CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.36% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Back to basics
Limit and Stop Orders are known as pending orders. So, they’re different from market orders in the sense that they get triggered only when the market reaches a price you’ve set yourself.
Limit Orders are used when you want to enter the market at a price advantage. For example, let’s say the current market price of the EURUSD is at 1.1078, but you feel it’s too expensive to buy euros at that price. Also, you believe that the pair is going to go down before it goes back up again, and you’re quite comfortable buying the currency at 1.1048. In this case, you’ll place a Buy Limit Order at 1.1048, which means that once the market price reaches that limit, your Buy Order will be filled.
The same logic goes for Sell Limits but the other way around. With a Sell Limit, you believe that the price is too low to sell euros against the dollar. You’ll then set a Sell Limit that’s higher than the current market price so that the order gets triggered once the market price reaches the level you’re willing to sell euros at.
A Stop Order, on the other hand, relies on a price that’s higher than the current market price on the Buy-side, and lower than the market price on the Sell-side. Stop Orders are mainly used to catch price breakouts and they’re meant to get you into the market as the price of a currency is rising or falling. For example, let’s assume the price of the EURUSD is at 1.1078. You believe that the pair has a very strong resistance level at 1.1098 and that once the market reaches that level, the pair will break out and keep rising. You place your Buy Stop Order at 1.1098 to catch that breakout. As for your Sell Stop Order, you set your order price lower than the current market price, so that you can catch the downward movement and limit your losses.
Stop Loss Order means that you set your order to close automatically once it reaches a certain price, so you can limit the losses on your trade.
For example, let’s assume the price of the EURUSD is at 1.1078. You believe that the pair has a very strong resistance level at 1.1048 and that once the market reaches that level, the pair will break out and keep going down. You place your Stop Loss Order at 1.1048 so that you can catch that breakout and limit your losses.
This type of order is one of the main risk management tools you can use as a trader, especially if you’re not actively following up on your account.
A Take Profit Order is one of the main risk management tools you can benefit from as a trader, especially if you’re not actively following up on your account. It allows you to close a trade automatically, at a price you set.
The financial markets experience volatility levels on a daily basis; that’s just the way things are. Many factors can affect market volatility such as breaking economic and political news, and daily economic releases. And based on how serious the news is, market volatility can spike which means that prices will change rapidly. Your ability to manage your trade executions at the prices you desire could potentially diminish due to a lack of market liquidity during times of uncertainty, which can result in your trades being filled at the next best price instead.
We don’t recommend you trade during major news releases; it’s your call at the end of the day, so if you decide to trade, make sure you follow market movements often. Also, keep in mind that you should always maintain high margin levels in your account so that you can cope with major price movements during times of high volatility.
Slippage is when your market or pending orders get filled at the next best price, not the one you originally wanted. There’s nothing wrong with the system, it just so happens when markets are highly volatile given prices change very fast; the price could change faster than the time it takes you to press that button!
Also, slippage happens in the case of low liquidity markets where there’s not enough volume that’s being demanded or offered at certain prices. So if you want a specific volume at price X, but the market can’t offer all of that volume at the price you want, then you might get a share of that volume at price X, but the rest of it will be calculated at the next best price.
Hedging is when you undertake two opposing positions of the same instrument; you’re then considered to be hedging. Fully hedged positions are when your two opposing trades are of equal size, equating to a net of zero exposure in that instrument, which will make your margin requirement go down to zero.
Let’s take an example; say you open a buy position for 1 lot of EURUSD, with a 1% margin requirement, which comes out to USD 1,000. To fully hedge your position, you’d have to open a sell position for the same volume of EURUSD (1 lot), which would also require a margin of USD 1,000. But since your positions are now fully hedged, the margins of both trades negate each other.
On the other hand, in partially hedged positions, the required margin would be the difference between the required margin levels of each position.
Leverage is the effect of increasing your purchasing power of a certain instrument in return for freezing an amount in your account called the required margin. Margin trading and the use of leverage allow you to trade with much higher volumes as opposed to trading on a cash to cash basis.
Keep in mind that margin trading is a double-edged sword that can magnify both profits and losses.
Total amount of funds in your account, after profits & losses from all your trades have been realized
Balance +/– profits/losses of open positions
The margin level you need so you can hold open positions
Equity – Margin held
It’s a % of Free Margin that you calculate like this: (Equity/Margin held) x 100
Rule of thumb; nothing is guaranteed in the financial markets given price volatility levels change on a daily basis.
Positions are filled on the basis of market execution. Market execution means that all your trades get executed at the best available price in the market, at the time you take or close your order. So don’t worry, you’ll always be filled at the available price – but that might not always be the price you requested, depending on the liquidity available at that time.
At times, you won’t be able to execute at your desired price, either because the price has changed before you could execute your trade, or the size of your trade exceeds the volume available in the market at that price currently.
Our trading interface includes a risk management system that will look to close out your positions once your equity reaches 50% of the margin required to hold those positions.
The Stop Out Level is the level at which we’ll start liquidating your positions.
