All You Need to Know About Trading Conditions

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Friday 15th April 2022, 8:26 am
Time to read:
10 mins

You can’t trade Forex (FX) or Contracts for Difference (CFDs) effectively if you don’t know the rules of engagement. In other words, you need to know the trading conditions before you start. These conditions determine what you can and can’t do, as well as how you make trades. 

If you don’t know what trading terms to look for, you could be putting yourself in a risky spot. This guide will take you through everything you need to know about trading conditions to find the right trading terms for yourself.

This article at a glance:


  • Trading conditions refer to the conditions on which brokerage platforms offer their trading service.
  • The conditions you can trade within vary from broker to broker.
  • Understanding trading conditions stop traders from making expensive and time-consuming mistakes.
  • Leverage, margin stop, margin call, spread fees, and overnight/weekend charges are some common trading conditions to know.

What are trading conditions?

Trading conditions are the principal terms governing the way financial instruments are bought and sold on a trading platform. They refer to the conditions on which brokerage platforms offer their trading service. This covers all the fees they may charge for specific services (such as holding a trade overnight), what ‘leverage’ they offer, dividend payment schedules, and more. 

For example, leverage allows a trader to make trades with money borrowed from a broker. The trader commits a small amount of money to the trade, and this is leveraged up (i.e., multiplied). This allows the trader to place orders that are several times bigger than the original capital commitment. The rest is loaned to them by the broker. 

Here, the extent of leverage provided differs from broker to broker, and is a key trading condition to watch out for. Various other conditions govern the ways you can trade, such as spreads or SWAP charges. However, they all work as the parameters within which you can buy and sell stock, forex, and other financial instruments. 

These vary from broker to broker. Therefore, you need to know the trading conditions before you start buying and selling, to ensure they’re suitable for your needs. 

Why are trading conditions used?

Trading conditions stop traders from making expensive and time-consuming mistakes by clearly outlining the terms on which they can trade. They create boundaries for the broker and yourself. 

For example, SWAP charges are fees for holding a position overnight. If the charges are high (relative to the value of the trades you want to hold overnight), then you either change your strategy, or look for a broker with different SWAP charges. If you don’t know what the SWAP fees are, you’re likely to incur hefty charges on your long term positions.

What might be agreeable to one trader, may not be so for another. That’s why you need to look through a broker’s trading conditions, and make sure the rules are right for the way you trade.   

What are some important trading conditions to know?

These are the key trading conditions you need to assess before you start trading:


Leverage increases your trading capacity beyond what you may otherwise be willing to deposit. Since you’re borrowing funds from a broker or lender, the amount of capital compared to your exposure is smaller. 

However, your risk here is multiplied – you’re losing money that you don’t actually have.

Leverage is often shown as a ratio.100:1 means that you’re increasing your market exposure by 100X. For example, with a deposit of 1 USD and a leverage of 100:1, your trading capacity per lot (the number of units of an instrument you can trade) would be 100 USD. 

However, if your broker provides you with a leverage of 1000:1, you could now trade a notional value of 1000 USD per lot with just 1 USD.

Here are the key points to keep in mind concerning leverage:  

  • Can place trades using a small amount of the value of the trade  
  • Helps take advantage of the market without bottomless funds  
  • Increased risk since losses can be magnified due to multiplied exposure

Margin stop and margin call  

Margin is another name for the value you use as a deposit when trading with leverage. The capital you commit against your leveraged trade is the margin.  

Every broker has a set level at which a margin call is triggered. A margin call is made when your trade equity falls below the level your broker expects you to maintain. At this point, you no longer have sufficient funds to maintain margin. At INFINOX, margin call takes place at 80% of the margin required

This means that when your margin falls to 80% of the required level, you may be in trouble. You will now need to add more money to your account to keep your positions open. If it drops further, you risk losing your largest or subsequent positions. This is referred to as margin stop, and at INFINOX, it is triggered at 50% of required margin.

Spread Fees

Spread fees are the fees charged by your broker whenever you open a trade. Brokers will generally sell you an asset, or buy an asset from you (if you’re shorting) at a price that is bumped up by a few percentage points over the actual market value of the underlying asset. This is one of the ways they make money from your trades.

As a natural conclusion, you want to look at a broker that offers you tight spreads so that you’re not handing out a chunk of your trading profits to them as spread fees. Your trade position only trends positively when it covers the spread and exceeds it, or else you’ll lose money. 

Spread fees are calculated according to the instrument you’re trading. Be sure to check how they’re charged by your broker, or find out more about the complete list of spreads charged by INFINOX.

