TD Ameritrade Forex Trading Overview
Investors oftentimes turn to TD Ameritrade for stocks and funds, but the broker also has a good platform for buying and selling forex. In fact, the firm is one of the few securities brokers to offer forex trading. Let's take a look at what TD Ameritrade delivers for currency traders.
The TD Ameritrade website has research tools for all products available through the firm, and this certainly includes forex. The broker offers a useful self-guided course on currency trading from Investools, an educational company owned by TD Ameritrade. This course can be expanded full-screen, and is free for all traders. There's also a useful assessment quiz that determines what level currency traders are at. A good selection of videos covers several important topics in currency trading, such as the use of margin, how to place trades, intermarket analysis, and interest rates.
TD Ameritrade Forex Commission Schedule
Forex trading at TD Ameritrade is priced in one of two schedules, either commission or non-commission. The non-commission schedule is simpler. The broker is
compensated from the bid-ask spread that is displayed on the platform. This bid-ask spread is wider than commissionable trades. With this schedule, in addition
to a bid-ask spread, there is also a commission. It is based on the counter currency rather than the base currency (the base currency is the first currency in
the pair, while the second currency is the counter currency). It is $0.10 per 1,000 units, with a $1 minimum. For example, the commission from a 1,000-lot
EUR/USD trade would be USD $1 ($1 minimum and/or $0.10 per 1,000 units).
The broker does not impose carrying or overnight fees. Moreover, there aren't any platform or subscription fees to trade forex.
TD Ameritrade Forex Margin/Leverage
One more reason we like TD Ameritrade is because their leverage requirements are lower than other popular FOREX platforms. They use a 50:1 and 20:1 leverage model
depending on whether the pair you’re trading is a major pair or an exotic pair. Here are two examples of what this would mean.
|10,000 units USD/NZD (major pair)
||50:1 leverage = $200 margin requirement
|10,000 units USD/MXN (exotic pair)
||20:1 leverage = $500 margin requirement
TD Ameritrade Margin Calls
TD Ameritrade will automatically liquidate your position if your margin meets one of the following criteria:
1. On any account with a risk level of less than 100% at 5 am EST.
2. Intraday if the risk level in the account falls to 25% or below, whichever comes first.
Currency trading at TD Ameritrade takes place on the broker's advanced desktop platform thinkorswim. The website does not have the ability to place trades for forex or futures. One great feature of thinkorswim is paper trading. Investors who don't have any experience trading forex can practice trading with a virtual currency without any risk of losing real money.
Thinkorswim has a section called Forex Trader. As the name implies, this is where forex is bought and sold. In the upper-left of the screen, balances are displayed, one of which is forex buying power. Below the balance section is news. News related to a currency can be found by typing in a currency pair, such as USD/JPY. Quotes and watchlists are displayed next. Currency pairs can be entered for real-time prices and bid-ask spreads.
On the right-hand side of the platform is the section devoted to currency pairs and their bid-ask spreads. These appear with a red sell button and a green buy button. A currency pair can be changed simply by typing in a new pair, such as AUD/USD or GBP/JPY. The quantity of the base currency to be purchased or sold can be changed. A # after the currency pair means the trade will be charged according to the commission schedule, whereas a currency pair without the # signifies the non-commission schedule. It's easy to switch between the two.
Charting for a currency pair is very advanced. Drawing tools and many technical studies are available. The graph is fully customizable, and trades can be placed directly from the chart with a click of the mouse.
In addition to trading on a desktop platform, TD Ameritrade has made sure its customers can trade on-the-go as well. The broker has a total of three mobile apps, two of which can be used to trade forex. All apps are free to use. Charting is available and includes many technical studies.
The order ticket is user-friendly. Users can choose between market, limit, stop, and trailing stop order types when submitting a purchase or sale. Advanced orders with triggers are also available on the app. Despite the level of sophistication of the mobile platform, it's easier to use than the more advanced desktop system.
TD Ameritrade offers general customer service 24 hours a day, 7 days a week. The broker has forex specialists who can be contacted by phone or e-mail, a big plus for currency traders who need some specialized assistance. The forex desk is open 24 hours a day from Sunday at 4 pm until Friday at 5 pm, CST.
New customers who open an account at TD Ameritrade with at least $25,000 will get $100. This is a great opportunity to practice currency trading and earn a quick
Benjamin Franklin. The promotion also comes with free stock and option trades for 2 months. The account must be opened and funded within 60 days.
The promo code is 220. Promotions link: Trade free for 60 days + get up to $600.
TD Ameritrade Forex Trading Summary
With TD Ameritrade, forex traders don't need a forex-only broker. The firm's clients get 24/5 customer service, currency education, and high-quality trading platforms, all with competitive spreads.
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What is Forex Market?
The Forex market is a bit difficult to understand, but the aim of trading in the Forex market is to make money from the ever-changing value of the world’s many currencies. To be profitable on the Forex market, one currency is set against one other currency that is utilized as a base currency. A pair of currencies is used to symbolize a Forex trade in order to represent the two currencies that are being pitted against one another. For example, if a currency pair is represented as USD/JPY, then the U.S. dollar is being traded against the Japanese Yen. In this transaction, the U.S. dollar is the base currency and the Japanese yen is known as the counter currency. In Forex transactions, the actual currency is rarely if ever exchanged. The deals are, instead, undertaken as contracts between two trading parties. The losses or gains from the Forex transaction are simply recorded into each trader’s account.
On any given day, currency values can be quite volatile, and although there may not be a drastic price fluctuation in currencies at all times, then movement is constant either in one direction or another. For those discerning traders that have studied the market and know what they are doing, there are significant gains to be made on the Forex market.
Forex Market versus the Stock Exchange
When compared to other markets, such as a stock exchange like the NYSE, the Forex market is quite different, mainly in the fact that it is relatively void of any regulation. A trade on the Forex market is entered into by two parties. There are no intermediaries to go through to route Forex transactions, although there may be some type of broker who works as a middle man for smaller investors. But there is no clearing house or dues to settle up at the end of the deal. Forex deals are over-the-counter or OTC deals, and as such, they do not take place in an exchange. This means that there is no need for the participants in the trade to be much disciplined in Forex trading. Individual investors can trade with the help of a Forex dealer in the over-the-counter market.
Forex dealers should be registered with the NFA, which is the National Futures Association. The NFA is an industry-wide, self-regulatory organization whose job it is to oversee the U.S. future’s industry. The NFA is headquartered in Chicago, Illinois. Dealers that are registered with the NFA are considered to be more credible than those who are not. NFA members enjoy arbitration services from NFA in the event of a transaction dispute, among other benefits.
Forex Trading for Novice Investors
Even experienced traders have a bit of difficulty understanding the Forex trading system, and that is doubly so for the novice investor or novice trader. With
some practice and knowledge, the process is a bit easier to understand. A big part of understanding Forex trading is to understand price quotes.
For example, if the currency pair that is being transacted is written: USD/JPY = 119.20, this shows that each U.S. dollar is worth 119.20 yen.
So, if you wish to buy one U.S. dollar using Japanese yen, you will need to pay that number of yen for one dollar.
If the Forex trader thinks that the Japanese yen will decline in value, he can sell his yen to buy the base currency.
This will give him what is known as a “long-position” in the trade. If he decides to buy Japanese yen and sell U.S. dollars, which is the base currency,
then he would then be taking the “short-position” on the trade. In short, if you are buying, you are purchasing dollars while exchanging yen,
and if you are selling, you are paying for yen using U.S. dollars.