Foreign Exchange (FX) is the buying and selling of one currency in terms of another for settlement in 2 business days. E.g. Buying USD/JPY means to buy US dollars and sell Japanese Yen at an agreed spot exchange rate.

This is the ability to buy or sell one currency in exchange for another before then selling or buying back respectively the bought or sold currency at a later date. Because the trading is on margin, you will only need to put down the margin deposit in order to open the position. This will typically be 1% of the total position.

Margin FX is priced almost identically to the underlying currencies, which are typically quoted on a spot basis.

Currencies are always quoted one against the other. When you buy or sell foreign exchange, you always buy one currency while simultaneously selling another at an exchange rate. A currency´s exchange rate can only be determined if it is compared to another currency.

The base currency is the first currency in the currency pair and the term currency is the second currency in the currency pair. For USD/JPY, the base currency is the USD and the term currency is JPY.

A direct FX quote is an FX quote where USD is quoted as the base currency in the pair. Examples of direct FX quotes are USD/JPY, USD/CHF and USD/CAD. An indirect FX quote is an FX quote where USD is quoted as the term currency in the pair. Examples of indirect FX quotes are GBP/USD, EUR/USD and NZD/USD.

A cross FX quote is an FX quote where USD is not quoted in the currency pair. Examples of crosses are GBP/JPY, EUR/JPY and NZD/CHF.

You can trade FX from Sunday 2200 hours to Friday 2200 hours (London Time).

You can trade a range of different currencies against each other. For example, if you were to buy GBP / USD, it means you are buying GBP and selling USD. If you were to sell EUR / USD, it means you are selling Euros and buying USD.

The prices are based on the inter-bank offered exchange rates for the various currencies, and are today´s prices, i.e. spot prices. The prices are adjusted to take into account the spreads that Spread Co is charging you to trade the currencies.

The concept of FX rollover can be best explained with an example.

On Monday, John bought 10,000 USD/JPY at 106.77 from Spreadco. This means that he bought USD and Sold JPY. As this is a spot FX transaction, this position should be settled in 2 days time. To settle this position, John is supposed to deliver ¥1,067,700 (10,000 x 106.77) to Spread Co by Wednesday and Spread Co should also deliver USD10,000 to John on Wednesday. However, FX trading (with Spread Co) doesn't involve physical delivery.

Instead, Spread Co will automatically rollover John´s position. To rollover this position, one party must compensate the other party with the interests which he is suppose to receive. The reason for "exchanging" the interests receipt is because if John has delivered the JPY to Spread Co, Spread Co would have earned interest on the JPY amount. Similarly, if Spread Co has delivered the USD to John, John should have received interest on USD. As a result, a net interest differential amount is paid or received. The interest rate is based on the inter-bank spot exchange rates (plus haircuts) applying at the time you enter the transaction.

Traditionally, the major participants in the FX markets include central, commercial and investment banks. Now the list expands to include international money managers and brokers, multinational corporations, registered dealers, options and futures traders, and private investors.