Introduction to Margin Forex

The global foreign exchange market is the largest market in the world with more than $1.5 trillion daily turnover, this surpasses the combined turnover of the world’s stock and bond markets. The high liquidity, competitive price quotes, on-line trading, accessible research and news has made Margin Forex (FX) trading the growth retail trading product and has made the trading of foreign currencies more accessible to the trading investor.

Some of the major driving forces behind currency fluctuations are interest rate differentials, inflation, government policies, economic situation and technical analysis perspective.

Margin Forex gives an investor the opportunity to trade over 100 foreign exchange currencies on a margined basis as opposed to paying for the full value of the currency with leverage up to 50 times the currency value, twenty four hours a day- seven days a week. With low dealing costs, transparent driving forces and dynamic movements makes Margin FX an attractive trading product for the savvy investor.

With the currency markets constantly moving, there are always trading opportunities, whether`a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the Euro and vice versa. So, if you think the EURUSD will decline (that is, that the Euro will weaken versus the dollar), you would sell EUR now and then later you buy Euro back at a lower price and take your profits. The opposite trading scenario would occur if the EURUSD
appreciates.

Note: The risk of loss in trading in derivatives and/or leveraged products can be substantial. A client should carefully consider whether trading such products is appropriate for them in light of`their financial circumstances and objectives.

What is Margin Forex?

Margin FX transactions are over-the-counter (“OTC”) derivatives. "Foreign exchange" generally refers to trading in foreign exchange currencies in the spot (cash) markets and is known as the physical. Whereas Margin Forex allows the investor an opportunity to trade foreign exchange on a margined basis as opposed to paying for the full value of the physical currency. Basically, there is no physical delivery of the currency, trades are cash adjusted or cash settled. In other words, investors are required to lodge funds as security (initial margins-normally 2% of transaction value for majors) and to cover all net debit (ie loss) adverse market movement (variation margins). Trades are monitored on a mark-to-market basis to account for any market movements on open positions. When clients are making a loss to an extent that they no longer meet the margin requirements they are required to “top up” their accounts or to "close out" their position.

Foreign exchange is essentially about exchanging one currency for another at an agreed rate. Accordingly, in every exchange rate quotation, there are two currencies. The exchange rate is the price of one currency (the “base” currency) in terms of another currency (the “terms” currency) such as the price of the Australian dollar in terms of the US dollar. For example, if the current exchange rate for the Australian dollar as against the US dollar is AUD/USD 0.7000, this means that one Australian dollar is equal to or can be exchanged for 70 US cents.