Forex

Trade the global markets
$5.3 trillion traded per day
EUR/USD, GBP/USD, GBP/JPY….
Introduction
to Forex trading
Peter Karsten
Commercial director
  

FOREX

The FOREX (Foreign Exchanges) market is the largest and most liquid in the world. Over $5 trillion is traded every day, meaning there’s opportunity even in the most unpredictable of markets. FX traders buy or sell a currency hoping that it will rise or fall against the value of another in order to profit from the difference in price. Forex traders benefit from trading regularly and taking advantage of volatility caused by high volumes of trading activity. FX prices are affected by macro/micro economic and geopolitical events that happen throughout the world including interest rates, inflation, government policy, employment figures and elections.

trade ForeX

  • The foreign exchange market is the world’s largest asset class and the most liquid with a daily trading volume of over $5 trillion. Trading forex (FX, foreign exchange trading) offers opportunities whatever the volatility in the market
  • You can access a wide range of instruments to trade including all majors, as well as minor currency pairs
 

Contract Specification

This table gives an indication of the margin requirements and pip values for a few of our most popular currency pairs.

  Instrument Symbol Contract Size Margin Currency  
  Australian Dollar vs US Dollar AUDUSD AU$ 100000 AU$ 5000 AUD  
  Euro vs US Dollar EURUSD € 100000 € 3333 EUR  
  Euro vs Great British Pound EURGBP € 100000 € 3333 EUR  
  Great Britain Pound vs US Dollar GBPUSD £ 100000 £ 3333 GBP  
  US Dollar vs Japanese Yen USDJPY $ 100000 $ 3333 USD  
Please be aware that the margin requirements are calculated based on ESMA leverage ratio of:
- 30:1 when the underlying currency pair is composed of any two of the following: US Dollar (USD), Euro (EUR), Japanese yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD) or Swiss Franc (CHF)
- 20:1 when the underlying index, currency pair or commodity is:
a) any of the following equity indices: Financial Times Stock Exchange 100 (FTSE 100); Cotation Assistée en Continu 40 (CAC 40); Deutsche Bourse AG German Stock Index 30 (DAX30); Dow Jones Industrial Average (DJIA); Standard & Poors 500 (S&P 500); NASDAQ Composite Index (NASDAQ), NASDAQ 100 Index (NASDAQ 100); Nikkei Index (Nikkei 225); Standard & Poors / Australian Securities Exchange 200 (ASX 200); EURO STOXX 50 Index (EURO STOXX 50);
Example 1

A Client X opens a 1 lot EUR/USD trade at 1.1720 market price.
Assuming his account is denominated in GBP and he has a 1:100 leverage, the margin required would be 1172.00 USD.
Converting this amount to GBP with an exchange rate of 1.3201, the margin required in the client’s account currency would be 887.81 GBP.
The formula to calculate required margin is:

contract size / leverage * market price

In our example: 100,000 / 100 * 1.1720 = 1172.00 USD or 887.81 GBP
Now let’s take a look and see how their margin would change should their leverage change from 1:100 to 1:30.

100,000 / 30 * 1.1720 = 3906.66 USD or 2959.36 GBP

As we can see from the example above, the margin has required has tripled.

Example 2

A Client X opens a 0.5 lot AUD/USD trade at 0.73966 market price.
Assuming his account is denominated in GBP and he has a 1:100 leverage, the margin required would be 369.83 USD.
Converting this amount to GBP with an exchange rate of 1.3125, the margin required in the client’s account currency would be 281.77 GBP.
The formula to calculate required margin is:

contract size / leverage * market price

In our example: (0.5)*100,000 / 100 * 0.73966 = 369.83 USD or 281.77 GBP
Now let’s take a look and see how their margin would change should their leverage change from 1:100 to 1:20. (0.5)*100,000 / 20 * 0.73966 = 1849.15 USD or 1408.87 GBP

As we can see from the example above, the margin has required has quintupled.

Example 3

A client SELLS 2 lots of GBPUSD at 1.56397
The position is closed at 1.56612

The profit/loss is calculated as
(Open Price – Close Price) * Contract Size * Lots
Lot: 2
Contact Size: 100000
Open Price: 1.3271
Close Price: 1.3248

(1.3248 - 1.3271) * 100000 * 2

= $460

The profit/loss is converted to the accounts currency:
If client’s account is in EUR:
USD 460/1.106 = EUR 415.91

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.40 % of retail investor accounts lose money when trading CFDs with INFINOX. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.