Why trade Forex?

Unlike other financial markets Forex has no physical location, like stock exchanges, for example. It operates through the electronic network of banks, computer terminals or via telephone. The lack of a physical exchange enables Forex to operate on a 24-hour basis, spanning from one time zone to another across the major financial centres (Sydney, Tokyo, Hong Kong, Frankfurt, London, New York etc). In every financial centre there are many dealers, who buy and sell currencies 24 hours a day during the whole business week. Trading begins in the Far East, New Zealand (Wellington), then Sydney, Tokyo, Hong Kong, Singapore, Moscow, Frankfurt-on-Maine, London and ends in New York and Los Angeles. Below there are approximate trading hours for regional markets (London time):

Japan 00:00-06:30
Continental Europe 06:30-13:00
Great Britain 8:30-15:30
USA 14:30-21:30






Forex has some advantages which make it very popular among investors:

1. Liquidity. Forex is the largest financial market in the world, with the equivalent of over $3-4 trillion changing hands daily whereas traded volume on the stock markets equates to only 500 billion US dollars.
2. Flexibility. Forex is a 24-hour market, which offers a major advantage over other markets, for example, stock exchanges which are only open during regional business hours. You can respond to breaking news immediately if the situation requires it and customise your trading schedule.
3. Lower transaction costs. Traditionally there are no commissions or charges on Forex, except for the spread.
4. Margin. Our 1:100 leverage (only for deposits below $ 100,000) is a powerful tool. You need to support a deposit of 1,000 US dollars to make a deal with $100,000. Such high leverage combined with rapid rate fluctuations can make this market profitable but at the same time risky: please see Risk Warning below.

Risk Warning

Under margin trading conditions even small market movements may have a great impact on the customer's trading account. You must consider that if the market moves against you, you may sustain a total loss greater than the funds deposited. You are responsible for all the risks, financial resources you use and for the chosen trading strategy

Calculating profit/loss

For example, EUR/USD exchange rate is 1.2505/1.2507 and your leverage is 1:100. You believe that EUR/USD will go up and buy 0.1 lot of EUR/USD at 1.2507 (Ask price) - for the contract size refer to Table 2. As we can see from Table 2, 1.0 lot of EUR/USD is 100,000 EUR, which means that 0.1 lot (our example deal size) is 10,000 EUR.

So, you buy 10,000 EUR and sell 10,000*1.2507=12,507 USD. In fact to fund this position you do not have to have 12,507 USD but only 125.07 USD. The rest of the money (in our example 12,381.93 USD) is leveraged to you by Alpari (UK).

The leverage (or gearing) mechanism allows you to open and hold a position much larger than your trading account value. 1:100 leverage means that when you wish to open a new position, you need to support a deposit 100 times less than the value of the contract you are interested in.





For example, you believe that EUR/USD is moving higher and buy 10,000 EUR and sell 12,507 USD. Assuming you are right and EUR/USD goes up to 1.2599/1.2601 and you decide to close the position: when you close a long position you sell the base currency (10,000 EUR in our example) and buy the quote currency (10,000*1.2599 = 12,599 USD):

Transaction EUR USD

Open a position: buy EUR and sell USD + 10,000 - 12,507
Close a position: sell EUR and buy USD - 10,000 + 12,599
Total: 0 + 92

What is FOREX?

The Foreign Exchange Market (Forex) is the arena in which a nation's currency is exchanged for that of another at a mutually agreed rate. It was created in the 1970's when international trade transitioned from fixed to floating exchange rates, and is now considered to be the largest financial market in the world because of its huge turnover.

Introduction to Forex

All currencies are traded in pairs and each is assigned with an abbreviation. Here are some of them (Table 1):
EUR Euro
USD US Dollar
GBP British Pound
JPY Japanese Yen
CHF Swiss Franc
AUD Australian Dollar
CAD Canadian Dollar
NZD New Zealand Dollar
SGD Singapore Dollar

'Base' currency is the first currency in the pair. 'Quote' currency, or 'term' currency is the second currency in the pair.
USD / JPY = 120.25
Base currency � Quote currency � Rate






This abbreviation specifies how much you have to pay in the quote currency to obtain one unit of the base currency (in this example, 120.25 Japanese Yen for one US Dollar). The minimum rate fluctuation is called a point or a pip.

Most currencies, except USD/JPY, EUR/JPY, CHF/JPY and GBP/JPY where a pip is 0.01, have 4 digits after the period (a pip is 0.0001), and sometimes they are abbreviated to the last two digits. For example, if EURUSD is traded at 1.2389/1.2391 the quote may be abbreviated to 89/91. The currency pairs on Forex are quoted as the Bid and Ask (or Offer) prices:

� � Bid � Ask
USD / JPY = 120.25 / 120.28

Bid is the rate at which you can sell the base currency, in our case it's the US dollar, and buy the quote currency, i.e the Japanese Yen.

Ask ( or Offer) is the rate at which you can buy the base currency, in our case the US dollar, and sell the quote currency, i.e. the Japanese Yen.

Spread is the difference between the Bid price and the Ask price.

Pip is the smallest price increment a currency can make. Also known as a point. e.g. 1 pip = 0.0001 for EUR/USD, and 0.01 for USD/JPY.

Currency Rate is the value of one currency expressed in terms of another. The rate fluctuation depends on numerous factors including the supply and demand on the market and/or open market operations by a government or by a central bank.