1/4 (divided by four)

• All pending orders affected by the split will be deleted, including Stop Loss and Take Profit orders.
• Clients will be able to open new trades with the new market post-split price.