Currency Trading

[damianoakley]

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

 

[bertie]

CURRENCY TRADING

i'm new to forex as well.....have a look at fxcm.co.uk or fxcm.com....

 

[neilcharlton]

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]

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]

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 .