Currency

Main currency markets

Foreign exchange is traded essentially in two distinctive ways. Over an organized exchange and 'over the counter'. Exchange traded foreign exchange represents a very small portion of the total currency market the great majority of foreign exchange deals being traded between banks and other currency market participants 'over the counter'.
1. Exchange traded currencies

In the case of an organized exchange like the Chicago Mercantile exchange (CME) in the US, standardized currency contract sizes that represent a certain monetary value are traded in the International money market (IMM). A central clearing house organizes matching of transactions between counter-parties. There are various disadvantages to trading currency futures as outlined in the chapter Advantages of trading FX.
2. Currency market

In comparison the over the counter market is traded around the world by a multitude of participants and price quality, reputation and trading conditions determine who a participant wishes to trade with. It is probably the most competitive market in the world and brokers like ACM must insure they live up to the highest standards of service and be compliant with market standards and practices if they want to acquire new customers and retain their existing ones. In 2007 a survey under the auspices of the Bank for International Settlements (BIS), global turnover of reporting dealers was estimated at about USD 3.2 trillion per day, representing a more than 60% increase since 2004.

Among the various financial centers around the world, the largest amount of foreign exchange trading takes place in the United Kingdom, even though that nation's currency, the British pound is less widely traded in the currency market than several others. As shown in the graph underneath, the United Kingdom accounts for about 34 percent of the global total; the United States ranks a distant second with about 17 percent, Switzerland is third with 6.1 percent, whereas Japan is only fourth with 6 percent.

Forex market

In the last years, the foreign exchange market has expanded from one where banks would execute transactions between themselves to one in which many other kinds of financial institutions like brokers and market-makers participate including non-financial corporations, investment firms, pension funds and hedge funds.

Its' focus has broadened from servicing importers and exporters to handling the vast amounts of overseas investment and other capital flows that currently take place. Lately foreign exchange day trading has become increasingly popular and various firms offer trading facilities to the small investor.

Foreign exchange is an 'over the counter' (OTC) market, that means that there is no central exchange and clearing house where orders are matched. Geographic trading 'centers' exist around the world however and are: (in order of importance) London, New York, Tokyo, Singapore, Frankfurt, Geneva & Zurich, Paris and Hong Kong. Essentially foreign exchange deals are made between participants on the basis of trust and reputation to deliver on an agreement. In the case of banks trading with one another, they do so solely on that basis. In the retail market, customers demand a written legally accepted contract between themselves and their broker in exchange of a deposit of funds on which basis the customer may trade.

Some market participants may be involved in the 'goods' market, conducting international transactions for the purchase or sale of merchandise. Some may be engaged in 'direct investment' in plant and equipment, or may be in the 'money market,' trading short-term debt instruments internationally. The various investors, hedgers, and speculators may be focused on any time period, from a few minutes to several years. But, whether official or private, and whether their motive be investing, hedging, speculating, arbitraging, paying for imports, or seeking to influence the rate, they are all part of the aggregate demand for and supply of the currencies involved, and they all play a role in determining the exchange rate at that moment.

Foreign exchange

Foreign exchange history, origins of the forex

In order to gain a complete understanding of what forex is, it is useful to examine the reasons that lead to its existence in the first place. Exhaustively detailing the historical events that shaped the foreign exchange market into what it is today is of no great importance to the fx trader and therefore we happily will omit lengthy explanations of historical events such as the Bretton Woods accord in favor of a more specific insight into the reasoning behind foreign exchange as a medium of exchange of goods and services.

Originally our ancestors conducted trading of goods against other goods this system of bartering was of course quite inefficient and required lengthy negotiation and searching to be able to strike a deal. Eventually forms of metal like bronze, silver and gold came to be used in standardized sizes and later grades (purity) to facilitate the exchange of merchandise. The basis for these mediums of exchange was acceptance by the general public and practical variables like durability and storage. Eventually during the late middle ages, a variety of paper IOU started gaining popularity as an exchange medium.