The Stop Out Level (or Liquidation Level) at Royal is set at a Margin Level of 50%, which means that your account equity is at 50% of the margin held.
Trading leveraged products gives you the opportunity to make more profits all the while investing fewer funds. But you also run the risk of increased losses.
At Royal, we have a Negative Balance Protection in place for retail clients, which helps decrease the risk of losing more funds than you’ve deposited. You should check with your Relationship Manager to make sure you qualify.
CFDs or ‘Contracts for Difference’ are derivative products that allow you to trade price movements of the underlying assets without actually owning that product, such as commodities, energies or indices – which would normally be traded on the Futures market or Spot market.
You can trade CFDs by opening a live trading account with Royal.
Royal offers you a wide range of CFDs.
You can see our full list of CFDs and their contract specifications here.
CFDs are traded in contracts. Every CFD contract represents a quantity of the underlying asset.
For example, 1 contract of Crude Light is equivalent to 1,000 barrels. Moreover, you can trade CFDs in terms of whole or partial contracts.
Take a look at the full list of CFDs we offer and their contract specifications.
The maximum leverage level you can use on all CFDs may vary depending on which Licenced entity you open your account with.
For instance, if you establish your account with the Australian entity, you receive up to 400:1 leverage on some CFDs, whereas if you open with the Cyprus entity, you receive 30:1 leverage as a retail client.
For example, based on the regulations we follow and for your protection, the leverage offered to retail investors trading CFDs is limited between 30:1 and 10:1 for the EU.
As for Australia, that leverage is 1:100.
For the full list of CFDs we offer and their contract specifications, click here.
The margin level for various instruments differs across asset classes, per standard lot or contract.
Trade hours are not the same across all CFDs. Click here for the full list of the CFDs we offer and their contract specifications.
Yes, Royal does charge overnight financing on CFD trades; the exception to that is Future CFDs.
Since CFD Futures are derivative contracts based on the Futures market, they carry some of the same characteristics, such as expiry or rollover dates. Each letter after the CFD symbol corresponds to a rollover or expiry month. So, based on the CFD in question, the months can be consecutive or periodic.
For example, the symbol for Crude Light with December 2019 expiry is CL.Z9. – Energy CFDs expire monthly.
On the other hand, the symbol for Dow Jones with March 2020 expiry is DJ.H20. Index CFDs expire quarterly.
For a full list of the CFDs we offer and their contract specifications click here.
Given CFD Futures contracts expire either monthly or quarterly, you can only go back and view the price movement history of a current CFD symbol from the time it started trading.
This error appears when you’re attempting to trade a CFD outside of its trading hours.
Foreign exchange trading (or forex, or FX) is the buying and/or selling of one currency in relation to another. Given all currencies are priced differently, the price difference can make you a profit or a loss when the values of currencies change.
The FX market is estimated to have a turnover value of over $5 trillion a day; which is quite a bit. Individuals, companies, banks, funds, and governments buy and sell global currencies all day every day until Friday – where the market closes at 22:00 GMT, and reopens on Sunday at 22:00 GMT. This $5 trillion turnover can be the result of import/export activities, hedging against currency risk, or speculating on the change of currency values.
Given you can normally exchange currencies through an exchange office or bank, forex trading is not centralised in a major national exchange, like stocks and futures. Such setup makes it very flexible, customisable, and of course, accessible.
Trading currencies is simply the buying of one currency and selling of another.
Royal offers what is called Margin FX products – which means we offer trade on the price movements of the forex market, where your profit or loss is a cash adjustment on your platform – not physically delivered.
When you see a certain currency as ‘cheap’, you can buy that currency in relation to another; you’re anticipating it will increase in value, after which you can sell it again. This also works – but the other way – if you consider the currency to be ‘expensive’.
Currencies are traded in pairs.
The first currency in the pair is called the Base currency; it’s the one you’re either buying or selling. The second currency of the pair is the Counter currency that you’re trading the base currency against.
For example, when you buy the EURUSD, it means that you’re buying EUR and selling USD. So, if the EURUSD is currently trading at 1.1078, this means that every euro is equal to USD 1.1078. If you’re anticipating an increase in the value of the EUR – in relation to the USD – you can execute a Buy order at 1.1078, and buy EUR by selling USD.
Let’s assume the price of the EURUSD increases to 1.1098; it means that every euro is now equal to USD 1.1098 and you’ve made a profit.
The most traded currency pairs are USD, EUR, GBP, CAD, CHF, JPY, AUD, and NZD.
When you exchange currencies at the exchange rate, you’re usually quoted two prices: the Bid and the Ask. The Ask is the price at which you buy a certain currency and what the market’s willing to sell at. On the other hand, the Bid is the price at which you sell the currency and what the market’s willing to pay to buy it from you.
The difference between the Bid and the Ask prices is what we call the spread. This difference happens because the Ask price is always higher than the Bid price. Imagine you buy a new car for $20,000, and drive it around for a week before you decide to sell it. Logically, you’d never be able to sell it for the same price as you bought it, or higher. So, the difference between the buying and selling price of this car is the spread. The same applies to the markets at the moment you execute.
