Quick Definition
Trading back to exchange one currency or currency against another, for example the purchase of 100 € against $ 150 or the sale of $ 150 against € 100.Trading takes place on the FOREX is an interbank market, so that is not centralized like a market place.The Exchange Rate is the price of exchange between 2 currencies. For the EUR / USD for example, if the price is 1.3450 that means that you get for 1 € 1.3450. $ In exchange.
The Forex market structure
Some figures in tires of example: in April 2007, the volume of daily transactions is 3200 Millions of US Dollars, with the United Kingdom in first place and France in third. Asia accounts for about 20 percent but is currently as a rising power. Indeed, at the time of this writing (late August 2013), the Thai brokers are starting to offer the special trading platforms to trade the SET Index (Stock Exchange of Thailand), with the EUR / THB, The EUR / USD, USD / THB, Gold and SP500 available.
Nature stakeholders
More numbers:
- 5% of the daily volume comes from governments or trade company,
- 95% comes from speculators,
- 80% of positions traded on Forex are kept for less than 7 days,
- 40% of positions traded on Forex are kept for less than 2 days
- 85% of transactions are done on Forex major pairs EUR / USD (28% of total volume), USD / JPY (17%), GBP / USD (14%).
These stakeholders also include all managers of shares:
- Central banks,
- Institutional Investors
- Multinational firms,
- Commercial banks brokers ("Brokers")
- Traders individuals.
Brokers, or "brokers" for their part, carry out orders and provide transactions.
The trading scheme is very simple:
What will be of particular interest, we retail traders, it is this form of trading contract called CDF .What is a CFD?
The CDF
CFDs (Contracts for Difference / Contracts for Difference) allow you to take advantage of changes in financial markets, upward or downward. You can access a wide range of international securities such as currencies, stocks, futures and commodities. In London, the CFD is called the "spread betting".
Briefly, a CFD is a contract that allows you to exchange the difference in value of the underlying asset between the beginning and the end of the contract.
With CFDs, you invest only on the change in the price of the underlying asset. You will never become the owner of the asset in binary options top11binaryoptions.com.
Trading CFDs allows you to make transactions in real time and to intervene in the markets as they evolve.
Some CFDs have an expiry date, while others are unlimited, allowing you to study the market and close positions at the moment that seems most favorable.
You can choose to trade CFDs on individual shares, commodities, currencies (Forex / FX), bonds, interest rates and ETFs.
These are strong variations in this asset class that create the many trading opportunities, especiallyintraday (opening and closing positions in a single day).
Your broker will often use the argument of low deposit required to open a position to demonstrate popularity and accessibility of CFD. " Although you only have a small amount to pay for a transaction , "they say," you will benefit from its full value . " They forget to add: " but also potential losses can be catastrophic if the market varies against you . "
Although this unique aspect of CFD allows for greater profits, however, must be extremely careful with this. You need a fairly comfortable indeed account in order to support you in case of falling or rising during sudden or unexpected. IF you have such an account with 50 euros, making the trading will be very risky because if prices go up or down a hundred points (or pips), your entire account will be swallowed. You then may fall into this spiral alienating consisting replenish your account by 50 euros, losing again, and so on. As we will see later, this can be avoided through proper Money Management and a risk setting on the platform, but better to have an account from the start of 1000 euros about to start, which will support you during of volatile phases.
One advantage: trade CFD is exempt from the tax stock. By cons, in France, profits on CFDs are taxed in the same way that classical scholarship.