The obvious advantage of carrying around 'precious' paper versus carrying around bags of precious metal was slowly recognized through the ages. Eventually stable governments adopted paper currency and backed the value of the paper with gold reserves. This came to be known as the gold standard. The Bretton Woods accord in July 1944 fixed the dollar to 35 USD per ounce and other currencies to the dollar. In 1971, president Nixon suspended the convertibility to gold and let the US dollar 'float' against other currencies.

Since then the foreign exchange market has developed into the largest market in the world with a total daily turnover of about 3.2 trillion USD. Traditionally an institutional (inter-bank) market, the popularity of online currency trading offered to the private individual is democratising forex and widening the retail market.

Forex Trading

Compared to other financial markets, the forex market offers many advantages, such as 24h trading, no commissions and margin trading. Most of the advantages forex trading offers are listed here below.

Advantages of forex trading

Although the forex market is by far the largest and most liquid in the world, day traders have up to now focused on seeking profits in mainly stock and futures markets. This is mainly due to the restrictive nature of bank-offered forex trading services.
Advanced Currency Markets (ACM) offers both online and traditional phone forex trading services to the small investor with minimum account opening values starting at 5000 USD.
There are many advantages to trading spot foreign exchange as opposed to trading stocks and futures. Below are listed those main advantages.

1. Bid/Ask Spread rates

Spread rates have tightened dramatically in the last years. Most online forex brokers offer a spread of 5 pips on EURUSD which is the most widely traded and liquid currency pair. ACM offers a 3 pip spread on EURUSD. In stock trading, only liquid stocks offer tight spreads. Those spreads often represent on average between 0.04% and 0.06% of the value of the stock. In comparison ACM offers a 3 pip spread on all major currencies, this equates to approximately between 0.02% and 0.03% on the underlying dollar value.

Exact percentages at current rates (May 2002):

EURUSD 3 pips 0.03%
GBPUSD 3 pips 0.03%
USDJPY 3 pips 0.023%
USDCHF 3 pips 0.018%

In the futures market spreads can vary anywhere between 5 and 9 pips and can become even larger under illiquid market conditions (which tends to happen substantially more often in futures currencies).

2. Forex trading commissions

ACM offers forex trading commission free. This is in sharp contrast to (once again) what stock and futures brokers offer. A stock trade can cost anywhere between USD 5 and 30 per trade with online brokers and typically up to USD 150 with full service brokers. Futures brokers can charge commissions anywhere between USD 10 and 30 on a round turn basis.

3. Forex trading margins requirements

ACM offers a forex trading with a 1% margin. In layman's terms that means a trader can control a position of a value of USD 1'000'000 with a mere USD 10'000 in his account. By comparison, futures margins are not only constantly changing but are also often quite sizeable. Stocks are generally traded on a non-margined basis and when they are, it can be as restrictive as 50% or so.

4. 24 hour forex trading

Forex trading market occurs over a 24 hour period picking up in Asia around 24:00 CET Sunday evening and coming to an end in the United States on Friday around 23:00 CET. Although ECNs (electronic communications networks) exist for stock markets and futures markets (like Globex) that supply after hours trading, liquidity is often low and prices offered can often be uncompetitive.

5. No Limit up / limit down

Futures markets contain certain constraints that limit the number and type of transactions a trader can make under certain price conditions. When the price of a certain currency rises or falls beyond a certain pre-determined daily level traders are restricted from initiating new positions and are limited only to liquidating existing positions if they so desire. This mechanism is meant to control daily price volatility but in effect since the futures currency market follows the spot market anyway, the following day the futures market may undergo what is called a 'gap' or in other words the futures price will re-adjust to the spot price the next day. In the OTC market no such trading constraints exist permitting the trader to truly implement his trading strategy to the fullest extent. Since a trader can protect his position from large unexpected price movements with stop-loss orders the high volatility in the spot market can be fully controlled.