The actual value of the spread depends on supply in the market (of the currency in question) at that moment. The higher the demand, the narrower the spread, and vice versa.
A pip is the smallest movement (or change) in a currency quote. For most major currencies, a pip is shown as 0.0001, except for the Japanese Yen (JPY) where a pip is 0.01.
Most currencies are traded in lot sizes of 100,000 units of the base currency, where one pip is equal to 10 units.
Trade volume is the size of your order; in MT4, it’s calculated as the number of standard lots you execute or units of a standard lot.
Each standard lot is equal to 100,000 of your base currency. Keep in mind that for markets other than FX, the lot is a different number.
A fraction of a standard lot – say 0.2 – is equal to 20,000 of the base currency.
Currencies are always traded in pairs.
The first currency in the pair is called the Base currency; it’s the one you’re either buying or selling. The second currency of the pair is the Counter currency that you’re trading against. For example, when you buy the EURUSD, it means you’re buying the EUR and selling the USD.
You can trade with Royal, whether the market is rising or falling. Online trading is conducted Over the Counter (OTC) and not through an exchange, which means that you can speculate on both rising and falling prices without having to own the underlying asset itself.
You can take advantage of multiple instruments – in both bullish and bearish trending markets – 24 hours a day, Monday through Friday. Keep in mind that the FX market closes on Friday at 21:00 GMT, and reopens on Sunday at 21:00 GMT.
Indicators are visual software tools that allow you to get information or data about the movement of the markets, so that you can make educated trading decisions. There are hundreds of trading indicators used worldwide for various purposes by most traders, especially technical analysts. Indicators take advantage of current and historical data to try and predict future movements.
Every pip movement – whether up or down – will result in a profit or loss (P&L) – depending on the direction of your trade. P&L per pip is calculated based on the counter currency since you’re always trading your base currency against it.
If you’re buying EUR against the USD, any profit or loss from your trade will be based on the conversion rate of EUR to USD. So, the P&L for this trade is converted to USD terms in real-time.
The P&L of a pip is always based on the size/volume of the trade and size of the pip.
Let’s take an example:
Pip profit/loss = Trading volume x pip size
So when calculating for the EURUSD:
1 pip = 100,000 x 0.0001 = USD 10
This means that if you’re trading with a volume of EUR 100,000, each pip up or down in the price will result in a USD 10 profit or loss.
The FX market is open 24 hours a day, 5 days a week starting at 22:00 GMT on Sunday, until 22:00 GMT on Friday.
Market execution means that all your trades are executed at the best available price in the market, at the time you take or close your order. This ensures you’re always filled at the next best available price – but that may not always be the price you requested.
At times, you won’t be able to execute at your desired price, either because the price changed before your trade execution went through, or the size of your trade exceeds the volume available in the market at that price currently.
Limit and Stop Orders are known as pending orders, and unlike market orders, they’re triggered only when the market reaches a price you’ve set yourself.
Limit Orders are used to enter the market at a price advantage. Let’s say that the current market price of the EURUSD is at 1.1078. You feel that the price is too expensive to buy EUR at, but you believe that the pair’s going to decrease before it rises again, and you’re comfortable buying that currency at 1.1058. You then place a Buy Limit Order at 1.1058, which means that once the market price reaches that limit, your buy order will be filled.
The same goes for Sell Limits but the other way around. With a Sell Limit, you believe that the price is currently too low to sell EUR against the USD. The price of a Sell Limit you set, in that case, is higher than the current market price, and the order is triggered once the market price reaches that level.
A Stop Order, on the other hand, relies on a price that’s higher than the current market price on the Buy-side, and lower on the Sell-side. Stop Orders are mainly used to catch price breakouts and are meant to get you into the market as the price of a currency rises or falls. Let’s say that the current market price of the EURUSD is at 1.1078. You believe that the pair has a very strong resistance level at 1.1098 and that once the market reaches that level, the pair is going to break out and keep rising. You place your Buy Stop Order at 1.1098 to catch that breakout.
Again, the same logic applies to a Sell Stop Order, but in that case, the order price is set at less than the current market price to catch a movement downwards.
A trade margin requirement is the amount of money you need to have available in your account, in order to enter into and hold a trade. Since FX trading relies on higher purchasing power as a result of leverage, your margin level is the cost of that purchasing power.
Royal offers you access to trade Spot Gold and Spot Silver.
1 Gold Contract = 100 Oz.
1 Silver Contract = 5,000 Oz.
The maximum leverage level you can use on all CFDs may vary depending on which Licenced entity you open your account with.
For instance, if you establish your account with the Australian entity, you receive up to 200:1 leverage on some CFDs, whereas if you open with the Cyprus entity, you receive 30:1 leverage as a retail client.
The margin requirement depends on which Licensed entity you open your account with. For instance, if you establish your account with the Australian entity, your margin requirement is 1% on Gold and 1.5% on Silver. Whereas if you open with the Cyprus entity and you’re a retail client, you’re required to have 5% of the total value of a Gold Contract, and 10% of the total value of a Silver Contract. As a professional, your margin requirement is 1% on Gold and 1.5% on Silver.
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