A foreign exchange trade buying and selling 2 different currencies and acquire profits from their exchange rate fluctuations
What is Exchange Rate?
- The exchange rate between currencies from 2 different countries, and this rate is applied when exchanging one country's currency with another's.
- We call trading currencies as Foreign Exchange, Forex / FX Trade in short.
- Currently FX Trade Market is the biggest one in the world, and its daily trading rate is over 100 times compared to stock market's.
What is FX Margin Trade?
- The trade that a personal investor buys and sells 2 different currencies from International Forex Market and pursues foreign-exchange profit with Consignment Deposit (10% of 1 Lot).
- From 8 currencies, 2 currencies are paired and traded, and contracts are concluded by choosing either Buy / Sell position.
- Marking Method: 'Reference Currency / Relative Currency - Buying Value / Selling Value'
- - - Marking Example: In case GBP and AUD are chosen, 'GBP/AUD - 1.82831/1.84578'
- - Reference Currency: Standard currency in a currency pair. Buy / Sell position of Reference Currency - Selling Reference Currency
- - - There are 8 kinds of currencies and 29 currency pairs. Investors are to choose 1 from 29 pairs and proceed trades.
- - Currencies: USD, EUR, JPY, CHF, GBP, CAD, AUD and NZD
- Trading Unit: 100,000 unit of the basis currency is the basic trading unit and called as 1 Lot (e.g. When the basis currency is GBP, 1 Lot is 100,000 GBP)
- Trading method: Personal investor opens an account at an agency in Korea and proceed trading, and the trading is proceeded by an agency in Korea through brokerage company overseas.
- Personal Investor
Margin Call / Market Order
- Korean Stock Firms
Deliver Market Order
- Stock Firms Overseas
Deliver Market Order
- International FX Market
Characteristics of FX Margin Trade
- Possible to trade 24 hours (Mon. 7 am ~ Sat. 6 am, when daylight saving time is not applied)
- Profit creation is possible both in ups and downs
- Difficult to control market price and technical anaylsis is relatively easy to apply
Risks of FX Margin Trade
- Investment principal may be lost in partial or in whole in a short time
- When account balance is smaller than maintenance margin, the contract is forcibly liquidated and losses bigger than the account balance might occur.
- Trading expenses occur such as biding spreads for buying and so forth even when there's no consignment fees
- FX margin trade is OTC derivative, so not applied to Depositor Protection Act