Trade on the terms of Margin Trading allows buying and selling currency for currency without a real exchange of one currency for another. All operations are made under full netting, without supply of a base active.
The sense of Margin Trade consists in an arbitration of exchange and extraction of a course difference.
Condition of Margin Trading is placing by the client on the pledge bank account, or margin, which is considered, as maintenance of its arbitration operations and consequently the trader cannot lose more, rather than his size of margin.
The second feature of Margin Trading consists in granting of a so-called leverage. The leverage is a certain factor, the relation between the greatest possible sum of traded currency and size of margin. Work with leverage is capable to increase potential profit over many times.
The sum of margin of the client and the received profit (or the loss) makes variation of margin. The relation of minimum margin to variation margin cannot exceed 100 %, or unit.
Owing to the speculative orientation, each operation in margin trade consists of two parts: opening of a position and position closing – a full trade. While operation is not closed by the opposite transaction, the broker has a record about an open position.
And now let’s speak about most popular delusions about Forex market.
The first, often occurring error consists that operations in Forex market are analogue of game in roulette – players stake, some people – win, and at once big sums of money, and all others — in loss.
Forex is not roulette because at the basic of change of exchange rates lie certain laws. First, value of currency depends on economic indicators of the country, and secondly, is defined by preferences and expectations of participants of the market. The first as a rule, it is known, and – it is possible to predict the second. Negative opinion about Forex is stated only by those who are never worked on it.
The second consists in opinion that the prize of one participant is reached only at the expense of loss of others.
However, in the Forex market not everybody plays at change of courses — there are the large groups of participants using operations with currency for other purposes. They are exporters, large investors, and tourists for who short-term rate fluctuations do not play a considerable role.
The basic customers of these operations are export-companies. Selling the production abroad, they receive currency of that country where it sales. To invest money in manufacture, the currency of that country where manufacture is necessary to them. Under orders of such companies, banks (the broker companies) also spend conversions. Thanks to that leading world, currencies are freely converted on free to floating rates; such conversions can become an income source.
The currency market as, however, and all financial markets, never is in balance. Its condition can be defined as constant search of escaping balance.
Surely not a single piece of knowledge can be a 100% guarantee against losses, in particular on Forex, but sometimes just one Forex book can save you much money.