Forex and Network Marketing

                                              Lets discuss network marketing/imarketslive.

Definition: A business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in that payouts occur at more than one level. .

Network marketing is a type of business opportunity that is very popular with people looking for part-time, flexible businesses. Some of the best-known companies in America, including International Markets Live, Avon, Mary Kay Cosmetics and Tupperware, fall under the network marketing umbrella.

                                        Lets discuss network marketing/imarketslive.

Network marketing programs feature a low upfront investment--usually only a few hundred dollars for the purchase of a product sample kit--and the opportunity to sell a product line directly to friend, family and other personal contacts. Most network marketing programs also ask participants to recruit other sales representatives. The recruits constitute a rep's "downline," and their sales generate income for those above them in the program.

Things can get sticky when a network marketing network compensates participants primarily for recruiting others rather than for selling the company's products or services. A network marketing system in which most of the revenue comes from recruitment may be considered an illegal pyramid scheme. That's why imarketslive is different because you must be a product of the product before marketing the products and actually sharing the opportunity.  

                                   Lets discuss network marketing/imarketslive.

Since network marketing programs are usually exempt from business opportunity regulation and aren't defined as franchises under state and federal franchise laws, you'll need to do your own investigation before investing any money. Check out for www.whatisiml.com and contact asap for the needful. 

                                   Lets discuss network marketing/imarketslive.

Mistakes Others Make Could be very Useful in Forex Trading

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In this article, I’d like to outline some of the mistakes that forex or stock traders make, to help you learn from these mistakes, and not to repeat the same mistakes. I think you remember that in one of my recent posts, I mentioned that “The wise learns from the others’ mistakes. The fool learns from his own if he learns at all.”

This is very true in forex trading. If you want to learn from your own mistakes, it can cost you a lot of time and money. But if you learn from those who have already made all the possible mistakes that a forex trader can make, it will save you a lot of time and money. It will shorten your learning journey and you will become a profitable forex trader sooner.

There are two kinds of mistakes that novice traders make. One is the mental and psychological mistakes, and the other one is the technical mistakes.

Mental and Psychological Mistakes:

1. Forex is a get-rich-quick scheme:

This is what many novice traders think. Forex makes money while you don’t need to promote any products or services, make any phone calls, sell anything to the customers and… . This is true, but it doesn’t mean that forex is a get-rich-quick scheme. It can potentially make a lot of money, but you will lose a lot of money if you deal with forex as a get-rich-quick scheme.

2. More trades, more money:

Forex is not like the other businesses that when you make more sales, you make more money. In forex, you have to wait for the market to give you a trade setup, whereas with the other businesses you have to spend more time, money and energy to make more sales to make more money. In forex trading, you have to be patient enough to wait for the trade setups. In the other businesses, you have to work more to make more money.

In forex trading, you have to wait for the market to give you an opportunity. In other businesses, it is you who has to create the opportunities.

3. I can make money through forex trading while I have no income and I need to pay my bills.

You will not make any money through trading if you “have to” make money. I mean you can not make any money through trading when you are already in trouble paying your bills. To become able to make money through trading, you have to have an income that covers your expenses, and so you can focus on learning with peace of mind. If you push yourself to make money through trading, you are hammering to lose your money. When you are in need, you lose your patience and you click on the buy/sell buttons while there is no trade setup.

Forex or stock trading is like hunting. You can not take your rifle and shoot aimlessly to hunt something by chance. You only waste your bullets. You have to look for the prey sometimes for several days. Sometimes you have to walk in the woods or mountains for weeks, or you have to sit in your ambush for days until you can hunt something.

It is the same with trading. You have to wait for a trade setup to form. If you just take a position while there is no setup on the chart, you lose.

When you “have to” make money to pay your bills, you push yourself to take positions while there are no trade setups, because you have to pay your bills on time.

Please read this article very carefully.

4. I am a great teacher, doctor, engineer, mathematician, scientists, …, AND SO I can make money through trading definitely.

Absolutely wrong analogy!

I have seen so many highly educated people who have done nothing but losing money in trading, and also so many non-educated people who succeeded to make money consistently.

