Currency values never remain stationary, and it is this dynamic that gave birth to one of the most popular trading strategies of all time, the carry trade. Carry traders hope to earn not only the interest rate differential between the two currencies (discussed above), but also look for their positions to appreciate in value. There have been plenty of opportunities for big profits in the past. Let’s take a look at some historical examples. 
Many traders define leverage as a credit line that a broker provides to their client. This isn't exactly true, as leverage does not have the features that are issued together with credit. First of all, when you are trading with leverage you are not expected to pay any credit back. You are simply obliged to close your position, or keep it open before it is closed by the margin call. In other words, there is no particular deadline for settling your leverage boost provided by the broker.
If you're feeling inspired to start trading, or this article has provided some extra insight to your existing trading knowledge, you may be pleased to know that Admiral Markets provides the ability to trade with Forex and CFDs on up to 80+ currencies, with the latest market updates and technical analysis provided for FREE! Click the banner below to open your live account today!
Good morning Traders! No change from our point of view, the pair developed the expected potential rally approaching the first resistance. That said, our idea still remains valid as shown in the previous analysis (see Part.2 below) and we would like to see a spike on the weekly chart (see Part 1 analysis). DAILY ANALYSIS (Part. 2) (click and play on chart...
Welcome to the premier resource for all of your forex chart needs. No matter what your experience level, we will keep you in tune with the market and help you on your way to becoming a successful trader. If you are an experience trader already, here you will have the opportunity to rediscover some of the fascinating properties of forex trading charts, refreshing your grasp of the subject, and perhaps even acquiring some new insights along the way.
Guaranteed stop-loss order (GSLOs) work in a similar way to stop-loss orders, with the main difference being that a GSLO has the effect of placing an absolute limit on your potential losses on a particular trade, as it ensures that your trade is closed at the price you specify. For this benefit, there is a premium charge that is payable on execution of your order. This charge is displayed on the order ticket. We refund this premium in full if the GSLO is not triggered.
Clearly, leverage should be used judiciously, but even with relatively conservative 10:1 leverage, the 7.5% yield on NZD/JPY pair would translate into a 75% return on an annual basis. So, if you were to hold a 100,000 unit position in NZD/JPY using $5,000 worth of equity, you would earn $9.40 in interest every day. That’s $94 dollars in interest after only 10 days, $940 worth of interest after three months, or $3,760 annually. Not too shabby given the fact that the same amount of money would only earn you $250 in a bank savings account (with a rate of 5% interest) after a whole year. The only real edge the bank account provides is that the $250 return would be risk-free. 
In the previous USD/JPY example, between 2005 and 2006 the U.S. Federal Reserve was aggressively raising interest rates from 2.25% in January to 4.25%, an increase of 200 basis points. During that same time, the Bank of Japan sat on its hands and left interest rates at zero. Therefore, the spread between U.S. and Japanese interest rates grew from 2.25% (2.25% - 0%) to 4.25% (4.25% - 0%). This is what we call an expanding interest rate spread.
Between 2003 and the end of 2004, the AUD/USD currency pair offered a positive yield spread of 2.5%. Although this may seem very small, the return would become 25% with the use of 10:1 leverage. During that same time, the Australian dollar also rallied from 56 cents to close at 80 cents against the U.S. dollar, which represented a 42% appreciation in the currency pair. This means that if you were in this trade – and many hedge funds at the time were – you would have not only earned the positive yield, but you would have also seen tremendous capital gains in your underlying investment. 

This way, if 1:500 leverage is used, a trader would be making 500 USD instead of 1 USD. It is of course important to state that a trader can lose the funds as quickly as it is possible to gain them. Now as we have understood the definition and a practical example of leverage, let's take a more detailed look at its application, and find out what the best possible level of gearing in FX trading is. Admiral Markets offers varying leverages which are dependent on client status via Admiral Markets Pro terms.
Guaranteed stop-loss order (GSLOs) work in a similar way to stop-loss orders, with the main difference being that a GSLO has the effect of placing an absolute limit on your potential losses on a particular trade, as it ensures that your trade is closed at the price you specify. For this benefit, there is a premium charge that is payable on execution of your order. This charge is displayed on the order ticket. We refund this premium in full if the GSLO is not triggered.

When you trade in the foreign exchange spot market (where trading happens immediately or on the spot), you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.2200 that means it takes $1.22 to purchase one euro. 
Just like stocks, you can trade currency based on what you think its value is (or where it's headed). But the big difference with forex is that you can trade up or down just as easily. If you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it. With a market this large, finding a buyer when you're selling and a seller when you're buying is much easier than in other markets. Maybe you hear on the news that China is devaluing its currency to draw more foreign business into its country. If you think that trend will continue, you could make a forex trade by selling the Chinese currency against another currency, say, the US dollar. The more the Chinese currency devalues against the US dollar, the higher your profits. If the Chinese currency increases in value while you have your sell position open, then your losses increase and you want to get out of the trade.
When you trade in the foreign exchange spot market (where trading happens immediately or on the spot), you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.2200 that means it takes $1.22 to purchase one euro. 
This is why many traders decide to employ gearing, also known as financial leverage, in their trading - so that the size of the trading position and profits could be higher. Let's assume a trader with 1,000 USD on their account balance wants to trade big and their broker is supplying a leverage of 1:500. This way a trader can open a position that is as large as 5 lots, when it is denominated in USD. In other words, 1,000 USD * 500 (the leverage), would equal a maximum size of 500,000 USD for the position. The trader can actually request their orders of 500 times the size of his deposit to be filled.

