Understanding Forex

Learn about the Forex Market and how to trade it with Rockfort Markets

About Forex

The Forex marketplace is the largest and the most liquid market in the world and has contributed to the ease of global travel, trading online efficiency, and instant international communication. The world is becoming smaller, and the need to exchanging different currencies is becoming more and more needed all the time. Currencies are traded against each other more and more often which has made the forex trading market grow at a fast pace and become more responsive and dynamic. The forex market is open 24 hours every business day with no central marketplace.

Trading with Leverage on

Trading with leverage enable investors to gain a larger exposure to a market with a relatively small deposit by borrowing capital. This is the way that investor’s profits can potentially be multiplied, for profit as well as loss. Investors can obtain some of the lowest margin rates (highest leverage) in the forex market, which is an extremely attractive proposition to investors that like to trade with leverage.

Way to Leverage Function

Trading leverage (trading on margin) will magnify investors’ profit if the price moves in investors’ favour, however, there is a potential that investors lose the initial deposit if the price move against investors’ favour. Any profits and losses are based on the full value, not the deposit amount, which could be a lot higher. At Rockfort Markets, our lowest margin rate is 1%, also can be referred to as ‘100:1 leverage’. This indicates that investors can open a position worth up to 100 times more than the initial deposit investor put in when the trade first opened.

Forex Examples

Each underlying asset will have a bid price and an ask price. To buy a contract over the underlying asset (go long on the contract), you will buy at the offer price multiplied by the contract size. If you sell a contract over the underlying asset (go short on the contract), you will sell at the bid price multiplied by the contract size.

For example

If a EUR/USD currency pair is quoted at 1.12751/1.12765:
To buy EUR, you would buy at 1.12765 x contract size; and
To sell EUR, you would sell at 1.12751 x contract size.

In this example, the difference between the two prices is the ‘spread’. Clients can use the online platform to see all orders, open positions, profit and loss reports and statements at any time. As this shows real time profit and loss results, clients are able to use this information to determine whether they wish to close their positions. As soon as a position is closed, any resulting funds can then be used as deposit for further positions.

Price Bid 1.12751
Ask 1.12765

Spread 1.4
Enter Trade Buy 1 standard lot (€100,000) at 1.1276
BUY €100,000 and simultaneously SELL US$112,765
Margin Required Using leverage of 1% you will only need to deposit €1,000
(€100,000 x 1% = €1,000) to open this position.
Profit Scenario After entering the trade, the EUR/USD then rallies over 100 pips to 1.1386 at which point you decide to close out your trade.
Gross Profit = £975.52
1.1386 (Sell Price) – 1.1276 (Buy Price) = 0.0110
0.0110 x 100,000 = $1,100
Convert to EUR, 1,100/1.1276 = €975.52
Loss Scenario The Euro decreases in value over the life of your trade. You close the position at 1.6358.
Gross Loss = -€897.20
1.1358 (Sell Price) – 1.1458 (Buy Price) = -0.0100
-0.0100 x 100,000 = -$1000
Convert to EUR, 410/1.2235 = €897.20
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Risk Warning: CFDs and margin FX are leveraged products that carry a high level of risk to your capital. Trading is not suitable for everyone and may result in you losing substantially more than your initial investment. Please consider our PDS

Rockfort Markets’ products are risky; please read our PDS.