The truth is that trading has nothing to do with education. You can make money through trading without any academic education, and with having a normal IQ. The only thing you need is learning some rules and then disciplined to follow those rules. If you do this properly and precisely, you can make money through trading. If not, you lose, no matter how educated you are.

Even many educated people are not disciplined enough to wait for the trade setups. Many of them are so proud of their education, and so they underestimate the forex market and think that the market has to follow what they say and predict. This is wrong. Markets don’t follow anybody. We have to follow the markets.

5. I have to invent and develop my own trading system.

Again, this is the problem of many educated people. They think they are smarter than following the others’ trading systems, and they have to develop their own. They spend a lot of time and money to do it, and will finally give up. There are simple and easy to use, yet strong and effective trading systems that anybody can use to make money. Why should we try to develop a unique trading system?

I have seen so many traders who have been working on their own system for years without any result. They develop a new system every week and modify it every day until the next week that they develop another new system. We are here to trade and make money, not to invent something. Do you agree?

6. The more I learn, the better I will trade, and the more money I will make.

This can be true about the other businesses, but not with forex trading. It is good to learn more, but you should know how to use this knowledge to strengthen your trading system. In many cases, the new things you learn deviate you from the right track and make you try new things that had not been tried before. Learning new things doesn’t mean winning in trading.

Of Course, an experience is good and valuable, and you will become more experienced every day, and so you will make fewer mistakes and your success rate will go up. But learning and trying things can cost you time and money. To make money through forex trading, you don’t have to keep on learning all the time. Just learn the trading basics, and then a trading system, and then master your trading system.

Please read this article very carefully. I have explained about the things you have to learn to start making money.

Technical Mistakes:

1. Trading using the indicators like moving averages.

The only moving average that the markets show reasonable reactions to it, is the Bollinger Middle Band which is a 20 simple moving average. The other moving averages are money suckers. Things you hear like “have a 40 or 100 or 200 or … MA on the chart, and go only long when the price is above it, and only short when the price is below it, is the most stupid thing some so-called trading gurus say.

Many of the indicators like Stochastic are money suckers too.

2. More indicators, more confirmation, and so a stronger and more reliable trade setup.

Candlesticks are the best and most real-time indicators that reflect the markets sentiment directly and without any manipulation. They will be stronger when Bollinger Bands are added to them. If you like to have more confirmation, you can use MACD. You don’t need anything else if you want to make money. If you want to lose, then add more indicators to the chart and make it too complicated.

3. Short time frames generate more trade setups, and so I can make more money.

Short time frames can generate more trade setups, but how profitable those trade setups are? How many hours do you have to sit at the computer waiting for the short time frames to generate the trade setups you want? How strong and reliable are those trade setups?

Daily Market Lookup - 23rd August, 2016.

