Slippage

FXCM seeks to provide clients with the best bid/ask prices available and to get orders filled at the requested rate. But sometimes, because of higher volatility or volume, orders can become subject to slippage. This usually tends to happen at some point during fundamental news events.

Market volatility can bring on conditions where orders are difficult to carry out, given that the price may be many pips away because of the extreme market movement. Though the trader wants to execute at a said price, the market may move drastically and the order would then be filled at the next best price available or the just market value. Likewise, increased volume can also end in slippage if there isn’t enough liquidity to carry out all trades at the requested rate.

The notion of slippage is not unique to the forex market, since it regularly occurs in the equities and futures markets. It is important to highlight that the "At Market Points" feature on FXCM's currency trading station lets traders control the amount of likely slippage they can accept on a market order. Zero designates that no slippage is permitted. When zero is chosen, the trader is informing FXCM that his order can be carried out only at the exact price requested, or not carried out at all. If the trader opts to accept a range of acceptable slippage to raise the likelihood of having his order carried out, the order will be filled at the best price available inside the specified range. For example, a client can indicate that he is prepared to be filled within 2 pips of his requested order. The system will then fill the client within the permissible range (in this case, 2 pips) if the market has moved rapidly through the price at which the order was entered. If the order cannot be filled within that range, the order will be refused.

Once a stop is generated, it turns into an At Best market order, and there is no assurance it will be filled at any particular price. As a result, stop orders can bring on slippage depending on market conditions.

FXCM has close banking relationships with a number of the world's leading and most important price suppliers. Having several price providers is particularly crucial in volatile markets, where one or two banks may post wide spreads, or even just avoid quoting any price. Having several foremost banks quoting prices to FXCM, one will find that there are competitive spreads and fills, even throughout market-moving news events.

Execution Delays

An execution delay may happen for several reasons, like technical problems with the trader's internet connection to the FXCM servers, which can bring about hanging orders. The FXCM currency trading station on a trader's computer does not necessarily maintain a regular and ongoing connection with the FXCM servers because of a lack of signal strength from a wireless or dialup connection. A break in the connection can occasionally disrupt the signal, and render inoperative the FXCM online currency Trading Station, incurring delays in data transmission between the traders’ currency trading station and the FXCM server. One way to verify your internet connection with FXCMs server is to ping the server from your computer. For more details on how to do this please visit http://www.fxpowercourse.com/techsupport/tracert.htm.

Resetting Orders

Market volatility generates conditions which render it difficult to carry out orders at the specified price due to an exceedingly high volume of orders. By the time orders can be carried out, the bid/ask price where a counterparty is ready to take a position may be many pips away.

When the liquidity pool is not big enough to fill a Market Range order, the order will not be accepted. For Limit Entry or Limit orders, the order would be discarded and reset in anticipation of the order being filled. FXCM provides the At Best order type for traders who would like to evade this situation.

Widened Spreads

FXCM seeks to supply traders with tight and competitive spreads. Nonetheless, there may be times when spreads widen past the usual spread. Throughout news events, spreads can widen significantly to make up for the huge amount of volatility in the market. The widened spreads can last anywhere from a few seconds to a few minutes. FXCM recommends that traders be cautions when currency trading on news events and always alert to their account equity, usable margin and market exposure. Widened spreads may unfavorably have an effect on all positions in an account including hedged positions (see below).

Hanging Orders

FXCM supplies its clients with no dealing desk* execution. FXCM uses an STP (straight through processing) system via which client orders are sent directly to the banks and filled on bank prices practically on the spot. Throughout periods of elevated volume, hanging orders can take place. This is a situation where an order sits in the "orders" window after it has been carried out. The order will be highlighted in red, and the Status column will show "executed" or "processing." Usually, the order has been carried out, but it is merely taking short moments for it to be confirmed by the banks. In such times of important currency trading volume, it is likely that a queue of orders will form. Such a boost in received orders can at times create conditions where there is a delay from the banks in confirming some orders. Outcomes can differ depending on the type of order placed. If it’s a Market Range order and the order cannot be filled in the particular range, or if the delay has passed, the order will be refused. On the other hand, if it is an At Best order, attempts to fill the order at the next best available price in the market will be made. In both cases, the "status" column in the "orders" window will usually indicate "executed" or "processing." The trade will just take a few instants to move to the "open positions" window. Depending on the type of order, the position can be carried out, and the delay is simply due to heavy internet traffic.

Bear in mind that it is only required to enter an order once. Several entries for the same order can slow or lock your computer or unintentionally open unwanted positions.

If you cannot access the FXCM Trading Station to manage your account, you may call the Trading Desk directly at
+1 212-201-7300 or from the US and Canada, call toll free at 1 866 600 FXCM (3926), or visit http://www.fxcmmena.com/en/contact-us for the UK’s contact information.

