Forex

Trade the most popular forex pairs like EUR/USD, GBP/USD and EUR/GBP with Kitco.

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Foreign exchange, or forex, is the world’s largest financial market; it is a market with a huge average daily trading volume of $6.6 trillion. Kitco Markets offer 24 hour CFD trading on FX pairs, opening at 07:00AM UTC to 15:00PM UTC Monday to Saturday
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Forex Spread

Foreign exchange trading involves trading one currency pair against another, predicting that one currency will rise or fall against another. Currencies are traded in pairs, like the GBP British Pound versus the US Dollar (GBP/USD). Forex trading is similar to trading shares or futures except that when trading foreign exchange you are buying or selling one currency against another and you do not take delivery of the underlying currency.
One of the key advantages Forex has over other financial instruments is that relatively small lot sizes can be traded – lot sizes can be as small as 1000 units (one micro lot). Typically, foreign exchange also involves leverage which in some cases can be as high as 1:500, which is very different to trading shares where no leverage is involved. Leverage allows traders to trade with more money than they actually have in their trading account. For example, if you had 1:100 leverage you could use a $1,000 deposit to control $100,000 worth of currency. This can be seen as an advantage however it can also result in losses.

How does Forex Trading work?

There are 3 primary markets:
  • Spot Forex Market – The physical exchange of a currency pair, taking place on the spot date (generally, this refers to the day of the trade plus 2 days – “T+2”).
  • Forward Forex Market – An Over the Counter (OTC) contract to Buy or Sell a set amount of a currency at a certain price at a future date.
  • Forex Futures Market – A forex futures contract is an exchange-traded contract to Buy or Sell a specified amount of a given currency at a predetermined price on a set date in the future.
The main factors that affect the Forex market:
  • Central banks – The world’s money supply is determined by central banks. If a central bank increases the money supply, the currency will likely drop. Generally, central banks also control interest rate levels, which is critical to the strength or weakness of a currency.
  • Economic data – Reports on the state of the economy serve as an important indicator of the currency’s strength. Major economic data includes: unemployment rates, inflation rates and trade balances.
  • Interest rates – Volatile currency moves tend to occur when a country’s central bank makes an unexpected move in interest rates. For example: if a central bank decides to unexpectedly cut interest rates, the currency will normally lead to a significant drop in value (as the market responds to the sudden change in monetary policy).
The following are forex-related definitions that you should familiarise yourself with when trading online:
  • Pip – Generally the lowest increment in which a currency pair is priced.
  • Spread – The difference between the Buy/Sell (Bid/Ask) price for a currency pair.
  • Leverage – Allows you to trade higher amounts with less capital. A leverage of 1:50 means you would need $200 to place a $10,000 trade.
  • Exchange Rate – The value of a base currency against a quoted currency.
  • Bid – The price at which the trader is willing to buy the currency pair.
  • Ask – The price at which the trader is willing to sell the currency pair.