The World’s Largest Financial Market (forex / FX)
With $5.3 Trillion a day of turnover recorded in 2013, ‘FX’ or ‘Forex’ market is considered to be the most liquid market in the world. The Forex market is the platform for trading global currencies. The Forex market beats the combined turnover of global stock and bond markets.
Investors are drawn to Forex trading due to the huge trading volumes and the liquidity provided; representing the largest asset class in the world.
Other factors that make Forex trading popular are:
Forex traders speculate on the value of one currency compared to another in order to generate profits. FX trading is typically executed on margin accounts and the industry practice is to trade on relatively small margin amounts.
Currencies that are traded against the US Dollar (“USD”) are called Majors, and these constitute the highest volumes of Forex trades.
The interest added or deducted for holding a position open overnight is called a rollover or swap. The rollover rates are determined as the differential overnight interest rate between the currency pair on which the position is being held. The rollover also depends on the position type (Buy (Long) / Sell (Short)).
The fixed fee applied to an interest-free online Forex, or CFD trading account is known as storage. An interest-free online trading account may maintain an open Forex position for a fixed grace period without being charged any storage charges. Any Forex positions that remain open beyond the fixed grace period are subject to the storage charge.
The client will pay to AMFX a fee as per the table below for each day the position is kept held after the first 15 days of opening the position.
The amount deposited with AMFX at the time of opening a trading account is known as the initial deposit and acts as the margin available to your trading account. The margin amount facilitates the level of gearing or ‘leverage’ allowed for trading.
AMFX reserves the right to liquidate the positions taken by you if the initial deposit and variation margin fails to cover the losses incurred.
A Pip is the smallest increment of movement (fluctuation) for a currency.
• One pip in EUR/USD pair is a move of 0.0001 or 1/100th of a cent.
• One pip in USD/JPY pair is a move of 0.01 or 1/10th of a cent.
For example if the value of GBP/EUR increases by a pip, the quoted rate will change from 1.2478 to 1.2479. The number of pips a currency pair moves determines the profit or loss for a trade.
A Forex lot is used to calculate the value of a deal. Each deal is valued at a certain number of lots, which is the standard unit size of the transaction.
One standard lot is typically equal to 100,000 units of the base currency and a mini lot is 10,000 units, whilst a micro lot is 1000 units. With AMFX, traders can choose the following lot sizes while trading currency:
• Standard lot size = 100,000 units – USD 10 for every pip move- leverage of 100 to 1
• Mini-lot size = 10,000 units – USD 1 for every pip move
• Micro-lot size = 1,000 units – USD 0.10 for every pip move
Our experienced and helpful staff are always on hand should you need assistance with Forex trading, margin / leverage, pips and lots although it is to be remembered that our staff are not authorised under our regulatory permissions to provide investment advice to you.