6. Sell before you buy

Equity brokers offer very restrictive short-selling margin requirements to customers. This means that a customer does not possess the liquidity to be able to sell stock before he buys it. Margin wise, a trader has exactly the same capacity when initiating a selling or buying position in the spot market. In spot trading when you're selling one currency, you're necessarily buying another.

The Forex Market

Contrary to popular belief, the unification of many European currencies into one single currency (the Euro) has only strengthened and rendered more popular the usage of foreign exchange as an investment, a hedging instrument and as a tool for speculation. The most marked development has been the democratisation of foreign exchange in the retail forex market, the tightening of spreads and drastic improvement of trading conditions for the small trader.

In practically all investments there is a forex foreign exchange transaction to be made, whether trading in the stock market, futures and options, or fixed income market or any other market, currency market is almost always involved. Whether in international trade, import-export, or practically any type of business, resorting to some form of forex foreign exchange operation is practically unavoidable. It is not surprising then that the forex market is by far the largest in the world, in fact it is approximately 32.5 times larger than all equities markets put together.

At ACM we welcome all types of market participants using our extremely competitive conditions to trade in the forex market and fulfill their needs.


ACM is the most competitive online fx broker in the world, to know why go to execution methodology. The full list of ACM advantages is available on advantages of trading on the forex market with ACM.

Forex

New to Forex

When starting to trade on the forex market, you have to be aware of this market's specificity.
The Forex market allows a trader to make profit when buying or selling. There is no commission per trade, but a spread between the buying and selling price.
The below lines contain everything you should know about the forex market.

What is Forex (Foreign Exchange, FX) ?

ACM offers online forex trading services for traders wanting to make speculative transactions on the exchange rate between two currencies.

These rates may be influenced by world economic and political events, currency rate differentials, as well as many other factors including extreme weather conditions (hurricanes), acts of terror etc.

The Forex is the largest marketplace in the world with more than 1.8 trillion dollars changing hands daily and so making it one of the most attractive and lucrative markets.

How does the Forex work?

The forex market allows you to buy and sell currencies against each other and speculate on the differences in exchange rates.

Making a transaction on the Forex Market is simple: the procedures are identical to that of any other market so switching to trading currencies is straightforward for most traders.

The forex allows you to buy and sell currencies

Buying/Selling - B/S

If you want to open a position (i.e.: place an order to sell – to make a profit if the exchange rate falls) you have to choose the amount (i.e.: 100.000 EURUSD) from the drop down menu on the platform and then click the mouse on the sell currency button: SELL (if you want to place an order to buy, you should act in reverse).

This will open a position in the market and you will receive an immediate notification of it on your trading station.

To close an open position, you have to do the opposite of the initial operation – in our case buy the 100.000 EURUSD back.

Different order types also exist to open or close a position under a certain condition.
Forex quotation system

How does the B/S system work?

As with any market, for each currency pair, there are 2 prices. The difference between them is called the spread.

The spread is measured in points or pips – lowest decimal figure in a currency rate.

For a EURUSD a pip equals 0.0001 (or 10 dollars on 100.000), for EURJPY a pip equals 0.01 (or 1000 yen on 100.000). More information on P/L calculation on the following page: profit and loss.

Forex currencies quotation system

Currencies are quoted in pairs, for example – EUR/USD or USD/JPY.

The first currency in the pair is called the base currency and the second is called the counter currency.

The base currency is the ‘basis’ for purchases and sales.
For example, if you buy EUR/USD, then you acquire Euros and sell Dollars. You do this if you expect the Euro to grow against the Dollar.

It is also possible for a currency pair to be quoted as USD/EUR, but this method is used extremely rarely.

Each transaction must have 2 sides – a buy and a sell (or a sell and a buy).
By this we mean that it is impossible to buy 100.000 EUR/USD and then exchange it for another currency pair (i.e.: EUR/JPY) without closing the first position.

Also please note that no physical currency delivery will be made. For these purposes banks and exchange companies, which specialize in low-rate currency conversions are available.

