 The "Foreign Currency Exchange Market," which is also referred to as "Forex" (FOReign EXchange), is the largest financial market in the world. Operating 24/5, the Forex market trades enormous amounts of money, estimated to be somewhere between six or several trillion dollars daily. This daily volume is larger than the combined volume of all the world's stock markets. The Forex market is unique in that it is not centrally located but rather an over-the-counter market where buyers and sellers conduct business linked by computers, telephones, faxes, and other tele-communications. Major influences of the FOREX market? The main factors that affect the FOREX market are mostly political and economical. Economies of different countries develop in a cyclical fashion (upturns and depressions), and the cycles do not often coincide. Market participants carefully analyze these processes. They analyze data on inflation, trade balances, output and many other indicators. This is called fundamental analysis. One factor affecting exchange rates between two countries is the trade balance. By definition, the merchandise trade balance is the net difference between the value of merchandise being exported and imported into a particular country. For example, consider the exchange rate for Yen against US dollars. Japan imports products from the USA and to pay for them, Japanese need dollars; therefore, the Japanese companies trade the Yen for dollars. On the other hand, because Americans desire Japanese-made goods, they purchase Japanese Yen to pay for Japanese goods. The Japanese demand for USA goods and services contributes to the demand for dollars while USA purchases of Japanese goods and services contribute to the demand of Japanese Yen. In this case, the net difference between Japanese purchases of American goods and services, and American purchases of Japanese goods and services, is the merchandise trade balance between the two countries. In the near term, these capital flows are greatly influenced by yield differentials. All else being equal, the higher the yield on American securities compared to Japanese securities, the more attractive American securities are relative to Japanese securities. An increase in American yields would tend to raise the flow of Japanese yen into American securities as well as decrease the outflow of dollars to Japanese securities. Combined, this increased flow of funds into Europe would lower the value of the U.S. dollar and increase the value of the Euro; therefore, the Euro to U.S. dollar ("USD/JPY") ratio, as it is represented in the Forex market, would increase. The last statement reminds us that action taken in the marketplace or unforeseen global events make technical analysis less useful until stability returns.
Open a free Demo account and practice trading currencies without real financial risk. Once you have become comfortable with the potential risk and reward present in Forex Trading you will be better prepared to open a live account. Each currency bears its appropriate three-letter code, its ISO Code developed by the International Organization of Standardization. For example, the US dollar code is USD (United States Dollar), the Euro code is EUR (Euro), the Japanese Yen is JPY, the British pound is GBP (Great Britain Pound), Australian dollar is AUD, the Canadian dollar is CAD. In the case of the currency quote, that consists of 2 numbers, e.g. the currency pair US dollar/Japanese Yen is designated as USD/JPY 117.73/117.77 the first number is called the bid and it stands for the market's willingness to buy US dollars for Japanese Yen at the given price (rate). The second number is called the ask or offer and it stands for a the market's willingness to sell US dollars against Japanese Yen at the given price (rate). This example shows that the market is ready to buy (bid) US dollars by paying 117.73 yen for each dollar, or sell (ask) US dollars for 117.77 yen. The trader who enters this deal in the market perceives the situation as opposite, so sells the US dollars (base currency) at the broker's bid price and buys dollars at the market ask price. Spread is the difference between the ask and the bid prices expressed in pips. At FXA Securities Ltd spread on core currencies under normal market conditions is one of the most competitive at between 3 and 4 Pips. When market swings occur, the spread increases. However at FXA Securities Ltd we maintain our fixed spreads, unless there is sudden huge Market movement. Eg; due to the FED intervening in the Market, causing huge volatility and lack of liquidity! If you take a detailed look at the mechanism of the Forex market you will find that it is quite simple. For example, at 10 a.m. the US dollar rate to the Japanese Yen was USD/JPY 120.00 - 120.05. If you believe that the Japanese Yen at present is undervalued against the US dollar, and the rate USD/JPY is about to move downwards, you make an order to sell $100,000 US for 120.00 (100,000*120.00) Japanese Yen. From that position, you are given two options: For instance, at 11 a.m. the US dollar rate to the Japanese Yen was USD/JPY 120.00-120.05. If you believe that the Japanese yen at present is undervalued against the US dollar, and the rate USD/JPY is going to move down, you order to sell 100,000 US dollars for 120.00 (100,000*120.00) Japanese Yen. From there, you have two options:
