Once solely the domain of large regional banks FX has dramatically changed its face over the last 30 years. The average consumers’ interaction with currencies was only at the bureau de change just before a holiday. Currency was never seen as an asset class by large fund managers let alone an investment opportunity for retail traders.
The US dollar is also the currency most used in international transactions, constituting almost 50% of trade around the world. The most traded currency pairs containing the US dollar are:
- US dollar and euro (EUR/USD)
- GBP and US dollar (GBP/USD)
- US dollar and Canadian dollar (USD/CAD)
- US dollar and Japanese yen (USD/JPY)
EUR/USD is one of the seven major currency pairs that contain the US dollar and is the most traded pair on the FX market. It is considered to be the most important and also the most liquid of all currency pairs because the euro is the 2nd most important reserve currency globally (the US dollar is the first), as well as the 2nd most traded currency on the FX markets. As currency pairs are affected by external factors that influence an individual currency value, the EUR/USD will fluctuate according to the difference in interest rates set by the European Central Bank (ECB) and the Federal Reserve (Fed). For example, any intervention by the ECB in the markets aimed at strengthening the euro would be likely to see a rise in the value of the EUR/USD. Conversely, if the Fed takes action to strengthen the dollar by intervening in the markets, the value of the EUR/USD would be likely to fall.
At Capital Index for FX CFD trading, a lot is the standard unit to measure the quantity of the base currency in the currency pair you are trading.
- A standard lot = 100,000 units of base currency
- A mini lot = 10,000 units of base currency
- A micro lot = 1,000 units of base currency
Traders generally side in one of the two camps, technical or fundamental however all successful traders regardless of their style will be aware of the different viewpoints.
Technical analysis is a technique used to forecast the future direction of prices through the study of historical market data, primarily price, volume and open interest. Technical traders use trading information (such as previous prices and trading volume) along with mathematical indicators to make their trading decisions. This information is usually displayed on a graphical chart updated in real time that is interpreted in order to determine when to buy and when to sell a specific instrument.
Fundamental analysis is a method that attempts to predict the intrinsic value of an investment. It is based on the theory that the market price of an asset tends to move towards its 'real value' or 'intrinsic value'.
Fundamental analysis in FX entails predicting the price valuation of a currency and its market trends by analysing current economic conditions, government policy and societal factors within a business cycle framework. FX Traders gauge a country's economic state by examining macroeconomic indicators covering:
- Interest Rates Announcement
- Gross Domestic Product (GDP)
- Consumer Price Index (Inflation) and Spending Indicators
- Employment Indicators
- Retail Trade and Consumer Confidence
- Balance of Trade Surplus or Deficit
- Government Fiscal and Monetary Policy
- Education and Learning
We offer seminars and tutorials for clients to help improve their trading styles and increase profitability.
EAs or Expert Advisors are common ways for traders to automate their trading strategy, from a combination of indicators or built completely from scratch in the MQL language. The program is run on the MT4 terminal and can be optimised through back testing on historical data.
Our platform is hosted on a top of the range low latency setup fully cross connected in LD4, this allows us to give client the maximum chance of the trades being accepted. As an agency model brokerage we are most happy when you are trading and we understand platform stability and quality of execution and we are constantly working to improve your experience.
Margin calls and stop outs are fully automated to make the execution as fair and consistent as possible. Once your free margin has fallen below 100% of your margin requirement you will be unable to open any new trades, you will also receive an email warning you that you need to address your margin (in certain market conditions this email may not arrive before your positions have been stopped). Although we make every endeavour to ensure that your positions are closed before you reach a negative balance it is possible that in certain market conditions this is not possible and may result in a negative balance on your account.
Leverage, sometimes referred to as gearing, defines the ratio of the contract value and how much equity you will need to have as margin in order to be able to open the trade. This allows you to hold positions worth far in excess of the value of your account. If you have leverage of 100:1 it means that you need to set aside 1% of the trade value as margin, the higher the number the lower the percentage so 200:1 would mean you only need to set aside 0.5% of the value as margin.