Does money in forex take time to settle?

I know this is a noob question and I can’t seem to find it anywhere. I don’t know if its right in front of me and I just cant see it or what. I have a practice account and I know the margin covers this but say I borrow the entire margin then sell. Can I buy again and sell? And keep doing this? In the practice act I can but I wasnt sure if it was different when Im using real money. I’m used to trading stocks which gives that 3 trades/week if your under 25k.
Thanks for your help

In forex, unlike stocks, you do not “buy” or “sell” anything. We use those terms, as a sort of short-hand; but, they are really misleading, especially for newbies.

When you take a LONG position, or a SHORT position, in forex, you are essentially placing a bet on the direction that a particular currency pair will move. The margin amount that you referred to is your broker’s “protective cushion” — it ensures that if you wipe out your account, you will lose only your money, and not his.

There’s a fixed mathematical relationship between this margin amount and the maximum allowable leverage which your broker offers to you. Margin percentage = 1 ÷ Max. allowable leverage. So, if your broker allows you 50:1 leverage (max), then he will require margin equal to 2% of the notional amount of every trade. (Notional amount means position size, in units of base currency.)

You referred to “borrowing” the entire margin amount. In forex trading, you never borrow anything — margin, or anything else — from your broker. You are permitted to “place bets” on any size position, provided you have the funds to cover the required margin plus the spread.

If you practice prudent money management, the percentage of your account committed to margin on any one trade will never be large. If you placed a trade using 15:1 actual leverage, you would be heavily leveraged. In this case, 30% of your account balance would be “set aside” as margin by your broker, meaning that it is not available to you to cover any losses which might occur in your account.

A more typical trade, not so highly leveraged, might involve actual leverage on the order of 5:1 or slightly more. At 5:1 actual leverage, your broker would “set aside” 10% of your account balance as margin.

In all cases, after your trade is closed, your margin is freed up, for you to use any way you see fit.

Regarding frequency of trading, there is no similarity between stock trading and forex trading. In forex trading, you can trade any number of times per day, provided you have the funds in your account to cover the required margin.

Finally, when you close a trade, it is instantly completed, done, settled — there is nothing to unwind, there is no ownership changing hands, and there is no “loan” to pay back.

I hope that answers your questions.

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So Clint are you saying that we don’t actually buy or sell anything but we are just gambling?

:rolleyes:oh no, don’t start that thread again.

Think of it as using one currency to buy or sell another currency. Except you don’t take delivery. Actually it is sort of like borrowing if you use anything greater than 1:1 leverage because then your trades size is greater than your account size. So if you had 10k in your account and you trade one standard lot your trades size is 100k

Regarding buying and selling…

That’s exactly what I’m saying. You are not buying or selling anything. Every broker out there uses the terms “buy” and “sell”, and I use those terms myself. But, there is no buying or selling involved.

Regarding gambling…

If you don’t like the idea of gambling, call it speculating. You are speculating on the direction in which XXX/YYY will move. At no time will you buy or sell any XXX or YYY, whatever those symbols might represent.

If you want to read my views on whether forex trading is gambling, try this — 301 Moved Permanently

Hey Casey, I’ve answered your question here: Will I actually be delivered currency? : Forex Leverage Newbie

It seems you have some questions in general on leverage and margin, I’d check out the other tutorials on that website. As far as the pattern day trader rule you’re referring to in stocks, that does not apply in Forex. Which is great :slight_smile:


Perfect answer to the exact question I was having. Thank you kindly :slight_smile:

I’m glad it was helpful.

Welcome to this forum, by the way!

Till now you would have known there’s a difference in demo and live trading. Now that you’re ‘buying and selling’ time and again, in demo, you can do the same in live trading too. That’s the cool part about forex. There’s really no limit on the number of times you can trade in a week. Add stop-loss to the trade and in case you feel you can do better, enter again.

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That’s something you need to confirm from your broker. Apparently there are different rules of different brokers. Don’t know which broker you’re trading with, so consult the support team.

You’ve turned a rather simple thread to a complicated one. The question of forex and gambling is one many of us do not want to ask.