Australian (ASX) Stock Market Forum

Forex Beginner

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.
 
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 :banghead:).

Thank a lot mate.
 
Top