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What is Forex (Foreign Exchange, FX) ?
Make speculative transactions on the exchange rate between two currencies.
These rates may be influenced by world economic and political events, currency rate differentials, as well as many other factors including extreme weather conditions (hurricanes), acts of terror etc.
The Forex is the largest marketplace in the world with more than 1.8 trillion dollars changing hands daily and so making it one of the most attractive and lucrative markets.

How does the Forex work?
The forex market allows you to buy and sell currencies against each other and speculate on the differences in exchange rates.
Making a transaction on the Forex Market is simple: the procedures are identical to that of any other market so switching to trading currencies is straightforward for most traders.


Buy/Sell, Long/Short
If you want to open a position (i.e.: place an order to sell – to make a profit if the exchange rate falls) you have to choose the amount (i.e.: 100.000 EURUSD) from the drop down menu on the platform and then click the mouse on the sell currency button: SELL (if you want to place an order to buy, you should act in reverse).
This will open a position in the market and you will receive an immediate notification of it on your trading station.
To close an open position, you have to do the opposite of the initial operation – in our case buy the 100.000 EURUSD back.


Quotation System
Currencies are quoted in pairs, for example – EUR/USD or USD/JPY.
The first currency in the pair is called the base currency and the second is called the counter currency.
The base currency is the ‘basis’ for purchases and sales. For example, if you buy EUR/USD, then you acquire Euros and sell Dollars. You do this if you expect the Euro to grow against the Dollar.
It is also possible for a currency pair to be quoted as USD/EUR, but this method is used extremely rarely.
Each transaction must have 2 sides – a buy and a sell (or a sell and a buy).By this we mean that it is impossible to buy 100.000 EUR/USD and then exchange it for another currency pair (i.e.: EUR/JPY) without closing the first position.
Also please note that no physical currency delivery will be made. For these purposes banks and exchange companies, which specialize in low-rate currency conversions are available.


Forex Market Working Hours
The Forex Market, based on ‘spot’ transactions, is unique in comparison with all other global markets.This is because trading takes place 24 hours a day, 5 days a week. Financial centers are open for work, and banks and other organizations exchange currencies in different parts of the world for different purposes.
Therefore, trading never stops apart from a short break during the weekend. Early closings are possible depending on calendar arrangement such as, for example, Christmas or new year’s eve.


Margins
A margin deposit is not, as many traditional traders suggest, the payment in cash for purchasing market shares. A margin is in fact a guarantee or a trust deposit, providing protection from losses during a deal? It allows traders to open positions on amounts that greatly exceed their account limits and so increase their buying power. 1:100 leverage, which means you can control 100 times your deposit in the real market.
If the funds in the account, in the course of trading, fall below the prescribed margin, your positions will be closed automatically without prior notice. Using this system, the client’s account cannot go overdrawn even under volatile, fast-changing market conditions.
The formula for calculating margins is as follows: (account balance + profit/loss) : open position = the margin.

Swap
For the sake of transparency and unlike any other online broker we actually have a complete explanation of applied cost of carry on behalf of the market or the customer on open positions held overnight. This overnight cost of carry is presented as a simple flat fee either paid or charged on a customer's account. This process makes for extremely simple statements and greatly increased executional transparency since we do not modify the original price of the position entered into by the customer.

2 comments:

forex said...

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