Overall, to make easier computations a following rule can be applied: value of one pip in the transaction worth 100,000 units of the base currency (that on the left side of the currency pair) is equal to 10 units of the counter-currency (that on the right side of the currency pair). Say, in a buy transaction worth 100,000 USD/JPY one pip values 10 JPY; in a sell transaction worth 100'000 EUR/USD one pip values 10 USD, and so on. Once the transaction is completed, profit or loss denominated in the second currency is immediately transferred to US dollars at the current market rate. The minimum lot for trading in the Forex market is 10,000 units of a currency. This doesn't mean you have to have this amount in your account with FXA Securities Ltd. All you need in your account is just a fraction of the sum (e.g. $2,000), while FXA Securities Ltd will loan the rest to you. If you open and close your position within one day, this loan will be free of interest charges, and the loan will not be credited into your account so you can only use it for trading in the Forex market. The ratio of the sum you are using for trading (including the loan) to the security amount required by the dealer is called Leverage. In the foregoing example, when you are trading the lot of 10,000 USD/JPY, the dealer requires a security deposit of $2,000 and your Leverage would be (10,000/2,000) = 5. This deposit required to enter a trade is called Margin. Balance is an amount held on the Customer's account, which can be changed depending on the client's performance on the market. Amendments are reflected on the balance only after a transaction is completed. Thus, the profit and loss open positions are not included in the balance. Forex margin deposit is not a down payment on a purchase, but rather a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allow you to hold a position much larger than your actual account value. FXA Securities Ltd's online trading platform Chart Trader has margin-management capabilities that allows you to get up to 200:1 leverage. The trading platform performs an automatic pre-trade check for margin availability and will only execute the trade if you have sufficient margin funds in your account. The system also calculates the funds needed for current positions and displays this information to you in real time. It is self-evident that to enter into more trades, you will need to have more funds in your margin account in addition to the Used Margin. These additional funds are called Free Margin. The Free Margin is the positive difference between your current Equity and Used Margin if the Equity is less than your account balance, and you have some unrealized losses that are currently outstanding in the open positions. When your Equity is larger than the balance, the Free Margin equals the positive difference between the balance and Used Margin. If you do not have enough margin to enter into a new trade, no more positions will be opened. The Short Margin is the condition when the current Equity becomes lower than the stated percentage (specified in the agreement) of the Used Margin. When this occurs the dealer will close some (or all) positions and the Customer might be asked to deposit more cash. Commission is a charge by a broker to execute a transaction. The commission amount varies and depends on the size, number of transactions and on other broker's terms. FXA Securities Ltd does not charge a commission to execute a client trade. FXA Securities Ltd acts as a principal in a trade directly buying and selling from a client. Interest / Rollovers (In respect of our various clients' country laws and cultural differences, those clients wishing not to recieve Rollovers, please state so on your application) Thankyou! The standard settlement of a Forex trade is two business days for delivery of currency. If our client trader desires not to take immediate delivery but rather to maintain his/her market exposure, a rollover is required. In this case, counter transactions encompassing the same currency pair, for the same amounts, settled on spot basis, are needed where one transaction closes a position for the "old" value date, and at the same time opens a new value date position. Current swap schedule Clients can access their Statements realtime online 24hrs, from the Trading Platform |
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Many factors affect the FX market everyday, from political developments, natural disasters, to mere rumours of such. Market participants react to these developments seeking to protect their cash investments, which creates unexpected or even dramatic movement in this market from time to time. It is for this reason that the currency market is never in equilibrium, and its behaviour can be defined as the perennial quest for an ever-elusive equilibrium.
