Specifics and Facts

If you want to trade you simply have to know what volatility is, how interest rate changes occur and what do they influence. While you chat with traders they will often use slang to express their thoughts in a shorter form: "market is really thin today...". Please click on the links below to read more about the trading specifics and the language used in the trading world.

Trading Terminology

Traders often chat with one another about a variety of topics related to financial markets, giving their perspectives and discussing trading ideas and current moves on the markets. While communicating with each other they often use slang to express their thoughts in a shorter form. Some of the most popular slang is listed below.

Asset Allocation: Dividing instrument funds among markets to achieve diversification or maximum return.

Bearish: A market view that anticipates lower prices.

Bullish: A market view that anticipates higher prices.

Chartist: An individual who studies graphs and charts of historic data to find trends and predict trend reversals.

Counterparty: The other organization or party with whom trading is being transacted.

Day Trader: Speculator who takes positions in instruments which are liquidated prior to the close of the same trading day.

Economic Indicator: A statistics which indicates economic growth rates and trends such as retail sales and employment.

Exotic: A less broadly traded market instrument.

Fast Market: Rapid movement in a market caused by strong interest by buyers and / or sellers.

Fed: The U.S. Federal Reserve. FDIC membership is compulsory for Federal Reserve members.

GDP: Total value of a country's output, income or expenditure produced within the country's physical borders.

Liquidity: The ability of a market to accept large transactions.

Resistance Level: A price which is likely to result in a rebound but if broken may result in a significant price movement.

Spread: The difference between the bid and ask price of a market instrument.

Support Levels: When a price depreciates or appreciates to a level where analysis suggests that the price will rebound.

Thin Market: A market in which trading volume is low and in which consequently spread is wide and the liquidity is low.

Volatility: A measure of the amount by which an asset price is expected to fluctuate over a given period.

Margin Requirements

Margin requirement is only applicable to margin trading. It allows you to hold a position much larger than your actual account value. Margin requirement or deposit is not a down payment on a purchase. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. Trading platforms often perform automatic pre-trade checks for margin availability and will execute the trade only if you have sufficient margin funds in your account.

In the event that funds in your account fall below margin requirement, most trading systems will automatically close one or more open positions. This prevents your account from ever falling below the available equity even in a highly volatile, fast moving market.

For example, you may be required to have only $1,000 in your account in order to trade position that would normally require $20,000. The $1,000 (5%) is referred to as "margin". This amount is essentially collateral to cover any losses that you might incur. Margin should reflect some rational assessment of potential risk in a position. For example, if a market instrument is very volatile, a higher margin requirement would normally be justified.

Overnight Interest

Overnight interest is only applicable to margin trading. Trading on margin means that a trader borrows money to buy or sell a market instrument using actual account value as collateral. Traders generally use margin to increase their purchasing power so that they can own more market instruments without fully paying for it.

Considering that trading on margin involves borrowing money, trader has to pay interest on the loan. That interest is referred to as Overnight Interest and is generally charged based on number of days a position on margin was held. Most trading systems will charge daily interest portion at the end of each trading session and charge three times more on Monday or on other preset weekday (if market is closed on weekends).

In case of Forex, Overnight Interest is calculated as interest rate differential between interest rates for particular currencies that make the currency pair that is being traded. For example, if a trader wants to sell USD/JPY on margin, he or she will have to pay 4.0% (e.g. U.S. interest rate at 5.0% subtracted by Japanese interest rate at 1.0% makes the interest rate differential) of the amount borrowed per year to hold the position.

Before trading on margin it is highly recommended to get information on exact interest rates charged for borrowing money and how that will affect the total return on investments.

Trading How To

Subscribe to an instrument

To subscribe to updates for a chosen market instrument: click Subscriptionsbutton in a price window. Under Subscribe section, click the text field and type in the desired market instrument name. You can also specify a part of a name for example, typing A will display all market instruments that have letter A in their names. Click Searchbutton. Within the search results box, double-click the name of any market instrument you wish to subscribe to. The name of the market instrument will appear in the box with active subscriptions. Click OKto confirm your subscriptions.

