Currency trading is an inter-bank market that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones. During exchange, the exchange rate of one currency to another currency is determined simply: by supply and demand exchange to which both parties agree. Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Currency Trading is used to speculate on the relative strength of one currency against another. The currency market is an over-the-counter market, which means that it is a decentralized market with no central exchange.
Advantages
Liquidity: the market operates the enormous money supply and gives absolute freedom in opening or closing a position in the current market quotation. High liquidity is a powerful magnet for any investor, because it gives him or her the freedom to open or to close a position of any size whatever. With average daily turnover of US$3.2 trillion,currency trading is the most traded market in the world. A true 24-hour market from Sunday 10 PM GMT to Friday 10 PM GMT, Currency trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York. Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur - day or night. Advantage of this business is that you make deals using computer from any part of the world 24 hours per day 5 days per week.
Participants
Commercial Banks Central Banks Currency Exchanges
Investment Funds Brokerage Houses Participants of this market are, first of all, large commercial banks through which the basic operations under the instruction of exporters and importers, investment institutes are carried out, insurance and pension funds, hedge and individual investors. Also these banks operations and in the interests due to own means, thus at large banks volumes of daily operations reach billions dollars, and at some banks even the basic part of the profit is formed only due to speculative operations with currency. Most traders focus on the biggest, most liquid currency pairs. "The Majors" include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily Forex trading happens in the major currency pairs.
AUD 100,000 EUR 100,000 GBP 100,000 USD 100,000 USD 100,000 1:100 1:100 USD 10,000 0.0001 3 points USD 50 1:100 USD 10,000 0.0001 3 points USD 50 1:100 USD 10,000 0.01 3 points USD 50 1:100 USD 10,000 0.0001 3 points USD 50
10 points 10 points 10 points 10 points 10 points from Running from Running from Running from Running from Running Price Price Price Price Price 20 Lots 20 Lots 20 Lots 20 Lots 20 Lots
Margin Requirement / USD 1,000 Lot Hedging / Lot USD 200 Force Liquidation
If Client Equity is equal or smaller than 10% Margin Requirement