All You Need to Know About Trading Conditions

SWAP/Rollover fees and weekend charges

When you open a trade, and hold that position overnight, you stand to incur overnight finance charges, known as SWAP or rollover fees. They’re not always charged – brokers can decide which of their products will have SWAPs charged for overnight positions. SWAP fees depend on your position. Depending on long or short, you can even receive overnight fees

SWAPs are calculated differently for forex trades. Here, they are calculated as the cost of borrowing between the value of one currency against the other in a forex pair.

On the weekends, a different charge gets stamped on your trade. These are weekend fees, and they are charged for – you guessed it – holding a position over the weekend. They are typically a triple charge that gets activated on Wednesdays or Fridays, depending on the instrument.

Dividends, bonuses and other adjustments 

Actions and adjustments are made to your positions when you invest in equity. A dividend is a prime example. You know dividends as payments to shareholders from companies, but they apply to trades too.  

If you have an open position on a long trade, you may be entitled to a dividend payment. If you had a short position instead, you would be liable to pay these.

On rare occasions, bonuses are added, or the company you buy from can request to buy back their shares.

Negative balance protection  

Balance protection is a service that can protect your balance from going into the minus territory. In simple terms, it’s a feature that helps you limit your losses so that you don’t lose more than your account balance. 

In this case, this feature ensures that your losses never result in your balance going into negative digits. This is an optional service that is not available with every broker, and tends to be stipulated in certain jurisdictions.

Market hours  

The market opens and closes at specific times every day. Market hours are tweaked on public holidays, and some markets will close completely on certain days too.   

These changes, no matter how small, impact market liquidity and cause price fluctuations (including price gaps in trading). 

Maintaining sufficient margin for your leveraged trades is a healthy practice in these cases. It’s also worth keeping yourself updated on market hours, which are updated regularly. Your broker will make this information available to you so you can plan your trades accordingly.

What trading conditions should a beginner trader look out for?

For traders, the right conditions often make the difference between success and failure. With this in mind, here are some things to consider before you start trading:  

  • Fees: Are there any deposit and withdrawal fees? These can impact your potential returns if you’re paying high fees compared to the size of your investments. 
  • Payment options and limits: What funding options does your broker accept and are you familiar with them? If not, you might be better off using a different broker. Similarly, if the minimum deposit or withdrawal is too high, the brokerage may not be suitable for beginners. 
  • Trade limits: Can you afford the minimum trade? If you’re looking to make trades worth no more than 10 USD, a broker with a minimum order size of 100 USD won’t be right for you.
  • Buy/sell limits: These limit orders ensure that your trades are executed at a benchmark price. A buy limit order means your trade will be executed only at a specific price or lower, and a sell limit order takes place at a specific price or higher.
  • Leverage: Trading with leverage is a high risk activity if you are a beginner. Ensure that you’ve understood how the leverage you’re trading with will impact your trading conditions, including margins and spreads.

What trading conditions should an intermediate trader look out for?

An intermediate trader needs to consider the same trading conditions as a beginner, such as fees, buy limits, and payment options. However, given that intermediates have more experience, it stands to reason that you’ll want to explore the following:

  • Pip value: A pip stands for ‘percentage in point’ or ‘price interest point’. It is used to measure price movements, and is helpful to calculate spread fees.

Pips indicate the smallest price movements an asset can make, and are typically expressed as decimal points. An intermediate trader should make sure they know the amount they are placing on each pip movement. 

  • Trading platforms: What trading software can you use and is it possible to set custom orders? For example, does the broker give you access to MetaTrader, or does it offer a proprietary trading platform?
  • Monthly charges: Some brokers charge monthly fees. Some also charge inactivity fees. If you’re not planning to trade on a regular basis, you’ll want to avoid brokers with high monthly fees and/or inactivity fees. 
  • Incentives: Some brokers offer promotions and incentives for trading activity, such as a cash-back. These offers may or may not be available to you depending on the region and jurisdiction you are in. 

Trading conditions FAQs

Are trading conditions required for beginners?  

Trading conditions tell you what to expect from a broker, and what terms are applicable for your trades. They have a heavy influence on the net amount you eventually get to take home. Therefore, they’re essential for all kinds of traders. 

How can I reduce the risk of CFDs?  

CFDs are risky, which is why it’s important to be proactive. Adding a stop loss/take profit order to your account is a smart move as it limits losses. You should always manage leverage responsibly too. Lastly, ensure that you place your trades via a trusted broker.

How can I start trading online?  

Anyone can begin trading CFDs and FX online with a trading account. To set one up at INFINOX, register online through our website or mobile app. You can then start trading everything from indices to equities. 

What amount of leverage should I take as a beginner?

The key thing for beginners to understand when trading with leverage is how to manage their risk. Leverage increases your exposure to the markets. Before you take this on, ensure that you’re clear about the associated risks, as well as what risks you are comfortable with. The amount of leverage you use as a beginner depends on your personal circumstances and risk appetite. 

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorized to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.


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