Greyed Out Pricing

FXCM does not deliberately "grey out" prices; but, this is a condition that happens when liquidity declines and market makers that supply pricing to FXCM are not actively making a market for specific currency pairs. Sometimes, a severe increase in the variation of the spread can happen because of a loss of connectivity with a bank or because of a broadcast announcement that may have a remarkable effect on the market that dries out liquidity. Such greying out of prices can result in margin calls on a traders account. When an order is placed on a currency pair affected by greyed out prices, the P/L will momentarily flash to zero until the pair has a tradable price and the system can calculate the P/L balance.

Hedging

The capacity to hedge lets a trader hold both buy and sell positions in the same currency pair at the same time. Traders are enabled to enter the market without having to choose a specific direction for a currency pair. Though being able to hedge is an enticing feature, traders need to be alerted to the factors that can impact hedged positions.

Diminishing Margin

A margin call can happen even when an account is totally hedged, because spreads can widen, thus making the residual margin in the account lessen. If the remaining margin is not enough to keep any open positions, the account may get a margin call, closing any open positions in the account. Even though maintaining a long and short position may sometimes let the trader think that his exposure to the market's movement is restricted, if not enough available margin exists and spreads widen for a certain amount of time, it can surely result in a margin call on all positions.

Rollover Costs

Rollover is when the closing and opening of a position happens at the same time and at a specific time during the day, so as to avoid the settlement and delivery of the bought currency. Rollover also refers to the interest which is either charged or applied to a trader's account for positions held "overnight," meaning after 5 p.m. EST on FXCM's trading station. The time at which positions are closed and reopened, and the rollover fee is debited or credited, is usually referred to as Trade Roll Over (TRO). Traders need to keep in mind that rollover charges are higher than rollover accruals. When all positions are hedged in an account, while the overall net position may be flat, the account may still incur losses due to the spread that happens at the time rollover occurs.

Exchange Rate Fluctuations (Pip Costs)

Variations in the exchange rate, or Pip Costs, are described as the value set on a pip movement for a given currency pair. This cost is the currency amount that will either be made or lost with every pip movement of the currency pair's rate and will be denominated in the currency denomination of the account in which the pair is being traded. On FXCM’s Trading Station, the pip cost for all currency pairs is found by selecting "View," followed by "Dealing Views," and then by clicking "Simple Rates" to apply the checkmark next to it. If "Simple Rates" already has a check mark next to it, viewing the dealing rates in the simple view is as easy as clicking the "Simple Dealing Rates" tab in the dealing rates window. Once visible, the simple rates view will display the Pip Cost on the right-hand side of the window.

When a trader's position is hedged against exchange-rate risk, it is still exposed to exchange-rate volatility if the counter currency of the pair being hedged differs from the denomination of the account.

For example, if you are both long and short 10K USD/CAD with 500 pips in gross P/L, one can assume the spread will remain constant. Keep in mind that P/L is in terms of the counter currency, thus the losses are 500 CAD and are converted at the spot rate. If the hedge goes on at 1.1000, the GROSS P/L is 500/1.10 = 454.54 USD.

If the rates decrease to 1.0300, the same 500 pips of locked-in loss is now worth 500/1.03 = 485.43 USD, 30 USD more on only a 10K hedge. Though slight for this example, this is multiplied as hedged volume increases; consequently, it can create circumstances that may drain existing margin.

This can be very important for clients who have very large, hedged JPY positions: if the USD/JPY falls 1000+ pips, it can (depending on leverage, of course) have a severe impact on the gross P/L of any hedged JPY positions.

Inverted Spreads

FXCM mainly upholds an agency execution model. When currency trading with FXCM, you are trading on price feeds which are provided by several leading banks and financial institutions. However, as with any technology, online currency trading technology is not perfect and, in rare instances, a price feed may be interrupted. This may last for just a moment, but when it does, spreads likely become inverted. During such rare instances, FXCM warns clients to avoid placing At Best orders. Though it may be tempting to place a "free trade," bear in mind that the prices are not real and your actual fill can be several pips away from the price shown. If trades are executed at rates not actually offered by FXCM's banks and financial institutions, FXCM maintains the right to undo such trades, as they are not regarded as valid trades. Remember that these cases are rare, and by placing Market Range orders or not trading through these instances, traders can steer clear of the risk associated with such scenarios.

Holiday/Weekend Execution

Trading Desk Hours

Trading Desk hours are from Sunday 5:15 p.m. EST through Friday 4:00 p.m. EST. Opening or closing times can be changed by the Trading Desk because it relies on prices being offered by banks and financial institutions which supply liquidity for FXCM.