Close open position(s)

To close an open position: within the [Positions] window, click on the row of the position you wish to close. Click on Close... button and the position will be set to status CLOSED. To close multiple positions: Click on Close Allbutton within the [Positions] window.

Edit target or stop-loss

To edit a position, it must have OPEN status: within the [Positions] window, click on the row of the position you wish to edit. Click on Change... button. You are then able to enter or change parameters: exit stop-loss, exit target and text written in the text column. Click OK.

Cancel active order

To cancel one order, it must have ACTIVE status: within the [Orders] window, click on the row of the order you wish to cancel. Click on Cancel... button and then confirm it. To cancel orders that have ACTIVE status, click on the Cancel allbutton in the [Orders] window. You will be asked to choose to cancel buy, sell or all orders. Make your choice and click OK. Orders you chose to cancel, if active, will receive CANCELLED status.

Edit active order

To edit an order, it must have the ACTIVE status: within the [Orders] window, click on the row of the order you wish to edit. Click on Change... button. You can then change order parameters shown in the [Change Order] dialog. Click OK.

Leverage we offer

We offer 1:100 leverage on margin trading desks. You can also think of that as 1% margin requirement.

Margin differences

Margin requirement for Forex instruments is calculated as percentage of your position quantity denominated in default desk currency, while margin requirement for Index and Commodity instruments is calculated as percentage of your position quantity multiplied with price of the instrument traded at the time of position opening.

Margin requirement

Our margin requirement on margin trading desks is 1%, which means that if you want to trade with quantity 300, you will need to have at least $3 on your Forex trading desk or at least 3 times current instrument price on your Index or Commodity trading desk. When you open a position, we will lock margin requirement amount until you close the position. We temporarily lock the margin as a security in case of large market movements.

Margin call work

If the equity balance on your margin trading desk falls below the margin requirement, a margin call will be generated. In the event a margin trading desk exceeds its maximum allowable leverage, some or all open positions will be liquidated immediately. For more details please check http://www.marketiva.com/index.ncre?page=re-margin-requirements page.

Overnight interest

Marketiva has introduced Zero-Interest policy on all open positions. No overnight interest is currently charged or paid on open positions. Most of other market makers charge Overnight Interest as a cost of carry associated with holding a position for more than one day.

Zero-interest

Marketiva has introduced Zero-Interest policy on all open positions. No overnight interest is currently charged or paid on open positions.

Stop-loss and target example

Here is an example that will help you with exit target and exit stop-loss levels

if you open a long position at 1.2000, your exit target should be at a higher level, for example 1.2020, and your exit stop-loss at a lower level, for example 1.1980. If you open a short position at 1.2000, your exit target should be at a lower level, for example 1.1980, and your exit stop-loss at a higher level 1.2020.

Limit & stop order example

A limit order is an order to buy below the current price, or sell above the current price. For example, if a market instrument is trading at 1.2952 / 55 and you believe that price is expensive, you could place a limit order to buy at 1.2945. If executed, this will give you a long position at 1.2945, which is 10 points better than if you had just bought the instrument with a market order. A stop order is an order where you buy above the current market price or sell below the current market price, and is used if you are away from your desk and want to catch a trend. If a market instrument is trading at 1.2952 / 55, you could place a stop buy order at 1.2970. In case the market moves up to that price, your order will execute and open a long position. If market continues in the same direction (trend), the position will bring you profit.

Position lifetime

When you want to open a position you need to place an "entry" order. If and when the entry order executes, the position becomes OPEN and starts its life on the market. For a previously opened position an instruction to close it may be entered at any moment.

Used margin and margin call example

Here is an example that will help you understand margin requirements

If you have $15 on a trading desk and you open EUR/USD position with quantity of 1000, used margin will be $10 (1% of $1 * 1000) and you will have $5 left as the available margin. If your loss on the position reaches $5, the position will be closed by a margin call. In case current price of Silver is $12 and you open a position with quantity of 100, used margin will be $12 (1% of $12 * 100) and you will have $3 left as the available margin.