What is FX?

Foreign Exchange

Commonly referred to as FX, Forex or Forex Trading, Foreign Exchange is the world’s largest OTC market and one of the most popular trading instruments for CFD traders. The Foreign Exchange markets are the world’s most liquid markets with global turnover in the trillions daily. Foreign exchange markets operate 24 hours a day and only rest on weekends giving traders opportunity to trade whenever it suits them. Mplus Markets offer all major currency pairs giving some of the industries tightest spreads.

 

How Foreign Exchange Works

The concept of Forex Trading is that a trader will pick the performance of one currency and match it against another. Hence every time you trade you will be long one currency and short another. The first currency in the pair is referred to as the base currency and the second referred to as the quote/counter currency. As an example let’s take a currency pair GBP/USD. Here the base currency GBP is the Great British Pound and the quote currency would be the US Dollar. If we thought that the Pound would strengthen against the US we would then purchase a quantity, let's say £20,000 of GBP/USD in the hope that it goes up. In this instance we would be long £20,000GBP and be short the equivalent in USD.

 

Liquidity

The reason foreign exchange markets are so large and liquid is because of the market participants involved. Major traders of FX include Institutional investors, Governments, Central Banks, Global Banks, Hedge Funds, Retails investors and other financial institutes. Mplus Markets uses some of the world's largest liquidity providers to give our clients access to these feeds with industry leading spreads.

 

Mplus Markets' FX CFDs are offered at low margin rates starting from 0.5% meaning clients can access leverage as high as 200:1.

 

Example – Buying GBP/USD

 

Opening the position

You decide to go long on the British Pound against the US dollar. Our quote is 1.5519-1.5521, and you will buy £20,000 at 1.5521.

 

The value of your position is £20,000 x 1.5521 = £31,042. To open the position there is a 0.5% margin requirement based on the full notional value.

 

Your margin requirement is therefore 0.5% x £31,042 = £155.21.

 

Interest adjustments

While the position remains open, your account is debited or credited to the current tom-next rate. Tom-next is a market swap rate that expresses, in pips, the difference between the interest paid to borrow the currency that is being notionally sold overnight, and the interest received from holding the currency that is being notionally bought overnight.

 

Closing the position

As you predicted, GBP/USD later rises to 1.5721-1.5723, and you decide take your profits and exit the trade at 1.5721.

 

Profits/Losses

Opening transaction: £20,000 x 1.5521 = £31,042
Closing transaction: £20,000 x 1.5721 = £31,442
Profit on trade: £400

 

If the price had fallen to 1.5321 and the trade exited at this price then the trader would have lost £400.

Advantages of ECN Style

 

What is an ECN?

As a broker offering ECN Pricing, MPlus Markets streams prices directly from our liquidity providers. We understand that today’s traders value deep liquidity, the highest levels of price transparency, tight spreads and the best execution to ensure the lowest slippage. 

The way to meet all these needs, while keeping the entire trading experience smooth and seamless, is through the Electronic Communication Network (ECN). This technology allows executable price streaming, creation of a virtual order book and an aggregation across multiple liquidity providers.

By connecting to a number of liquidity providers, brokers like MPlus Markets, can offer extremely competitive spreads, ultra-low latency execution and minimal slippage. ECN Pricing allows orders to be matched and executed at ultra competitive pricing. It works extremely well for traders using Expert Advisors (EAs) as this further accelerates the speed of execution.

ECN Pricing at Mplus Markets  refers to the way in which pricing is derived and ensures that competitive prices are offered. This is distinct from order execution which may result in an off-setting order to be placed with a liquidity provider, the trade to be off-set with another client order or the client trade to be held internally by Mplus Markets. 

Regardless of Mplus Markets hedging strategy the goal of our ECN pricing model is to ensure quality execution at ultra tight pricing.

 

FX
_sidetext.gif

Who is MPlus Markets?

MPlus Markets is a proudly Australian owned trading business. We are committed to small investors and opening the door to a broad range of markets, both domestically and globally, that have previously been difficult for them to access.

Disclaimer:

Mplus Markets is incorporated in Australia (ACN 160 992 389) and is an authorised representative of FPMarkets (Authorised Representative number 433025). First Prudential Markets Pty Ltd trading as FP Markets holds an Australian Financial Services Licence (number 286354) issued by the Australian Securities and Investments Commission (ASIC). Commission, interest, platform fees, dividends, variation margin and other fees and charges may apply to financial products or services available from FP Markets Pty Ltd. The information in this website has been prepared without taking into account your personal objectives, financial situation or needs. You should consider the information in light of your objectives, financial situation and needs before making any decision about whether to acquire or dispose of any financial product. Derivatives can be risky; losses can exceed your initial payment and you must be able to meet all margin calls as soon as they are made. FP Markets CFDs are offered as over-the counter (OTC) products and are therefore not traded on an exchange. When trading Contract for Difference (CFD) you do not own or have any rights to the CFDs underlying assets. FP Markets recommends that you seek independent advice from an appropriately qualified person before deciding to invest in or dispose of a derivative. A Product Disclosure Statement for each of the financial products available from FP Markets can be obtained either from this website or on request from our offices and should be considered before entering into transactions with us.