              Daily Market Lookup

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• Asia shares inched up on Tuesday while oil fell for a second session as investors awaited clues on whether the Federal Reserve will raise U.S. interest rates this year. A survey of Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, but the improvement was marginal and had little impact on stocks. The IHS Markit/Nikkei Japan Flash PMI rose to 49.6 in August from a final 49.3 in July. More flash surveys are due from Europe and the United States later in the day. The whole world seems to have hushed ahead of comments from Fed Chair Janet Yellen at the central bank's annual meeting in Jackson Hole on Friday. Investors still doubt the stars will align for a hike anytime soon, so a hawkish tone from Yellen would challenge that equanimity. Prices retreated from two-month highs on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count. The New Zealand dollar blipped higher after the country's central bank forecast another 35 basis points in possible rate cuts, less than many investors had wagered on.
• The dollar dipped against the yen on Tuesday, while the New Zealand dollar rose after the nation's central bank chief said he did not see the need for a rapid succession of interest rate cuts. The kiwi was up 0.6 percent at $0.7308 NZD=D4 after Reserve Bank of New Zealand Governor Graeme Wheeler said the current interest rate track involves further monetary easing but did not see the need for a rapid series of rate cuts. The RBNZ in early August cut interest rates by 25 basis points to a record low of 2.0 percent and said further policy easing may be needed The kiwi nevertheless rose to a 15-month high of $0.7351 mid-month, as it has proved resilient to falling cash rates at home given they remain far higher relative to those of other developed economies. The market's focus was on whether she would express hawkish views similar to those of Vice Chair Fischer and New York Fed President William Dudley, or take a more subdued stance in line with the July Fed policy meeting minutes that suggested the central bank was not in a hurry to raise rates. Over the immediate horizon, the market is looking for catalysts from the euro zone and U.S. purchasing managers index (PMI) data and U.S. home sales numbers due later in the session.
• U.S. Federal Reserve has two guiding goals when designing monetary policy: maximum employment and stable inflation. But as the country's central bankers converge for their annual symposium in Jackson Hole, Wyoming this week, they are under increasing pressure to reform their own system and goals to better reflect the diversity of America and its incomes. At this year's flagship economic policy conference, from Aug. 25 to 27, U.S policymakers will confer not only with their counterparts from around the world but also host a meeting on Thursday with a group calling for a radical overhaul of the Fed. Fed Up, a network of community organizations and labor unions that wants a more diverse, transparent and income-inequality aware central bank, will meet with Kansas City Fed President Esther George. It may be one reason why the organizers changed the dress code for the evening, usually a suited and booted affair, to casual attire. So far three other Fed policymakers, New York's William Dudley, Cleveland's Loretta Mester and Boston's Eric Rosengren, are also scheduled to show up. A Fed spokesman said Federal Reserve Governor Lael Brainard from the Washington-based Board of Governors also plans to attend the meeting. The activists will look to build on their proposals, put forward in conjunction with former top Fed policy adviser Andrew Levin, to make the Fed's 12 regional banks government entities. The Fed is the world's only major central bank that is not fully public. Oil prices fell over 1 percent on Tuesday, with Goldman Sachs warning that August's price rally had been overdone and that a proposed oil production freeze at current near-record levels would not help rein in an oversupplied market. Analysts said the falls were a result of an overdone price rally this month which lifted crude by over 20 percent between the beginning of the month and late last week. "While oil prices have rebounded sharply since Aug. 1, we believe this move has not been driven by incrementally better oil fundamentals, but instead by headlines around a potential output freeze as well as a sharp weakening of the dollar (and exacerbated by a sharp reversal in net speculative positions)," Goldman Sachs said. The bank said a proposal by members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia to freeze output at current levels "would leave production at record highs" and therefore do little to bring supply and demand back into balance. Goldman also said the likelihood of a deal "may not be high" due to disputes between OPEC members Saudi Arabia and Iran as well as uncertainty over non-OPEC producing giant Russia's willingness to cooperate.

Happy Trading.

You can join our Team to remain successful and profitable in the Fx Industry. 

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HOTFOREX - UYO.

   

                               

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Our current economy really calls for diversification of income stream, especially the ongoing retrenchment in the oil and banking sector. Join us weekly during our 2 Hours Live Trading/Training Session as we show practically how to be successful in the Global Forex and Derivative Markets, by trading Gold, crude oil, currencies and thousands of other products. 
Highlights: 
1. Intro to the Forex Market
2. Hot Forex in Uyo
3. Forex 101 part 1 
4. Sharing of Strategies.

Join us tomorrow at Food Affairs, Ikot Ekpene Road, Uyo.
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Brokers and The Brexit

A comprehensive list of ‎brokers that have updated their trading requirements. More ‎‎‎will be added as news comes in.

Ahead of the upcoming UK referendum on EU membership scheduled for Thursday,  the ‎majority of brokerage firms are raising their margin requirements, mostly on GBP, ‎EUR and UK indices, amid fears that the Brexit vote on European Union ‎membership on June 23 will trigger market mayhem.‎

This article is designed to be an easy-to-understand guide that lists the margin and ‎leverage changes across most of the key players in the trading industry. ‎The tightening of the trading conditions was a mandatory step to help ‎ensure that their clients are provided with better protection against the predicted volatility ‎surrounding this event. ‎

You can find below a list of ‎brokers that have updated their trading requirements, and more ‎‎will be added as news comes in.‎

Darwinex: Margin for EUR crosses up to 2% (from 0.5%-1%), margin for EUR/GBP up to 5%. Date of effect: June 16th

