FOREX (Foreign Exchange Market)
Foreign exchange market is the arena where a nation's currency is
exchanged for another in a mutually agreed rate. FOREX
market has formed 70th, when international trade has
system changed from fixed rates for floating rate system
exchange.
In fact, every national currency is a commodity like wheat ore
sugar, the same medium of exchange, like gold and silver. Since
the world changes each year more and more rapid economic development
the conditions of each individual country (labor productivity, inflation,
unemployment, etc..) depend on the level of development
other countries more and more, and this, in turn, impacts on
value of its currency relative to currencies from other countries.
This is the main reason the process of rate fluctuations.
Currency Symbols
EUR Euro
USD Dollar U.S.
GBP British Pound
JPY Japanese Yen
CHF Swiss franc
AUD Australian dollar
CAD Canadian Dollar
NZD New Zealand Dollar
SEK Swedish Krona
DKK Danish Krone
NOK Norwegian krone
SGD Singapore Dollar
ZAR South Africa Rand
Currency Exchange Rate
Exchange rate is simply the ratio of one currency valued
against another. For example, "EUR / USD exchange rate is 1.2505 "
means that one euro is exchanged for 1.2505 U.S. dollars.
The exchange rate of currencies is usually given as a bargain price
(left) and a selling price (right). The bid price represents what has
obtained in the quoted currency (U.S. dollars in our example)
when selling one unit of base currency (Euro in our example).
The sale price represents what has to be paid in the event of
(coin U.S. dollar in our example) for a unit
base currency (Euro in our example). The difference between the
supply and the sale price is known as propagation.
1.0 Size of lot of different currency pairs (Table 2)
1.0 Currency Lot Size necessary margin for 1 lot 1 pips
EURUSD 100,000 euros, 1,000 euros 0.0001
USDCHF USD 100,000 1,000 USD 0.0001
GBPUSD 0.0001 GBP £ 70,000 700
USDJPY USD 0.01 USD 100,000 1000
U.S. $ 200,000 2000 AUD AUDUSD 0.0001
USDCAD USD 100,000 1,000 USD 0.0001
EURCHF 100,000 euros, 1,000 euros 0.0001
EURJPY 100,000 euros, 1000: 0.01 EUR
EURGBP 100,000 euros, 1,000 euros 0.0001
GBPJPY £ 70,000 700 £ 0.01
GBPCHF 70,000 700 GBP 0.0001 GBP
EURCAD 100 000 1000 EUR EUR 0.0001
EURAUD 100 000 1000 EUR EUR 0.0001
NZDUSD USD 0.0001 USD 200,000 2000
USDSEK USD 100,000 1000 USD 0.0001
USDDKK USD 100,000 1,000 USD 0.0001
USDNOK USD 100,000 1,000 USD 0.0001
USDSGD USD 100,000 1,000 USD 0.0001
USDZAR USD 100,000 1000 USD 0.0001
CHFJPY 100.000 1.000 CHF 0.01 CHF
Suppose the exchange rate EUR / USD is 1.2505/1.2509.
He may have done market analysis and decide The EUR / USD
moving higher (at least 1.2600). You buy 0.1 lot (minimum
contract size) of EUR / USD at 1.2509 (ask price). Table 1
helps define what the contract size is: that is, 1.0 per lot
EUR / USD is 100 000 euros, below, 0.1 lot (size of our contract) is 10
000.
This means that you bought 10 000 and sold 10
000 * 1.2509 = 12,509 dollars. Thus, In order to reach an agreement not
must sell $ 12,509 total, but 100 times less fair
$ 125.09. The remaining sum of money (in our eg $ 12,383.91)
is used to you by an agent (a company that has introduced
contract to enter the market).
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