Frequently Asked Questions

Overview

Below are some of the most frequently asked questions from WSD. Please scroll down for a complete listing of all FAQs that are available on our website. . If your question is not in the list below please contact one of our friendly and competent assistants and they will be glad to be of assistance to you.

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• What's the difference between a practice and live trading account?

  A WSD Direct practice account features real-time quotes and charts in a demo environment, along with all the trading tools and information you'll have access to as a WSD Direct customer, including single and contingent order types, a real-time newsfeed, up to the minute market commentary, daily and weekly research, and more.

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Forex Market

• What is a Foreign Exchange Market?

  The Foreign Exchange market, also referred to as the "Forex" market, is the most traded financial market in the world, with a daily average turnover of approximately US$3.2 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.

• Where is the central location of the FX Market?

  FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or 'Interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.

• Who are the participants in the FX Market?

  The Foreign Exchange market is called an 'Interbank' market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and individual investors.

• When is the FX market open for trading?

  The FX Market is accessible 24/5, meaning around the clock really since there is always a market somewhere that is trading to be found, except during the weekends when all the markets encounter one common period of closing time.

• What are the most commonly traded currencies in the FX markets?

  The most often traded or 'liquid' currencies are those of countries with stable governments, respected central banks, and low inflation. Today, over 85% of all daily transactions involve trading of the major currencies, which include the US Dollar (USD) , Japanese Yen (JPY) , Euro (EUR) , British Pound (GBP), Swiss Franc (CHF) , Canadian Dollar (CAD) and the Australian Dollar (AUD).

• Is Foreign Exchange trading expensive?

  WSD Direct requires a minimum deposit of $200. WSD Direct allows customers to execute margin trades at up to 200:1 leverage. This means that investors can execute trades of $10,000 with an initial margin requirement of $50. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. A more pragmatic margin trade for someone new to the FX markets would be 20:1 but ultimately depends on the investor's appetite for risk.

• What is Margin?

  Margin is essentially collateral for a position. It allows traders to take on leveraged positions with a fraction of the equity necessary to fund the trade. In the equity markets, the usual margin allowed is 50% which means an investor has double the buying power. In the Foreign Exchange market leverage ranges from 1% to 2%, giving investors the high leverage needed to trade actively. Of course, trading on margin can increase your risk.

• What does it mean have a 'long' or 'short' position?

  In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the trader benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the trader benefits from a declining market. However, it is important to remember that every FX position requires a trader to go long in one currency and short the other.

• What is a Forward deal?

  A forward deal is a contract where the buyer and seller agree to buy or sell an asset or currency at a spot rate for a specified date in the future (usually up to 60 days). Forward contracts are conducted as a way to cover (hedge) future movements in exchange rates. Margin spreads are higher than in Day Trading but no renewal fees are charged.

• What is a Limit Order?

  A limit order is where you nominate a rate at which you want to open a deal. When and if this rate occurs in the market, your 'reserved' deal is automatically opened.

• What about terms like "bid/ask", "spread", and "rollover"?

  WSD Direct has an extensive Explanation of Key Terms that provides detailed definitions of all Foreign Exchange related terms.

  
  Click here for Explanation of Key Terms
• What is the difference between an "intraday" and "overnight position"?

  Intraday positions are all positions opened and closed anytime during the 24 hour trading period of WSD. Overnight positions are positions that are still open at the end of normal trading day (5:00 PM), which are automatically rolled by WSD at competitive rates (based on the currencies interest rate differentials) to the next trading day.

• How are currency prices determined?

  Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Foreign Exchange market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Foreign Exchange market makes it virtually impossible for any one entity to "drive" the market for any length of time.

• How do I know which currency will go up or down?

  International currency prices are highly volatile and very difficult to predict. Due to such volatility, there is no system that can assure you that transactions on the foreign currency market should result in great benefits to you, nor is it possible to guarantee that your transactions would yield favorable results.

• How do I manage risk?

  The most common risk management tools in FX trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against a trader's position. Contingent orders may not necessarily limit your risk for losses. One other option would be to hedge your positions.

• What kind of trading strategy should I use?

  Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor. The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.

• What currencies can I trade with WSD Direct?

  WSD Direct offers all major currency pairs for trading as well as exotics, gold and silver in some regions, CFD's, and Crude oil.

• Is the Foreign Exchange market regulated?

  Yes, in many world regions Foreign Exchange is regulated (though not all regions). WSD Direct holds licenses in:

  
  
  

  Authorized Futures and Options Firm by New Zealand Exchange Limited

  Broker Clearing Member of the Dubai Gold Commodities Exchange.

• Is Forex risky?

  Yes, we advise all our clients that foreign exchange trading does involve substantial amount of risk. With WSD you cannot lose more than your 'margin', the money you are prepared to risk plus the daily rolling fee if you have entered a Day Trade transaction. Profits are unlimited but you can never lose more than what you initially risked. However, risk only what you can afford. Before you join you need to read our Disclaimer and Terms and Conditions.

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