Forex market working hours

The Forex Market, based on ‘spot’ transactions, is unique in comparison with all other global markets.
This is because trading takes place 24 hours a day, 5 days a week (ACM platform works from Monday 00:00 to Friday 23:00 CET). Financial centers are open for work, and banks and other organizations exchange currencies in different parts of the world for different purposes.

Therefore, trading never stops apart from a short break during the weekend.
Early closings are possible depending on calendar arrangement such as, for example, Christmas or new year’s eve.

Forex trading margins

A margin deposit is not, as many traditional traders suggest, the payment in cash for purchasing market shares. A margin is in fact a guarantee or a trust deposit, providing protection from losses during a deal? It allows traders to open positions on amounts that greatly exceed their account limits and so increase their buying power. ACM offers a 1% margin (or 1:100 leverage), which means you can control 100 times your deposit in the real market.

If the funds in the account, in the course of trading, fall below the prescribed margin, your positions will be closed automatically without prior notice. Using this system, the client’s account cannot go overdrawn even under volatile, fast-changing market conditions.

The formula for calculating margins is as follows: (account balance + profit/loss) : open position = the margin

Rollover of positions (swap)

For the sake of transparency and unlike any other online broker we actually have a complete explanation of applied cost of carry on behalf of the market or the customer on open positions held overnight. This overnight cost of carry is presented as a simple flat fee either paid or charged on a customer's account. This process makes for extremely simple statements and greatly increased executional transparency since we do not modify the original price of the position entered into by the customer.

You can find a more detailed explanation on the following page: overnight positions.

How to start trading forex ?

Open a live account if you feel ready to trade in the real market
OR
Open a demo account on one or both of our trading platforms and choose which suits you best

1. Define how long you can trade for.
2. Define the currency pair you feel most comfortable with.
3. Choose the tradable amount.
4. Before opening a position, you have to consider how much profit you wish to make or how much loss you are eventually prepared to take. Depending on this analysis, place stop and/or limit orders.
5. Open your position or place an entry order.
6. Follow significant news events and technical indicators which you can consult inside your trading station or from third party sources (find out more about different types of analysis on the following pages:

* Technical vs fundamental analysis.
* Forex technical indicators.
* Forex fundamental analysis.

Also please consult the following pages for more information or contact customer support.

Learn more about foreign exchange

* Foreign exchange glossary.
* Spreads and margin requirements.
* Execution methodology.
* Trading examples.
* Forex order types.
* Phone trading terminology.
* Trading with a strategy.

Specialist in the forex, ACM provides forex services, support and currency trading via the online dealing platform, real time currency exchange rates, forex trading software powered by java technology, news and analysis on the currency market.

Gold

GoldProfits4You (GP4U) is a private investment group operating on the forex and currencies markets. Our professional traders have accumulated a great experience of stock trading and developed a lot of highly profitable funds management schemes which allow us to put high interest rates for our customers. We always aim to increase the value of your short-term investment and provide you with a regular income that you may choose to withdraw or reinvest to achieve your growth objectives today and tomorrow.

Although Forex trading can lead to very profitable results, there are many involved risks: exchange risks, investing risks, and credit risks. The essence of our success is the integration of a dedicated risk management and optimization tool, which is applied within the context of a trading process, to produce a value enhancing combination.

In complete accordance with our trading and risk management strategy, we keep 20% of our assets in a emergency reserve fund to alleviate the losses that may incur.

GP4U is an investment opportunity for almost everyone. You may have at least $10 and agree to be legally bound by company's rules to start investing with us. Discover the internet investment world with GP4U.


INVEST $10,000+ TO JOIN OUR VIP CLUB:
For investments in excess of $10,000, we will give you direct access to the audited documents from the finance company we work with, the yearly financial reports and all activities of our company thus gaining you a preferential investment rate. And you will be provided a phone line that works 24/24 to available to answer all your questions.