Afb forex

Afb forex


What is Forex Trading?

Overview

AFB provides an online trading platform for individuals, Introducing brokers , and financial institutions that want to speculate on the exchange rate between two currencies. In doing so, traders buy and sell currencies with the hope of making a profit when the value of the currencies changes in their favor, whether from market news or events that take place in the world. The forex market is the largest market in the world with daily volume of over 1.7 trillion making it one of the most exciting markets for trading.



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Market Hours

A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

Tokyo Open

00:00

Tokyo Close

09:00

London Open

08:00

London Close

17:00

NY Open

13:00

NY Close

22:00

The FX market is considered an Over the Counter (OTC) or 'interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.

Spot Rate

Spot rate is today’s market price of one currency measured in terms of another, for example, the price of one US dollar in Japanese Yen. The spot rates of all currencies against the US dollar (USD) are basic ones, the rest are considered cross rates.

Some of the existing currencies are said to be major; these include the US dollar (USD), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the Canadian Dollar (CAD),the Australian Dollar (AUD) and the Japanese yen (JPY).

When you ask your dealer for a quote, for example EUR/USD, he will provide you with two different prices, e.g. 1.2043 – 1.2048. The difference between these two numbers, “buy” and “sell” from the dealer’s point of view is called the spread. If you want to buy one euro, you have to pay, in this hypothetical case, 1.2048 USD for it, but if you want to sell one euro you are going to be paid by your dealer 1.2043 for it. In this case the difference between “buy” and “sell”, or the spread, is 0.0005 or 5 pips. Note that buying one currency is actually the action of selling the other; alternatively, selling one currency actually means that you are buying the other.

Advantages of Forex Trading

• 24-hour TradingThe main advantage of the Forex market is that it is a true 24-hour market. No matter what time it is, there are always buyers and sellers somewhere in the world actively trading Forex. In this way, investors can respond to breaking news immediately.
• Increase in LeverageLeveraged trading, also referred to as margin trading, allow investors in the Forex market to execute trades up to $100,000 with an initial margin of only $1,000. It is important to remember that higher gearing creates greater profits if one correctly anticipates movements in Forex prices and vice versa.
• LiquidityThe Forex market is more liquid than any other market in the world because there are always broker/dealers willing to buy or sell currencies. The Forex liquidity, particularly for major currencies, helps ensure price stability that enables investors to always open or close a position, receive a fair market price, and more importantly be less vulnerable to liquidity risk.
• Lower Transaction CostsForex market is much more cost efficient to invest in terms of both commissions and transaction fees. In general, the width of the spread in a FX transaction is less than 1/10 as wide as a stock transaction.

Participants of Forex

• commercial banks
• currency stock exchanges
• the firms which are carrying out the foreign trade operations
• investment funds
• the broker companies, private persons

Participants of this market are: large commercial banks, which the basic operations under the instruction of exporters and importers are carried out through, investment institutes, insurance and pension funds and private investors. Also these banks carry out operations and in the interests due to own means, thus volumes of daily operations at large banks reach for billions of dollars. Some banks make the basic part of the profit formed only due to speculative currency operations.

Except for banks, the broker houses are the active participants of the market, which are carrying out a role of the intermediary between a plenty of banks, funds, commission houses, the dealing centers, etc. act.

Commercial banks and broker houses not only make operations on sale and purchase of currency under the prices which are established by the other active participants, but also offer own prices. Thus, they actively influence a process of pricing and a life of all market, therefore they are named market - makers. As against active participants, passive participants of the market cannot offer own quotations and make purchase-sale of currency under the prices which are offered by active participants of the market.

Passive participants of the market pursue usually following targets: payment of export-import contracts, foreign industrial investments, opening of branches abroad or creation of joint ventures, tourism, gamble on a difference of rates, hedging of currency risks, etc.

The Central banks of the different countries come on FOREX, not with the purpose of extraction of the profit, as a rule. They usually do it with the purpose of stability check up, or correction of an existing rate of national currency, The correction of an existing rate of national currency influences on a condition of national economy.

The central banks also come out on the currency market through commercial banks. The profit is not the basic purpose of these banks, unprofitable operations do not involve them as well. Therefore interventions of the central banks are masked usually and carried out through several commercial banks at once.

The central banks of different countries can carry out also the joint coordinated interventions. If active participants make operations with the big sums of a few millions dollars passive participants can use margin trade, They have an opportunity to temporarily operate the capital, in one hundred times exceeding this deposit. Such way of trade allows to take a part in work of the currency market to fine investors with the small capital and thus to receive significant profit.

The structure of the basic participants of the market testifies that this market is actively used by "serious business" and for the serious purposes. That means not all the participants of the market use FOREX in speculative purposes. As we already said, the change of the exchange rates can lead to huge losses at the export-import transactions. Attempts to be protected from currency risks force exporters and importers to apply for hedging various instruments of the currency market: forward transactions, options, futures, etc.

Moreover, the business not even associated to export-import transactions, can have loss at change of Currency rates. That's why studying FOREX is an obligatory component of any successful business.


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