Admiral Markets: Margin for GBP pairs and FTSE100 up by five times on Admiral.Markets accounts. Date of effect: June ‎‎20th

JFD ‎Brokers: Margin for AUD/USD, USD/CAD, NZD/USD, USD/JPY down to 0.5% from ‎‎1.0%. Date of effect: June 12th

GMO ‎Click: Limits to size of open positions. No GBP/JPY trading on FX options. Date of effect: June 11th

FXCC: Margin for all GBP and EUR pairs up by 200% and 100% for all remaining ‎ones. Margin call level up to 150% and stop out level up to 100%. Date of effect: June 13th

Dukascopy: Leverage for GBP pairs down to 1:30 and for GBR.IDX to 1:10. Date of effect: June 22nd ‎

Saxo ‎Bank: Margin for all UK Index CFDs up to 8%, GBP pairs up to 7%.Date of effect: June 20th

Orbex: Leverage for GBP and EUR pairs down to 1:25, other symbols 1:100, stop out ‎level up to 50%. Date of effect: June 16th

IG ‎Group: Margin for FTSE100 and all GBP pairs up to 1% from 0.5%.Date of effect: June 17th

OANDA: Leverage for GBP pairs down to 1:20 and for EUR pairs down to 1:50. Date of effect: June 17th

IronFX: Margin for FTSE100 and GBP crosses up to 5%‎. Date of effect: June 17th

XM: Margin for all currency pairs, gold and silver up to 4% and 10% for all CFDs ‎on equity indices and commodities.‎ Date of effect: June 22rd

Rakuten: Maring for GBP pairs up, GBP/USD to $140. Date of effect: June 19th

Z.com: Leverage for EUR/USD down to 1:100, GBP/USD, GBP/JPY, EUR/GBP to 1:50. Date of effect: June 19th

Invast: Net open positions for GBP crosses restricted, higher margin.Date of effect: June 20th

AxiTrader: GBP crosses, several EUR, XAGUSD, XAUUSD, European indices- margin ‎down to 1:20. Other instruments 1:100. Date of effect: June 20th

LiteForex: GBP and EUR pairs, oil, indices, commodities – margin increase up to ‎twentyfold. Only ‘close mode’ for exotic GBP and EUR crosses.‎ Date of effect : June 20th

Vantage ‎FX: Margin increase up to 5% and 2% for XAUUSD, limited max trade size and ‎‎’close only’ mode for minor GBP and EUR crosses.Date of effect: June 20th

FxPro: Margin for indices increased to 5% and FX to 2%(cTrader) and up to 0.5% for ‎MT4, depending on position size.‎ Date of effect: June 17th

FxCrown: Margin for GBP and EUR crosses down to 4%‎. Date of effect: June 17th

ETX: Margin for indices up to 2%(5% for Spain/Italy) and 3% for gold and oil. ‎Margin for GBP pairs and minor EUR up to 3%. GBP/CHF and EUR/CHF up to ‎‎6%.‎ Date of effect:  June 16th

Forex.com: Margin for GBP pairs and UK indices up to 3% (including EUR/GBP). Margin ‎for EUR pairs and indices and US indices up to 1%.‎Date of effect: June 17th

Capital ‎Index: Margin for all tradable assets up to 5%, stop out level up to 90%. Date of effect: June 17th

Roboforex: ‎’Close only’ mode for GBP pairs. Since 23rd deposit for GBP instruments up ‎to 20 times.‎ Date of effect: June 20th

DeltaStock: Possible changes – to be updated. Date of effect: TBA

INTL ‎FCStone: GBP and EUR pairs, gold, silver- 200% of min CME margin.‎ Date of effect: June 16th

BMFN: Deposit for FX up to 2%, commodities to 5%,indices to 10%. Stop Out at ‎‎100%. Date of effect: June 19th

Pepperstone: Leverage for GBP pairs and UK100 down to 1:50, for EUR pairs and indices ‎down to 1:100.Date of effect: June 18th

DMM FX: Trading suspended on GBP and EUR pairs. Date of effect: June 22nd

UFX: Margin on all GBP pairs up to 2% and for Gold 1%. Date of effect: June 22nd ‎

