You trade in pairs

All currencies & commodities are traded in pairs and each product has an official abbreviation, for example GBP for British pound, USD for US dollar and EUR for the euro.

The ‘base currency’ is the first currency in the pair and the ‘quote currency’ is the second currency. These are commonly referred to as the bid and ask price.

Price differences create trading opportunities

You can trade because the values of currencies & commodities change. The rate tells you how much of one currency you need to pay to buy one unit of another. In FX trading, exchange rates are displayed as the bid and ask price for a currency pair.

You can trade in bullish and bearish markets

When you trade, you’re buying one product and selling another at the same time, which means you can speculate on rising and falling markets. This is one of the major advantages of Exchange trading.

You are likely to hear traders talk about bullish and bearish markets. When a market is rising or believed to be about to rise we call it ‘bullish’; when it’s falling or believed to be about to fall, it’s called ‘bearish’.

How you can place your first trade

First of all, consider whether the product you wish to trade is likely to rise or fall. This forms the basis of your trading strategy.

In a buy position, you believe that the value of the base currency, in our example the Euro, will rise against the quote currency, the US dollar.

Let’s assume the price of the EURUSD is 130.72 on the bid price and 130.74 on the ask price. Therefore, the spread is two pips. When you buy, your trade is entered at the ask price of 130.74.

Later you decide to close your trade and the bid price of the EURUSD pair is 130.76 and the ask price is 130.74. Your trade has gained 2 points. Since each pip is worth five US dollars, you would have made a 10 USD profit.

Now let's bring the same example and see what happens with a sell position. You believe that the value of Gold will fall.

The current value of Gold is $1250.00 on the bid price and $1250.30 on the ask price. As you’re selling, your trade is entered at the bid price of $1250.00.

Later in the day, you look at the position and Gold is now at $1245.80 on the bid price and $1246.10 on the ask price. You decide to close your position at the current price of $1246.10. Your trade has gained $3.90. Since each point is worth 3.20 US dollars, you would have made a $124.80 profit.

Safety & transparency is one of the main reasons why people trade on Exchanges. EGM are not active in the market, but have the necessary permissions from SCA to allow their clients to be active in Exchange base trading.

You can trade 24 hours a day, 5 days a week

The market runs 24 hours a day, 5 days a week, because at any given time of the day or night the market is open somewhere in the world. That means you can trade whenever you want, from anywhere in the world.

Avoid Paying Swaps & Rollover Costs

Exchange trading completely negates the need to pay overnight charges (or swap charges) on your positions.

You can trade both rising and falling markets

One of the reasons to trade is that you can find opportunities in both rising and falling markets – you can trade when you believe the price of the instrument is going up, or when you think it’s going down. If you think the price is going up, you buy (or go long), and if you think it’s going down, you sell (or go short).

You can find opportunities in high volatility periods

Sometimes you can observe periods of volatility when a market opens or closes. That means that the prices can change very quickly and unexpectedly. High volatility can create trading opportunities, but it also increases risks.

Ask yourself, why not?

If you’re asking yourself, why trade, the answer is simple – you can find great opportunities in the financial markets. If you’re interested in the world of business and you keep up with the latest news, then trading with EGM could be the ideal place to make your moves.

What is leverage?

One of the most powerful tools in Exchange trading is the use of leverage. Using leverage means that if, for example, you want to make a $50,000 deal, you would need a deposit of only $1,000. High leverage can make the market highly profitable though very risky.

It’s similar to buying a property

To show you how it works, let's look at the process of buying a house. You have a deposit of GBP50.000 and the property costs GBP250.000, five times your deposit. You need to use your bank as leverage to be able to buy the house, so you apply for a mortgage that covers the remaining GBP200.000. The ratio – or your leverage – is 50,000:250,000. This is more commonly expressed as 1:5.

Here’s how it works in trading at EGM

Before you start trading, you are required to put up a percentage of the money that you borrow ‘in good faith’. Let’s say you want to trade the EURUSD currency pair and the amount you want to invest in that position out of your own pocket is USD 5,000.

The Exchange has fixed margin requirements for all their products and as a result this would be the minimum required to take a position. This initial deposit is your margin requirement. The value of your trade is much higher than this. When you trade with EGM the value can be as much as 50-75 times your initial deposit. With an investment of USD 5,000 you could essentially take a position as large as $250,000.

Ensure you understand the risks

It’s important to remember that you should be careful and not over-leverage your position based on the equity in your account. Trading on margin and leverage can greatly increase your profits, but it can also magnify your losses very quickly if the markets move against you.

Your leverage check-list

• Your margin requirement is the initial deposit you need to make with your broker to enter a trade.
• Your leverage is the ratio of the total value of your positions compared to your margin requirement.
• Leverage enables you to magnify profits but your losses also increase.
• If you over-leverage your position and the markets move against you, there is the risk that your broker will liquidate your positions.

If you trade forex on a ‘spot’ basis, all trades settle two business days from inception, as per market convention. The settlement date is referred to as the value date.

Equiti offers ‘rolling spot’ forex. This means we don't arrange physical delivery of currencies and therefore, all positions left open from 23:59:45 to 23:59:59 (MetaTrader time, EET) will be rolled over to a new value date. As a result, positions are subject to a swap charge or credit. Please read our rollover/interest policy to find out more.

The rollover cost is based on the interest rate differential of the two currencies. Let’s assume that the interest rates in the EU and USA are 4.25% and 3.5% per annum respectively. Every currency trade involves borrowing one currency to buy another. If you have a buy position of 1.0 lot in EURUSD, then you earn 4.25% on your euros and borrow US dollars at a rate of 3.5% per year.

In other words:

• If you have a long position (buy) and the first currency in the currency pair has a higher overnight interest rate than the second currency, you receive a gain.
• If you have a short position (sell) and the first currency in the currency pair has a higher overnight interest rate than the second currency, you lose the difference.
• If you have a long position and the first currency in the currency pair has a lower overnight interest rate than the second currency, you lose the difference.
• If you have a short position and the first currency in the currency pair has a lower overnight interest rate than the second currency, you receive a gain.

Notes:

• If you open and close a position before 23:59:45 (MetaTrader time, EET), you will not be subject to a rollover.
• The act of rolling the currency pair over is known as tom.next, which stands for tomorrow and the next day.
• When you roll an open position from Wednesday to Thursday, Monday next week becomes the value date, not Saturday; therefore the rollover charge on a Wednesday evening will be three times the value indicated on the rollover/interest policy page.