Financial leverage is quite different from operating leverage. Operating leverage of a business entity is calculated as a sum total of the amount of fixed costs it bears, whereby the higher the amount of fixed costs, the higher the operating leverage will be. Combine the two and we get the total leverage. So, what does leveraging mean for a business? It is the use of external funds for expansion, startup or asset acquisition. Businesses can also use leveraged equity to raise funds from existing investors.
High Risk Investment Warning: Trading FX/CFDs on margin carries a high level of risk, and may not be suitable for all investors. Leverage can work against you. Before deciding to trade FX/CFDs offered by FXCM Australia Pty. Limited ("FXCM AU" or "FXCM Australia") you should carefully consider your objectives, financial situation, needs, and level of experience. By trading, you could sustain a loss in excess of your deposited funds. Before trading FX/CFDs you should be aware of all the risks associated with trading FXCM products and read and consider the Financial Services Guide, Product Disclosure Statement, and Terms of Business issued by FXCM AU. FX/CFDs products are only suitable for those customers who fully understand the market risk. FXCM provides general advice that does not take into account your objectives, financial situation or needs. The content of this website must not be construed as personal advice. FXCM recommends you seek advice from a separate financial advisor. For any questions or to obtain a copy of any documents, contact FXCM at [email protected] FXCM AU is regulated by ASIC [AFSL 309763]. FXCM AU ACN: 121934432.
Charts are the keys that allow us to unlock the secrets of forex trading. The subject covers a vast ground, and only by continuous practice can we expect to acquire the necessity fluency and expertise in evaluating them. The language of forex charts is really the language of currency trading. It will take some time to learn it, but when you are a native speaker, so to speak, your imagination and creativity are the only limits to your potential.
USDCAD is on an uptrend since forming a support at 1.29500. Levels to watch: - The rebound on the support has formed a channel up similar to another two occasions. - The price just hit the MA50 and is consolidating. - The long term pattern is a bearish megaphone. - The bearish megaphone's lower highs are made when the price crosses the MA200. This is a top...
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To trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into her or his margin account. The leverage provided on a trade like this is 100:1. Leverage of this size is significantly larger than the 2:1 leverage commonly provided on equities and the 15:1 leverage provided in the futures market. Although 100:1 leverage may seem extremely risky, the risk is significantly less when you consider that currency prices usually change by less than 1% during intraday trading (trading within one day). If currencies fluctuated as much as equities, brokers would not be able to provide as much leverage.
New to the world of trading or Forex? Confused by different technical descriptions that seem to be used to describe the same things about financial markets? Want to learn how to trade Forex It is important to feel comfortable before you start trading with real money, as mistakes from misunderstanding basic execution concepts such as spread , leverage and position sizing can be very costly. This page will explain the key “hows” and “whys” such as the basic workings of the market, how to buy and sell Forex, and the meaning of leverage.
In contrast, when a trader opens a position that is expected to last for a few minutes or even seconds, they are mainly aiming to extract the maximum amount of profit within a limited time. What is the best forex leveraging in this case? Usually such a person would be aiming to employ high, or in some cases, the highest possible leverage to assure the largest profit is realised, while trading small market fluctuations.

Charts are categorized according to the way price action is depicted as well as the time frame of the period being examined. Imagine that we have a 4-hourly candlestick chart of the EURUSD pair. This means that each candlestick on the graph presents the price data of a four-hour long period in a compact form. What happens inside that time period is irrelevant. If we had chosen an hourly chart, each candlestick on the chart above would be replaced by four different candlesticks.
The carry trade opportunity was also seen in USD/JPY in 2005. Between January and December of that year, the currency rallied from 102 to a high of 121.40 before ending at 117.80. This is equal to an appreciation from low to high of 19%, which was far more attractive than the 2.9% return in the S&P 500 during that same year. In addition, at the time, the interest rate spread between the U.S. dollar and the Japanese yen averaged around 3.25%. Unleveraged, this means that a trader could have earned as much as 22.25% over the course of the year. Introduce 10:1 leverage, and that could be as much as 220% gain.
Forex trading involves the sale of a currency, and the simultaneous purchase of another with the purpose of closing the position at a later time with a profit. Unlike in the stock or commodities markets where prices are routinely quoted in USD, the price of a currency can be quoted in any other currency due to the essentially bartering nature of currency transactions where live, as well as historical, forex charts are used to identify trends and entry/exit points for trades.

For retail clients, leverages of up to 1:30 for currency pairs and 1:20 for indices are available. For professional clients, a maximum leverage of up to 1:500 is available for currency pairs, indices, energies and precious metals. Both retail and professional status come with their own unique benefits and trade-offs, so it's a good idea to investigate them fully before trading. Find out today if you're eligible for professional terms, so you can maximise your trading potential, and keep your leverage where you want it to be!
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