What is FX?
The FX (foreign exchange) market is today’s world’s biggest market with an estimated $5.3 trillion in daily trading volume, where all of the world’s currencies are being traded and exchanged. Forex trading enables you to exchange one currency for another, at a predetermined rate.
For instance, the GBP/USD rate is 1.2373, i.e. £1 is worth $1.2373 US Dollars.
Let’s assume for a moment that you need to buy British pounds with US dollars.
Each pound costs $1.2373. So if you buy £300, you pay $371.19.
You can now wait until the Pound strengthens against the dollar, and then sell back your Pounds at a profit.
Currency exchange rates tend to constantly rise and fall against each other due to numerous factors, such as world economics, government policies, natural factors, international trade, market sentiment and political factors. Your ultimate goal as a Forex trader is to make profits resulting from these rate changes by speculating on upcoming market movements.
Anyone is able to join in the forex market; from banks, governments and businesses to private investors and traders. FX trading carries some degree of leverage (up to x200 on Capital88’s platform). As a result, you can enter a trade with a relatively very small percentage of the entire value of your position and profit according to the full value of the trade – without any commissions or hidden fees.
The SELL rate of the Euro against the US dollar (EUR/USD) is 1.0589 and the BUY rate is 1.0672.
You predict that the EURO will strengthen against the USD, so you open a BUY position on an amount of 10,000.
10,000 x 1.0672 = 10,672
The contract is leveraged x50.
$ 10,672 : 50 = $213.44
This means you need at least $213.44 (initial margin) in order to open this position.
EUR/USD then increases to 1.1459. You manually close the position and earn:
1.1459 - 1.0672 = 0.0787
0.0787 x 10,000 = $787
Your profit is $787.00
You didn’t actually buy any euros or sold any dollars at no point. All you did was simply investing on the market performance of the currency pair.
Advantages of FX trading
FX trading is relatively different than most other forms of trading. Opening a position enables you to speculate on future currency pair movements through investing a reasonably small amount of capital and without paying fees to any third parties.
Unlike traditional trading, there is no actual need to physically exchange currencies. Instead, what you are trading on is the price movements of your selected currency pair.
Since FX is a leveraged product, you only need to invest a small percentage of the trade’s real value. Your profits, on the other hand, are calculated based on the total investment amount of the trade.
When trading in FX, you have an opportunity to profit from both the rising and falling of foreign exchange currency prices. On top of that, this market’s never-ending liquidity guarantees reliable pricing at all times, including in high volumes and enables you to take advantage of the tightest possible spreads.
You can diverse your overall investment portfolio and control it by setting the stop loss/take profit parameters on your open positions. Doing so will automatically close any open position you have in the event that the price either drops/rises beyond a predetermined level.
- No intermediary, no commission
- Instant trade execution
- Enormous leverage
- Diversification to spread risk
- 24/5 availability
- Fully secured and transparent
Why trade FX with Capital88?
When you trade FX with Capital88 you benefit from a complete trading experience like no other. Maximize your skills with our cutting-edge trading technology, enrich your knowledge with an all-inclusive access to our multi-purpose video courses database, trading eBook library and live expert webinar sessions, daily financial news and updates, professional account management and our expert 24/7 customer support.
The benefits of Capital88:
- Ground-breaking platform
- Fixed-tight spreads
- 100% safe and secured
- Unlimited FX market access
- Professional education center
- 24/7 dedicated support
- No commissions or hidden fees
- 1-on-1 live training sessions
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