More liquid than any other financial market, the forex market is opens to participants globally and at all times – making its trading volume the highest with a turnover of US$ 5 trillion daily. Often referred to as forex or FX, foreign exchange is the domain in which the exchange of money between two countries takes place at a mutually agreed rate.
Over-the-Counter Market (OTC)
Your trades do not go through an exchange and forex trading is settled “on the spot” as opposed to at a set date in the future. Forex gives options for you to enter a buy or sell trade whenever you’d like without restrictions, offering opportunities to gain from short-selling currencies.
Trade with Leverage
Leverage allows you to hold larger positions than your initial deposit, allowing traders to hold positions with only a fraction of the value that is required. With a larger tradable fund for trading, you are able to trade more than what you have initially deposited.
Forex Contract Specifications Details
Blackwell Global’s typical spreads apply under normal forex trading conditions, and are derived from the top international banks.
Blackwell Global quotes currency pairs to the 5th decimal place (Japanese Yen are quoted to the 3rd decimal place). This allows accuracy and transparency in our price offerings compared to a 4-digit pricing where trading figures are rounded up.
Lot Size Specification
A standard lot for forex represents 100,000 units of the base currency. The minimum required lot is one micro lot, which is 0.01 of a standard lot or 1,000 units of the base currency.
Transactions above the minimum size can be in fractions of a contract.
- The minimum size: 0.01 of one contract, or the equivalent of 1,000 units of the base currency.
- The maximum size: 100 lots can be placed depending on market availability. However, this may be subjected to slippage.
Trading in Different Currencies
Profit and Loss will be automatically calculated in your default currency using post rate for conversion.
Leverage allows traders to hold larger positions than their initial cash deposit. In other words, this means that their initial outlay is supplemented to increase the value of their underlying investments. The higher the leverage, the larger the position the trader can execute for the same amount of initial deposit.
For example, a client using 100:1 leverage can hold a position in the forex market of $100,000 with a margin of $1,000. For a 200:1 leverage, the client will need a $500 margin to hold the same position.
Leverage increases the potential of high return when the market moves in a trader’s favour. However, traders are to note that leverage will similarly act against them when the market moves against their predictions.
Different leverage levels apply to different account types.
Prior to opening a position in the market, an initial deposit is required when an trader opens an account with a broker. This cash deposit will act as a deposit to cover any credit risks that the trader might undertake. Depending on the agreement, the investor could be able to leverage up to a certain limit as set by the broker.
The margin requirement for a forex trade is calculated using the following formula:
Margin = (Lot Size * Contract Size * Opening Price) / Leverage
The examples below are based on a Standard/Classic account with a leverage of 100:1.
|Forex||Margin requirement for one standard contract position in EUR/USD at 1.2500 is calculated as follows:
Margin = (1 * 100,000 * $1.2500) / (100) = $1250.00
|Spot Gold||Margin requirement of one standard contract position in Gold at 1579.01 is calculated as follows:
Margin = (1 * 100 * $1579.01) / (100) = $1579.01
|Spot Silver||Margin requirement for one standard contract position in Silver at 28.70 is calculated as follows:
Margin = (1 * 5000 * $28.70) / (100) = $1435.00
Note: Interest is not required to be paid on the borrowed amount, but if the investor decides to hold his position overnight, interest will be charged as the rolled over rates on the total positions held.
Margin Call is a level set by a brokerage that defines the minimum amount of money required to trade in the market. When your account falls below the margin call level, you will need to make an additional deposit to maintain your positions. Alternatively, you can close some of your positions to reduce your required margin. At Blackwell Global, Margin Call is set at 120%.
Stop Out Level
In the event you are unable to maintain sufficient funds in your account after hitting Margin Call, and if your account value depreciates to the Stop Out level, your positions will be closed automatically to prevent further loss to your capital. At Blackwell Global, Stop Out level is set at 80%.
Also referred to as Rollover Interest, swaps are charged when holding onto a position overnight due to the difference in interest rates between the base metal and the quote currency.
Blackwell Global deals forex trading on a “spot” basis. Trades are all settled two business days from inception as per market convention. Swaps are automatically calculated and settled at 21:59 GMT (Server Time 22:59) on a daily basis. Blackwell Global does not arrange for physical delivery.
Open positions on a trade date basis that are held from Wednesday to Thursday will be charged three times the value. The extra payment is to cover the interest that would normally have been charged on Saturday and Sunday when the market is closed.