Learn Forex
Exchange rates on the Forex Market are expressed using the following format:
Base Currency / Quote Currency Sell / Buy
The fundamental characteristic of the buy-sell spread is that it is also the transaction cost for a buy and sell trading operation. For example, in the case of EUR/USD at the exchange rate of 1.2812/1.2815, the transaction cost is three pips. The formula to calculate the transaction cost is as follows:
Transaction Costs = Purchase Price – Sale Price
· CURRENCY CROSS:
A currency cross is any currency pair other than the US dollar. For example, opening a long (buy) EUR/GBP position is equivalent to buying the EUR/USD pair and selling one GBP/USD. Currency pair crosses often have a higher transaction cost.
· MARGIN:
When you open a margin account with a Forex broker, you must deposit a minimum amount with that broker. This minimum varies between brokers and can be as low as $100 to as high as $100,000.
Each time you open a new position, a certain percentage of your account margin balance will be set aside from the initial required margin for new positions in any currency pair. Having this a current price, and the number of units (or lots) in the position. The lot size always refers to the base currency.
For example, suppose we open a mini account that offers 1:200 leverage or 0.5% margin. Mini accounts trade mini lots. Let’s say a mini lot equals $10,000. If to open a mini lot, instead of having to deposit $10,000 you only need $50 ($10,000 x 0.5% = $50).
· LEVERAGE:
The leverage is the proportion of the amount of capital used in a trade that requires a security deposit (margin). It is the ability to control large amounts of money with a small amount of capital. Leverage varies dramatically with different brokers, ranging from 1:2 to 1:400.
At DTP we have agreements with different brokers to operate in Forex to obtain greater or lesser leverage depending on the student’s capital availability.
MARGIN CALL:
This occurs when your broker notifies you that your deposit margin has fallen below the minimum required level, because an open position has moved against you.
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