Outside these hours, the majority of the top-tier world banks and financial centres are closed. Therefore, the lack of liquidity and volume throughout the weekend hinders execution and price delivery.

Prices Updating Before the Open

A little before opening, the Trading Desk refreshes rates to mirror current market pricing in preparation for the open. It is important to note that trades and orders held over the weekend are subject to execution. Quotes at this time are not executable for new market orders. After the open, traders may place new trades, and cancel or modify existing orders.

Liquidity

Note: During the first few hours after the open, the market is inclined to be thinner than usual up until the Tokyo and London market sessions open. These thinner markets may result in wider spreads, since there are less buyers and sellers. This is mainly due to the fact that for the first hours after the open, it is still the weekend in most of the world.

A wide-ranging list of spreads can be found at http://www.fxcmmena.com/en/spreads-and-margins/spreads. For more insight on market hours and activity, please visit http://www.fxcmmena.com/en/education-center/what-is-forex.

Gapping

Sunday's opening prices may not necessarily be the same as Friday's closing prices. Sometimes, the prices on the Sunday open are close to where the prices were on the Friday close. At other times, there can be a considerable discrepancy between Friday’s close and Sunday’s open. The market may widen if there is an important news announcement or an economic event altering how the market views the value of a currency. Traders holding positions or orders over the weekend should be fully at ease with the likelihood of the market to gap. One of the great things about currency trading at FXCM is that outside of announced major holidays, the trading hours regularly close only once a week on the weekends, which matches with the hours of major banks and financial institutions. Dissimilarly, most stock exchanges close five times each week, and can gap notably on each day's open.

Order Execution

Limit orders are normally filled at the requested price. Orders will not be filled in the event that the asked for price is unavailable in the market. If the requested price of a stop order is reached at the open of the market on Sunday, the order will become a market order. Limit Entry orders are filled the same way as limit orders. Stop Entry orders are filled the same way as stops.

Weekend Risk

Traders who worry that the markets can be very volatile over weekends, that gapping can take place, or that the potential for weekend risk is not suitable for their currency trading style, can merely close out orders and positions prior to the weekend.

Margin Calls

Margin currency trading simply means that your margin acts as a good faith deposit to protect the larger estimated value of your position. Margin currency trading lets traders hold a position a good deal larger than the real account value. FXCM's online currency trading platform has margin management features, which allow for this high leverage. Certainly, currency trading on margin doesn’t come without risk, since high leverage can work both for you and against you. If account balance goes down below margin requirements, the FXCM Trading Station will prompt an order to close all open positions. When positions are over-leveraged or currency trading losses occur to the point that not enough equity exists to maintain existing open positions, a margin call will happen, and open positions should be liquidated.

Even though the margin call capability is intended to close positions when account equity drops below the margin requirements, there can be cases when liquidity does not exist at the exact margin call rate. Consequently, account equity may go below margin requirements at the time orders are filled, even to the point where equity account becomes negative. This is particularly spot on during market gaps or volatile times. FXCM will not hold traders responsible for deficit balances in this instance, but clients should be aware that all funds on deposit in an account are subject to loss. FXCM also proposes that traders use stop orders to limit downside risk instead of using a margin call as a final stop.

It is strongly recommended that clients keep the proper amount of margin in their accounts at all times. You may request to change your margin requirement by contacting us at +961 1 986 686 or by sending an email to ops@fxcmmena.com. You will be required to fill out a “Margin Change Request Form”, which is subject to approval by FXCM.

Chart Pricing vs. Prices Displayed on the Platform

It is important to make a difference between indicative prices (displayed on charts) and dealable prices (displayed on the FXCM Trading Station). Indicative prices are those that put forward an indication of the prices in the market, and the rate at which they are changing. Market watchers, such as S&P and eSignal, gather indicative quotes as a proxy for the market's actual movement. These prices are drawn from a host of providers such as banks and clearing firms, which may or may not mirror where FXCM's liquidity suppliers are making prices. Indicative prices are typically very close to dealing prices. Indicative quotes only give an indication of where the market is. Equity and futures traders dealing via a broker will see indicative quotes. Executable quotes ensure finer execution and thus a reduced transaction cost. Equity and futures traders are accustomed to prices being the same at any given time, regardless of which firm they are trading through or which charting provider they are using, and they often assume the same holds true for spot forex. Because the spot forex market is decentralised, meaning it lacks a single central exchange where all transactions are conducted, each forex dealer (market maker) may quote slightly different prices. Therefore, any prices displayed by a third party charting provider, which does not employ the market maker's price feed, will reflect "indicative" prices and not necessarily actual "dealing" prices where trades can be executed.