The FOREX allows spot currency positions to be leveraged at various amounts depending on the broker – up to 50:1 leverage is common. This means that a 2% margin deposit ($200) allows you to control $10,000 of currency in a 1 Mini lot position in the FOREX market. FOREX trading is conducted on “margin” which means that a cash deposit, usually much smaller than the underlying value of the currency contract, is required in order to trade. Margin available in your trading account is based on account equity, not account balance. The equity is the most accurate measure of the value of your account, as it takes into account unrealized gains and losses.
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WHAT IS MARGIN?
ByadminThe amount of cash deposit required in a clients account in order to open a position or to maintain an open position. Margin is essentially collateral for a position. If the market moves against a customer’s position, the client will be requested to deposit additional funds through a “margin call.”
WHAT IS THE PROCESS IN WHICH YOU EXECUTE TRADES?
ByadminThe majority of all Forex trades are made over electronic trading platforms connected to the Internet. Typically, a trader Installs and opens a trading platform on a computer. Then, the trader creates an opening transaction, which is an order to establish either a buy (Long) or sell (Short) position. As a general rule, a trade…
WHERE IS THE CENTRAL LOCATION OF THE FOREX MARKET?
ByadminFOREX trading is not centralized on an exchange, as with the stock and futures markets. The Forex market is considered an Over the Counter (OTC) or “Interbank” market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
WHAT IS A LOT?
ByadminA standard unit of measurement for a FOREX trade. One lot in a standard account is approximately equal to $100,000 currency. Whereas, one lot in a Mini account is approximately equal to $10,000 of currency.
HOW IS VALUE OF A PIP CALCULATED…FIXED OR FLOATING?
ByadminThere are fixed and floating values for a pip depending upon the currency pair. When the USD is on the right side of the pair (EUR/USD, GBP/USD, AUD/USD, and NZD/USD) the pip is value is fixed at $1.00 per 10,000 currency units. This is a fixed pip value. When the USD is on the left…
WHAT ARE THE MOST COMMONLY TRADED CURRENCIES IN THE FOREX MARKETS?
ByadminThe most often traded or ‘liquid’ currencies are those of countries with stable governments, respected central banks, and low inflation. A large number of Foreign Exchange daily transactions involve trading the major currencies, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar.