Forex Principles

The forex market, where they negotiate the world's major currencies, moving to $ 2 trillion daily, while the stock market moves in New York averaged 60 billion dollars. Many of the investors in this market are large financial institutions, mutual funds, arbitrage (hedge funds), corporations, central banks and investors. The gains can be enormous, but equally may be lost. Thanks internet now investors can access this small market and the risk for those who love the forex market offers opportunities to offer capital markets and bonds.

What are the attractions of the forex market?

First, there is no commission on transactions conducted. The gain accruing to firms that offers their services as brokers, resulting from the sale price and purchase. For example, the broker buying 1.2000 euro at 1.2003 and resold to, so that the investor receives a sales price of 1.2003 and when it wants to sell, the broker will buy at a lower price. The screen shows a price that implicitly includes a margin that allows them to earn profits. That no matter how many contracts that the investor wants to buy or the number of transactions you make. Second, leverage is higher than other markets. Indeed leverage can be between 100:1 and 400:1, i.e. it is only necessary to invest a dollar to buy 100 units of another currency. This increases profits significantly, however, also increases the level of risk.

The forex market is open 24 hours a day seven days a week, starting Sunday with the opening of Asian markets and ending with the close Friday with the U.S. market. This allows at any time can be opened or closed positions and strategies to adjust to the news that emerge.

Fourth, the margins are executed automatically. Due to the leveraged nature of the market, brokers need to maintain a margin to cover adverse movements in a certain position. In a contract of 10,000 units (10K) usually the margin is USD50, i.e. if you have an open position and is against this loss, the performance margin is paid once the capital falls below USD50. This is done automatically, so the capital never reached zero.

Finally, when buying and selling currencies can earn interest, this is known as "carry trade" and emerged in nineties when Japan decided to reduce its interest rates to zero in order to stimulate its economy. The "carry trade" involves buying a currency that pays a higher interest that the currency you are selling. For example, if you buy dollars and sell yen (long position in USD / JPY), is winning by 5% and would have dollars to pay 0% to sell yen, the difference is 5% for this position. If the position is short, would be paying 5%.