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RISK WARNING
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. Seek education and gain experience before risking real money, but please always remember, your past performance does not guarantee future results.
What Is Forex?
The foreign exchange market (or “forex” for short) is the biggest financial market in the world, with over $4 trillion worth of transactions occurring every day. Simply, forex is the market in which currencies, or money, are traded in the interbanking system.
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By Investopedia Staff
What Is Forex?
The foreign exchange market is the “place” where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can’t pay in euros to see the pyramids because it’s not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.
What is the spot market?
More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a “spot deal”. It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.
Note that you’ll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market.
Forex Event Driven Trading on Forex, Forex.Today: 28 December 2020 – Live Training for FOREX Traders – 💴💷💶💵.
Measurable Event Trading Versus Over-Simplistic Assumptions
Spikes don’t vary a lot in this regard, they just take place over a smaller sized home window of time. A spike takes place to begin with because the market has just discovered brand-new info, info which is not yet “valued in”. Depending on the extent of the info, the spike will be huge or small, and also continue or fail. To explain this principle a little better, I’m mosting likely to mention what numerous event-driven quantitative strategies do regularly:
Programmers of these event-based (spike) trading strategies are able to measure information fetched from financial information launches instead easily. They just take the deviation from the actual and also anticipated number, couple it with other financial information launches that take place at that point in time (if needed), take the ordinary modification in cost prior to and also after certain inconsistencies take place, the timeframe in which these changes take place, and also are able to enhance an approach based on this and also any other technological factors they wish. They have a background of information (numbers) with which to work.
In all of the factors noted above, numbers are readily available, and also devices require numbers. But what takes place when a spike is triggered by a comment from a high ranking government official? No numbers there, just words. Yes, words.
What concerning words? Words, when it pertains to programs, can be numbers. Let me explain:
Words are weights, when gauged against each other in relation to cost motions. “downgrade” carries a various weight than “stimulus” or “protect” or “protect the money”, and so on, depending upon that it is originating from and also the context of other words utilized at the time.
High and low ranking government officials can be weights. The high ranking government official considers greater than a low ranking government official, and so on. A ranking firm, and also words utilized in their news release, can be weight. Etc. and so on.
So when you take an industry-standard information feed, designate weights (numbers) to every little thing mentioned over against ordinary cost motions, time, other technological factors, and so on, you wind up with a sample of information that can be enhanced right into a possibly rewarding trading technique.
As well as while I understand it all could appear absurd at first, if you assume I’m just pulling your leg on all of this, reconsider. While I’m providing a really streamlined explanation of the principle, it is undoubtedly utilized in mainly all markets by different participants, and also most definitely in this one.
What is margin in foreign exchange?
Margin is an essential part of leveraged trading. It is the term utilized to define the initial deposit you put up to open and also maintain a leveraged position. When you are trading foreign exchange with margin, bear in mind that your margin requirement will transform depending upon your broker, and also how huge your profession size is.
Margin is generally expressed as a portion of the complete position. So, a trade on EUR/GBP, as an example, could only require 1% of the overall value of the position to be paid in order for it to be opened. So instead of depositing $100,000, you ‘d only require to transfer $1000.
Final Verdict:
Event-driven trading strategies provide a great means to maximize boosting cost volatility, yet there are many threats and also constraints to take into consideration. When developing and also carrying out these strategies, it is necessary for investors to set up limited danger controls while giving sufficient area for the unpredictable situation to play out in the market. In the long run, event-driven trading strategies provide an important arrow in the quiver of any active trader.
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