Forex Beginner

[Stormin_Norman]

Hello. I'm newbie too.

Hope anyone here would help me answer these questions.
(I downloaded and tried MT4 from Go Markets but until now I cannot get it clear)

Question 1: What are the fees/opp. cost in FX? Do I have to pay fees for buying/selling, monthly account fee, commission fee or withdrawal fee etc.?

Question 2: I don't understand the leverage. I chose 100:1 leverage and with initial $5000 deposit. Then it allows me to make an order of size 1.0 (which is about $100 000). How come I can make an order which is bigger than my deposit?

Question 3: Is it possible that my account balance goes negative?

Thank you very much.

Q1. in the case of gomarkets the cost is the difference between the buy and the sell price - what's called the spread.

so if you bought and sold a currency pair at the same time, the spread would be the cost of making that transaction.

say you can buy a currency pair at a ratio of 101. you can sell the pair at a ratio of 99. the cost of buying and selling that pair is 2. so if u sell for 99 the price has to increase to 101 for you to 'break even' after the cost of the spread.

some brokers also charge commission as well as/on top of spread.

Q2. when u buy a house with 5% deposit you are using leverage of 20:1. same idea. you are buying a $100k house with only $5k.

100:1 leverage would allow you to take out $500k worth of positions with $5k deposit.

of course this can see you make, or most likely lose that deposit quickly as a 1% movement in the market on a fully leveraged account would either double it or wipe it out.

Q3. yes. although not likely, as margin calls see your positions sold out if u lose 80% of its value - leaving you with 20% buffer. however if you were in a bad position over the weekend, and the market moved even further before opening on monday (ie 'gapped) then you could be left with a negative balance.

brokers like OandA guarantee you wont be held liable for negative balances, others such as go make you agree to pay should this (unlikely) situation arise.

 

[kbp]

Thank you for your detailed reply. I've got it clear now.
So gomarkets doesn't charge any fee/commission and they earn money by using "spread".

I've also found a "school" for newbies like me on babypips.com

I will probably spend next 6 months to learn all of this and do it with my demo account then live account.

FX is seem to be a good place to invest. Started yesterday with $3k demo, end today with $4.8k. More than 1k income a day! If this happened in real, I'd be very happy.

(And IMO, FX market is seem to be much better than stock market since I hardly win in stock market ).

Thank a lot mate.

 

[Stormin_Norman]

FX is seem to be a good place to invest. Started yesterday with $3k demo, end today with $4.8k. More than 1k income a day! If this happened in real, I'd be very happy.

that can easily be reversed.

 

[Mr J]

that can easily be reversed.

Oh come on, we all know how easy it is - just listen to all the fx ads.