‎OctaFX: Margin for EUR pairs up to 0.5% , margin for pairs up to 1%, and can be ‎increased to 2% (1:50)‎. Date of effect: June 23rd

ForexClub: Maximum leverage available for trading is not going be more than 1 to 20. ‎Also, next week it could be lowered further to 1 to 10 and other limitations ‎may be applied.‎ Date of effect: June 22nd

SwissQuote: Select GBP crosses margin increased to 5%: Date of effect: June 17th

Fullerton Markets: Increase in margin requirements on a selection of GBP crosses ranging from 2%-4%. Date of effect: June 21st

ICM Capital: All EUR crosses will have a leverage of 1:50, all GBP crosses will have a leverage of 1:25 and F100 and DAX will have a margin of $5,000. Date of effect: 12th June

This article was prepared with the assistance of Finance Magnates Business Intelligence Department.        

Hot Forex - Another Giant in Africa

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HotForex, a foreign exchange broker regulated by the Financial Services Commission (FSC) of Mauritius under the name HF Markets Ltd., has extended its licensing to a new jurisdiction today, bringing the South African market under its mantle of operation, according to a recent HotForex statement.

Open A Live Trading Account with Hot Forex Here and gain free membership to our Trading Room, where you will stay updated.

Many brokers have been eyeing growth and future markets that have included such regions as Southeast Asia, Latin America, and Africa. Boasting one of the world’s top ten capital markets and thousands of investors, South Africa has become a repeated destination for brokers looking to expand their presence on the continent.

HotForex presently holds licenses under the FSC, the Financial Service Authority (SVGFSA), and the Cyprus Securities and Exchange Commission (CySEC) license – per its latest ambitions, it has now added the licensing of the Financial Services board (FSB) of South Africa via HF Markets (SA) Ltd.

Open A Live Trading Account with Hot Forex Here and gain free membership to our Trading Room, where you will stay updated.

The license itself operates under the name HF Markets SA (PTY) Ltd with license number 46632 and will be helpful in expanding its focus in the region moving forward. As opposed to other saturated locales, South Africa stands to constitute a large amount of new business, with HotForex looking to capture new clients.

Nigerians are already in with Hot Forex office in Nigeria before South Africa. 

Emalbans Fx. 

Gold Hits 5-Week High amid Brexit Turbulence

Gold’s next major resistance hurdle is located above the psychological $1,300 level.

This article was written by Evdokia Pitsillidou, Risk Management Associate at easyMarkets.

Gold prices are trading at new monthly highs, as jitters over Britain’s upcoming referendum on European Union membership has triggered wide scale risk aversion in the global financial markets.

Since June 1, gold prices have soared over $70 or 6% to $1,285.00 a troy ounce, the highest level in five weeks. The increase also confirmed a bullish reversal for the yellow metal, according to the short-term momentum indicators.

Gold’s next major resistance hurdle is located above the psychological $1,300 level. The yellow metal last traded above that level in August 2015. After several failed attempts through the first five months of 2016, the metal appears poised for another re-test of $1,300.

 The precious metals rally has not been limited to gold. Silver futures have spiked 9% since the beginning of June, reflecting the growing investment appeal of the grey metal, which benefits from industrial as well as investment demand.

Much of the recent advance in gold and silver has been tied to anxieties about the Brexit vote. Markets are in disarray at the moment, as investors speculate about the economic and political consequences of Britain quitting the EU. British assets have been hit especially hard. London’s FTSE 100 Index is trading at its lowest level since February, while the pound has slumped to fresh two-month lows against the US dollar.

Brexit anxiety has been driven by several opinion polls showing that the Leave campaign is holding sway among British voters. A recent TNS poll gave a seven-point lead to Vote Leave, a broad political coalition headed by Conservative MPs Boris Johnson and Michael Gove.

According to a separate YouGov poll for The Times, the Leave camp holds 46% of the popular vote, compared with 39% who support British Prime Minister David Cameron’s Remain camp.

Britain’s referendum on European Union membership will be held on June 23. Nobody knows exactly what a Leave vote could entail for the British economy or global financial markets, but investors can expect waves of turmoil leading up to that date. A Leave vote on June 23 could propel gold and other precious metals to multi-year highs, as investors seek a hedge against global volatility.

