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Forex Trading FAQs

  • What is a Lot in Forex Trading?

    The basic contract unit of the Retail Foreign Exchange is the lot.
    The standard lot size is 100,000 units of the base currency, known as a Standard Lot (1st currency in the currency pair), however you can also trade either multiples of, or fractions of, lots. The minimum at T4TCapital is 0.01 lot.
    Example: Buying 1 lot on the GBP/USD market is the equivalent to buying £100,000 and selling the equivalent amount of USD at the current rate.

    Lot Size Units of base currency (First currency)

    1 100,000

    0.1 10,000

    0.01 1,000

  • What is a Pip in Forex Trading?

    A pip, short for point in percentage, is a very small measure of change in a currency pair in the forex market. It can be measured in terms of the quote or in terms of the underlying currency. A pip is a standardized unit and is the smallest amount by which a currency quote can change. It is usually $0.0001 for U.S.-dollar related currency pairs. A fractional pip or point is equivalent to 1/10 of a pip. There are 10 points to every 1 pip.

  • What is Leverage?

    Leverage is a way to make larger investments than the initial risk capital will allow.
    For example: A trader can use 1:500 leverage and can control a $500,000 trade with $1000.

  • What does the Spread mean?

    The spread is the difference between the ASK price and the BID price. The BID price is the rate at which you can sell a currency pair, and the ASK price the rate at which you can buy a currency pair.

  • What is the required margin?

    The margin requirement is the amount of funds used to hold a position open.

  • What is the difference between account balance and equity balance?

    The balance on your account reflects the amount of funds you currently have in your account, without taking into consideration any open positions profit or loss. Equity is your balance +/- the floating profit/loss of your open positions.

  • How do I calculate the profit and loss of a position in Forex?

    To calculate the profit or loss of a position:


    BUY Positions

    Profit = (Closing Price – Opening Price) * Volume

    SELL Positions

    Profit = (Opening Price – Closing Price) * Volume

    Keep in mind that the profit is calculated on the quote currency, and you will need to multiply the exchange rate between the quote currency of the traded pair and the account base currency.

    Example 1:

    Account Currency: USD

    Position: BUY 1.00 lot EURUSD

    Opening Price: 1.14000

    Closing Price: 1.14500

    Volume: 100,000

    Exchange rate to USD = 1

    Profit = (1.1450 – 1.1400) * 100,000 = 500 USD

    Example 2:

    Account Currency: USD

    Position: SELL 0.10 lot USDCAD

    Opening Price: 1.3400

    Closing Price: 1.3380

    Volume: 10,000

    Exchange rate CAD to USD: 0.747

    Profit = (1.3400 – 1.3380) *100,000 = 200 CAD

    Profit = 200 * 0.747 = 149.4 USD

    Example 3:

    Account Currency: USD

    Position: BUY 1.00 AUDNZD

    Opening Price: 1.0250

    Closing Price: 1.0210

    Volume: 100,000

    Exchange rate NZD to USD: 0.6920

    Profit = (1.0210 – 1.0250) * 100,000 =  -400.00 NZD (Loss)

    Profit = 400 * 0.6920 = -276.8 USD (Loss)

  • How do I calculate the required margin?

    Margin = Base Currency Volume / Leverage



    Example 1:


    Account Currency: USD

    Currency Pair: USDCAD

    Base Currency: USD

    Volume = 1.00 lot (100,000 units of base currency)

    Leverage = 1:500

    Margin = (100,000 * 1) / 500 = 200.00 USD


    Example 2:


    Account Currency: USD

    Currency Pair: EURUSD

    Base Currency: EUR

    Volume 0.10 lot (10,000 units of base currency)

    Leverage= 1:400

    Spot rate EUR to USD = 1.1400

    Margin = (10,000 * 1.1400) / 400 = 28.5 USD




    Example 3:

    Account Currency: USD

    Currency Pair: GBPCHF

    Base Currency: GBP

    Volume: 0.20 lot (20,000 units of base currency)

    Leverage: 1:100

    Spot rate GBP to USD = 1.3200

    Margin = (20,000 * 1.3200) / 100 = 264.00 USD

  • What is Margin Call?

    A margin call occurs when the account equity falls below the required margin.

    Once your margin level goes below 100%, your account will go into margin call. You will no longer be able to open new positions. To avoid further losses or liquidation (which happens at 30% on our accounts), the client must either deposit more funds into the account or close some of the positions to raise back his margin level.

  • What is the Stop out level?

    If your Equity falls to less than 30% of the required margin, your trade(s) will be closed out by our Automated Risk Management System starting with the position with the greatest loss, until your equity can support 30% or higher of your margin requirement.


    You need to make sure that you fund your account well in advance to make sure you can support your margin requirements. To calculate the margin level (%), apply the following:

    (Equity / Margin held on open trades) x 100

    Equity equals your balance plus or minus floating profit or loss.

    Margin is the amount of funds being used to hold a position open.

    Margin level is the equity divided by used margin multiplied by 100.

  • Do you allow Scalping?

    Yes we do.

  • Do you allow Hedging?

    Yes we do.

  • What is the Margin Requirement for hedged positions?

    Our margin requirement for hedged positions is Zero.

    When you decide to hedge a position in one particular instrument (respectively buying or selling the same amount of that instrument), there will not be any margin needed to maintain the hedged position. As such, your net position will be equal to zero.

    As a result of the decreased margin, you will have the benefit of more available funds.

  • If the required margin for hedged positions is 0, how can my positions be stopped out?

    While there is no margin requirement requested for fully hedged positions, this does not protect your orders to be closed out at one point.

    Mainly this is related to spread widening. Spreads may widen depending on the product you are trading during overnight hours, over news releases, during market opening and market closure, as the liquidity is thin, and the volatility is high.

    This can also be related to the overnight financial charges, which apply to each position if you keep them open over rollover, which takes place at midnight MT4 platform time each trading day.

    The moment the equity on your account falls below zero your open positions will be closed out, so it is important to ensure you have funds to support your account.

  • Are my trades guaranteed?

    Orders are never guaranteed because if volatility is high, prices can be missed, and we may not be able to obtain a quote for you at the price you requested.

  • What is slippage and why does it happen?

    Orders are sometimes filled away from the desired price due to gaps in the market. This occurs because currency prices can sometimes be very volatile, or liquidity can be thin. In these scenarios, orders cannot always be filled at the exact price, but the next available price.

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