Currency Trading

damianoakley

Established member
542 57
Hi all, I wonder if someone could give me some advice.

When trading currencies, how do the contracts work?

For example - when trading Stock Options, you might get a quote for an Option trading at 50 pence - the minimum contract size is 1000 options, so 1 contract is £500.

I think that you have to buy or sell currencies in lots of $100,000 - is this right? If so, how does it work in terms of margin and trading capital required, etc.

Any help, no matter how simplistic, would be greatly appreciated.

Many Thanks
 

neilcharlton

Junior member
43 1
Yeah its not the easiest thing to get your head around especially if you come from an equity's background like me . He's my quick start guid , sure others on this board will go into more depth if you need it .

You essentially buy and sell currencies just like stocks really , but you trade the pair i.e gbp/usd , chf/usd etc etc.
Obviously currencies dont move an awful lot , so unless you got a spare million or 2 , your stuffed. Thats where leverage / margin comes into play . For your margin of $1000 your broker will leverage you up to $100,000 or 1 lot. 100:1 .
Say you trade USD /GBP at 1.6000 for every 1 pip movement i.e 1.6001 you make 10$ ... so a 100 pip move and you bag $1000 , you've doubled your money . The margin requirement is always $1000 so you need money in reserve to handle the swings or your position will be closed. You can also trade mini lots 0.1 which is 10,000$ for $50 margin ..200:1 leverage! .
( Search for the post on pip size )
Hope this helps a bit .
 

damianoakley

Established member
542 57
Thanks for that - I just wanted to understand the minimum trade size - which from what you say is 1 lot=$100,000.

Do all/most currency brokers trade at 100:1 margin?

Also, I'm looking at spread-betting currencies - what is your experience of this compared to normal trading of currencies thru a broker?

Thanks for the information.
 

neilcharlton

Junior member
43 1
The min bet size with a mini account is 0.1 of 10,000 base currency for which you need $50 margin . Thats a leverage of 200:1. For a normal trading account 1 lot is 100,000 for which you need $1000 active margin thats 1:100.

Never looked into spread betting , would be interetsted to find out more though .
 
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