In the short-term, gold’s biggest obstacle continues to be the US dollar. Since the NFP meltdown on June 3, the dollar has rebounded 1% against a basket of global currencies. However, with the Federal Reserve unlikely to raise interest rates this summer, the dollar’s gains are likely to be limited absent any unexpected market catalysts.

Those catalysts are unlikely to present themselves before the June nonfarm payrolls report, which will be released July 8. US job creation slowed to a dismal 38,000 in May, the Labor Department reported earlier this month. This shocking low figure raised doubts about the health of the US economy, pushing the dollar to monthly lows and supporting a short-term spike in gold and silver prices. This suggests that the inverse relationship between the US dollar and gold is likely to continue for the foreseeable future.

Our Opinion on EURUSD after the fall.

Resistance – 1.1196, 1.1236, 1.1275 

                                                      Support – 1.1125, 1.1102, 1.1060 

Hope it's time for a safer entry. EUR has come to an important Trendline Support in the Daily Chart. It's only if broken that the bears would be in control beyond 1.07, otherwise it's wise to go long as it bounces off the trend line.

Forex Lots & Contracts, Leverage and Margin, Spread, Bid and Ask Price

   

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Lots and Contracts

Forex is traded using Standard Lots. One standard lot is equal to 100,000 units of currency. One standard lot is also known as one contract.

The Forex Lot or Contract is the size of the amount of currency that is to be bought or sold in the online exchange market by an FX trader.

The Standard Lot which is equal to $100,000 Dollars worth of currency is not traded physically, but this $100,000 Dollar amount is represented by a contract.

The two terms, that is 1 Standard Lot and 1 Contract can be used interchangeably because both of them refer to the same thing - $100,000 Dollars of Transaction in the FX Market.

Why Trade Units of Currencies of $100,000

The reason why such large contracts are used is so as to increase the value of a pip (profit).

The Currency Price moves are measured in Pips - Price Interest Points

100 Pips Make 1 Cent, therefore, the price movements are calculated using very small price movements.

EURUSD will be quoted as 1.3452

The last decimal is the PIP (4th Decimal Place)

From 2010, a fraction of a pip movement was introduced and this is now referred to as fractional pips or pipettes.

EURUSD will be quoted as 1.34520

The last decimal is the PIPETTE (5th Decimal Place)

To answer the question why currencies are traded in lots of $100, 000 Units of a currency, we shall use the following example to explain:

Most currencies in the FX market will not even move more than 1 Cents a Day, 1 Cent is equal to 100 Pips, and the most common price moves are between 40 pips and 80 Pips.

Example:

• For one foreign exchange contract (standard lot) of $100,000

Value of 1 pip = 0.0001 USD

If one unit is used of 1 Euro then Value of 1 pip = 0.0001 USD

If 100,000 units (1 Forex contract) of Euros are used then value of 1 pip = 100,000*0.0001= 10 USD

NB: 100,000 units of Euro are used but the profit is calculated in USD, the quote currency and because the Exchange Trade is EURUSD.

Therefore, you can see that if you are trading with only 1 Euro your profit per 1 PIP price movement would have been 0.0001 USD, not even equal to 1 Cent, But when you trade with a standard lot of 100,000 Unit then profit is equal to $10 dollars per 1 PIP.

This is why Forex is traded using 100, 000 Units of Currency Contracts/Lots.

But How Can any Trader afford $100,000 to Invest With?

That is a very good question, the answer is LEVERAGE and MARGIN

You don't need $100,000 Dollars to trade, with leverage and margin you only need $1,000 dollars to transact a contract, but how?

We shall explain using the example below:

In Forex, a small deposit can control a much larger transaction this is called Leveraging, which gives the traders the ability to make nice profits, and at the same time keep risk capital to a minimum. The trader will transact on borrowed capital, having $1,000 dollars one can borrow the rest using a leverage option such as 100:1 - meaning that one borrows 100 dollars for every 1 dollar they have, therefore in total they will control a total of $100,000 dollars - this is how leverage works.

