In our last lesson we learned how to place our first forex trade using our real time demo trading accounts. In this lesson we are going to continue our discussion on the logistics of forex trading with a look at how positions are sized in the forex market.
As with any market you need to specify the amount of a currency pair that you are going to trade as a part of the trading process. Although technically in the spot FX market there are no contract standards since the market trades over the counter, most Forex Trading firms standardize the minimum position size in which you can trade. Once this minimum position size is established then the trader can trade the minimum or any increment thereof going up from there.
Although it varies by firm, most forex trading firms offer at least one of, if not all of, the following options for position sizing:
Option 1: Standard Account A standard account trades "standard" contract sizes which in the retail fx market are 100,000 of the base currency. So for example if you are trading EUR/USD then the minimum position size you could trade would be 1 contract which would equal 100,000 Euro's against the equivalent amount in US Dollars. As the EUR/USD is trading at 1.5678 as of this lesson that would be 100,000 EUR against 156,780 US Dollars.
As a second example if you were trading USD/JPY in a standard account then the minimum you could trade would be 100,000 US Dollars against the equivalent amount of Japanese Yen. As the Japanese Yen is currently Trading at 101.27 against the US Dollar this would be 100,000 USD against 10,126,000 JPY.
Option 2:Mini Account A mini account trades "mini" contract sizes which are 1/10th the size of standard contract sizes or 10,000 of the base currency. So using our examples above if you were trading EUR/USD the minimum you could trade on a mini account would be 10,000 EUR against $15,678 USD.
If you were trading USD/JPY in in a mini account then the minimum amount you could trade would be 10,000 USD against 1,012,700 JPY.
Option 3 Flexi Account: A flexi account allows you to trade any size you would like. So for example instead of having to trade a fixed position size in a flexi account you could trade a position size of 5,765 EUR/USD which would be 5,765 EUR against the equivalent amount of USD.
As you can see from these examples one of the great things about the forex market is the ability to trade very small position sizes, which allows traders to start with a smaller account balance and avoid being over leveraged, something we will discuss in later lessons.
Secondly, as normally the spread which you pay does not increase as the trade size gets smaller and there are no commissions, the transaction cost you pay for the trade gets smaller as the trade gets smaller as well.
As a quick example lets login to our demo trading accounts and place another quick trade. If you have not done so already I encourage you to pause this video now and register for a free demo trading account which you can do by clicking the link above this video if you are watching on InformedTrades.com or to the right of this video if you are watching on YouTube.
Once logged into the account choose the currency pair that you want to trade and click in the dealing rates window to bring up the market order box. In this box you will see a line that says "Amount K". As you will notice if you pull down the drop down menu there it goes in increments of 100K or 100,000 of the base currency. As you should now know from learning about the three types of accounts that we just covered as we are trading a contract size of 100,000 of the base currency we are currently on a standard account.
As you can see from the market order window if you would like to trade more than 100K then simply pull down the drop down menu and select the amount you would like to trade in any increment of 100,000 of the base currency and you are good to go.
Thats our lesson for today, in our next lesson we will learn what a pip is as well as something known as fractional pip pricing how to calculate profits so we hope to see you in that lesson.
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WEEKLY Forex Economic Calendar: 29 Mar Wed
14:00 US- Pending Homes Sales
14:30 US- EIA Crude 30 Mar Thu
12:30 US- Weekly Jobless
12:30 US- GDP
23:30 JP- CPI 31 Mar Fri
7:55 DE- Jobless
8:30 GB- GDP
9:00 EZ- flash HICP
12:30 US- Core PCE Deflator
14:00 US- final Univ of Mich 2 Apr Sun
00:00 AU/NZ- Clocks "Fall Back"
Forex Market: items driving the forex market:
Event Risk: Solid U.S. data have helped stabilize the USD today. It appears now that unless the Trump Administration can get its legislative act together that the Fed will be forced pursue a cautious policy tightening posture, as opposed to an aggressive one.
Event Risk: Article 50 was signed late Tuesday UK hours by PM May. It will be presented to the EU today at 13:30 CET to the EU. (11:30 GMT).
As expected, a request to the U.K. Parliament for a second Scotland Independence referendum was approved by the Scottish Parliament Tuesday. Odds are the request will not be considered immediately.
There is a growing perception that the ECB might start to consider stepping back from excessive policy ease. Watch flash HICP data Friday. The March German Ifo Survey (Monday) was considerably stronger than expected and will be noted by the ECB.
Lots to consider. Please comment...
John M. Bland, MBA co-founding Partner, Global-View.com
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
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