Mayflam Forex Trading

What is Forex trading??

The foreign exchange or forex market is the worlds largest financial market in a place of vital role in the global economy everyday trillions of dollars are exchanged from one currency to another this kind of currency exchange is essential for international business forex market. Forex market participant include government businesses and of cause investors . Government use the forex market to implement policies for example when conducting business with another country wether it’s borrowing money, lending money or offering aide a country need to convert it’s currency into a foreign currency businesses use the forex market to facilitate international trade the may need to convert payment for goods and services bought overseas or to exchange payment for international customers into their preferred currency investors use the forex market to speculate on changes in the currency prices, currency price change almost constantly during the week because the forex market is open continuously from Sunday 4pm until Friday 4pm central time our trading days start about 4pm and end about 4pm central time the following day. The market needs to be open around the clock because of the global nature of the economy. Lets go over to some basics no how we trade forex works, when you trade forex, you are not just trading one product you are trading two currencies against each other this is known as a currency pair. Currency pair defines the value of one currency related to the other the easiest way to understand any quote is to read the quote from left to right take for example using the EUR vs USD currency pair. EUR / USD is trading at 1 EUR = 1.20USD here is another example using the USD/CAD is trading at 1USD = 1.25CAD even though their are two currencies involve, the pair is arts as a single entity similar to stock or commodity just like when trading stock investors profit when the buy a currency pair and it’s price increases, investors can also profit when the sell stock or short currency pair in a price decreases. let’s take an example assume an investor thinks that Europe economy will grow faster than the United States and as the result she thinks that the EUR will strengthen against the USD she can buy the EUR vs USD pair on speculated assumption if the price of the paired currencies rises she will make money conversely if the price fall she will experience a lose now we have covered the basics lets look at the few key aspect of the forex market. Lets start with “margin” when you trade on margin you only need to put up a percentage of the total invesment the amount is known as the margin requirement. When you trade in other security like “stocks” trading on margins means you are borrowing funds from your broker however forex trade can only be covered using funds from the investors account. investors can’t borrow funds to enter a forex trade but if you don’t have funds in your forex account, you need to transfer funds before placing a trade forex margin requirement varied depending on the currency pairs and the size of a trade. Currency pairs typically trade in a specific qualities known as “lot” the most common Lot sizes are standard lot and Mini lot, standard represent 100,000 units and mini lot represent 10,000 unit depending on your brokerage firm you may also be able to trade forex in 1000 unites increment which is also known as micro lot. margin requirement can also be as small as 2% of a trade or as large as 20% of a trade but the margin requirement for most currency pairs avareges around 3% to 5% to understand how margins is calculated lets look at another example EUR VS USD pair lets say this pair was trading at 1.20 and an investor want To buy a standard lot which is 100,000 units the total caused of the trade will be $120,000 however an investor doesn’t have to pay the full amount instead she pays the margin requirement lets say the margin requirement is only 3%. 3% of $120,000 is $3,600 that’s the amount an investor needs in a forex account to place this trade. This brings us to another key element in the forex market “leverage” this enables investors to control a large investment with a relatively small amount of money, in this example the investor is able to control $120,000 with $3,600 the leverage associated with currency pairs is one of the biggest benefit of the forex market but is also one of the biggest risk. Leverage gives investors the potential to make large profit or large loses. One more important element in the forex market is “financing” this is the calculation of net interest old or on currency pair and it happens when an investor holds position passed the closing day. The USD is associated with the overnight lending rate set by the feds and this rate defines the cost of borrowing money similarly each currency have their own overnight lending rate. Remember when you trade a currency pair you are trading two currencies against each other that acts like a single entity you are technically long one currency and short one the other currency. In teams on financing you are lending the currency that you longed and borrowing the currency that you short this lending and borrowing occurs on the overnight lending rate of each respective currency, in general if a vars receives a credit, if the currency here is long has a higher interest rate and the other currency short conversely an investor is debited if the currency here is long have a lower interest rate than the currency here short. Let’s look at an example, suppose an investor have a position in AUD vs USD currency pair say the overnight lending rate for the AUD is 2% and the overnight lending rate of the USD is 1% the investor is long the currency pair. Which means she long the AUD and short the USD.since the AUD have a high interest rate than the USD the investor will receive a credit however if the investor will short the AUD and long the USD he have today the depth because he short the currency that have the higher interest rate. Financing is performed automatically by a brokerage firm however it is is important to understand how it works and it’s financial inpart on the trade. this is just the basics on how Mayflam Group perform their day to day forex trade and we guarantee 40% – 50% profit rate any day we enter trade.