Leverage is expressed in the form of a ratio, for Example, 100:1, means the broker with giving a trader $100 Dollars for every 1 dollar that the trader has.

Margin is the amount of money required by your broker so as to allow you to continue trading with the leveraged amount. Foreign Exchange Margin is the amount you deposit so as to open an account with. If you deposit $1,000 then that is your margin.

With leverage, it is possible for retail investors to trade the Foreign exchange market. Leverage of 100:1 means that for every dollar you deposit, the broker will give you 100 dollars. This also means that in converse the broker requires you to maintain a margin of $1 Dollar for every $100 Dollar that they give you so as to let you continue controlling the borrowed amount of capital that they have given you for trading.

Forex Margin Trading Example:

If you deposit $1000, and the broker gives you leverage of 100:1 then it means you now have $1,000*(100) = $100,000 Dollars that you can trade with.

Because the total amount you control is $100,000 and your money is $1,000 which is 1%, this will mean your margin requirement is 1%.

A broker can tell you that our margin accounts require 1 % which means their leverage is 100:1, if they tell you their accounts require 2% margin it means their leverage is 50:1 (calculation: 1 is 2 % of 50).

Therefore, with Leverage and Margin as shown above traders are not required to deposit all the cash for the whole position they are going to trade. The account they open will, therefore, be referred to as a Margin Account meaning they are trading on margin - the funds in their account is the margin for the leverage they are using for trading.

Spread

The spread is the difference between the price which you buy and the price that the broker is offering to sell.

Spread can also be defined as the difference between the Bid Price and the Ask Price, this Bid and Ask price are shown in the example below and the spread is also calculated as the difference between these 2 price points.

Example of Spreads on MT4 Platform

EURUSD - Bid-Ask Spread Calculation of 1.5 Pips                                       

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Example of How to Calculate Spread:

If The Bid-Ask of EURUSD is 1.2914/1.2917

The Spread is 1.2917-1.2914= 3 pips

These 3 pips is profit for the broker. If you were to buy EURUSD you would buy at 1.2917. If you wanted to sell back the EURUSD you have just bought, the broker will buy from you at 1.2914, i.e. 3 pips less than the price you bought, the broker makes a profit this way. The lowest spreads charged is about 2 pips for major currency pairs. It is best to open an account where the spreads charged are low so that you can reduce your transaction costs when buying and selling.

Update: From 2010, there was an introduction of fractional pips, with fractional pips brokers also argued that they could now offer lower spreads.

For Example in the above spread illustrated on the MetaTrader 4 Platform Bid-Ask Quotes the spread is:

1.33790/1.33750

Spread is 1.33790-1.33750= 1.5 Pips

Most brokers now use the fractional pips, 5 Decimal Place Quotes so as to offer traders lower spreads, commonly referred to as "tight spreads", for example, 1.8 Pips Spread instead of fixed 2 Pips spreads.

Examples of Average Spreads (Major Pairs) in The Foreign Exchange Market

• EURUSD - 2.0 Pips Spread
• USDJPY - 2.0 Pips Spread
• GBPUSD - 3.2 Pips Spread
• USDCHF - 3.2 Pips Spread

Bid/Ask Price

Bid is the price at which you sell

Ask is the price at which you buy

If the quote for EURUSD is 1.29140/1.29170

Bid/ask= 1.29140/1.29170

Therefore:

Bid Price =1.29140

Ask Price =1.29170

Example Of Bid-Ask on MetaTrader 4 Platform

Bid-Ask Prices of Various Foreign Exchange Currencies on MT4 Platform

Mini Lots and Micro Lots

As a note, there is also the fraction of 1 Lot, these fractions of the standard lot are provided by brokers so as to make Forex more affordable to traders with the minimum capital required being as little as $100 dollars.

The Fraction of a standard lot is called Mini Lot which is 1/10 of a standard lot and Micro Lot which is 1/100 of a Standard Lot

Mini Lot = $10, 000 Units of Currency

Micro Lot = $1, 000 Units of Currency

These mini lots were introduced to make the FX Market more accessible to the retail FX investor as well as attract more and more retail investors. Maybe this is why Forex has become very popular, even with as little as $100 dollars anyone can enter this market.

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Happy Trading.