Markets

Everyone has heard about the fantastic possibilities provided by Forex: that it means high income, low initial deposit, availability of various trading-facilitating software, absence of intermediaries and thus, of high commissions that eat into the profits, etc. Let's consider all this item by item.

Forex is an international currency market where major world currencies are traded. Anyone can become a trader and make money in this market. The main currencies traded on it are US dollar, euro, Japanese yen and British pound.

What is the work schedule of this market?

Forex is open for trading around the clock, five days a week from Monday to Friday, closing only on weekends and major holidays, such as Christmas and Easter.

How is money made?

Everything is very simple: you have to buy currency at a lower price, wait and then sell it at a higher price. Let’s suppose that the quotation of the euro to dollar currency pair (EURUSD) is 1.1226, and the trader believes that the rate will grow in the next few hours or days. Thus, he buys euros for dollars, and if the quotation goes up to, let’s say, 1.1296, he can conduct the reverse operation: sell euros and buy dollars.

As we can see, the difference between the purchase and sale price is 0.0070 or 70 points, which are called thousandths or PIP (point in percentage). Since the trader buys not one but 10,000 euros at once, he earns $70.

What to do if the exchange rate is going down?

If a trader believes that the exchange rate will fall, he can first sell, for example, the same 10,000 euros, and then buy them back. The main thing is to make this operation profitable, and thus, every PIP of the rate decrease will translate into one dollar of profit.

Fluctuations of exchange rates are based on fundamental principles, including the strength of the economy and changes in interest rates; yet, political and economic news, events elsewhere in the world or neighboring countries can affect these fluctuations as well. To profit from these changes, the trader needs to either own extensive amount of funds or use credit leverage. When using the latter, even small amount of a few hundred or a thousand dollars can grow 100-, 200- or 400-fold.

With only 1000 US dollars, you can use credit leveraging, for example, 1 to 50 or 1 to 100, to get very large profits within a short period of time. Let's say, the exchange rate of the peso against the dollar has changed from 19.20 to 19.60, i.e., the difference is 0.40. With a leverage of 1 to 50, your earnings with an investment of one thousand dollars will increase 50 times, from 400 pesos to 20,000 pesos. On the other hand, if the trader’s estimation of the direction of the rate change proves to be wrong, he will lose the lion share of the deposit amount with even the slightest fluctuation.

Where can I get 1,000,000 pesos? I don’t have so much money at my disposal

This issue can be solved by using leveraging. If you have funds sufficient for a small security deposit, leveraging will enable you to obtain the amount of funds that is several times larger: the broker will lend you this amount, albeit for a short time and only for investing it in financial markets. With about 1,000 US dollars at a 1-to-50 leverage you will be able to use $50,000 (about 1 million pesos); and the higher the leverage is, the greater the amount of funds will be, meaning that even a 1 point change in the exchange rate will bring you tens and hundreds dollars of profit if your prediction of the direction of price movement has been correct.

All this is true: you can indeed trade at any time convenient for you from almost any place with access to the Internet, getting high profits from small investments. However, you always need to remember the risks involved and understand that Forex trading may not be suitable for everyone.

What are the Forex risks?

The main risk of trading in the Forex market is the use of leveraging. Leveraging will multiply your profits manifold provided the rate moves in the direction you have predicted, but it can also cause losses as quickly if your prediction proves to be incorrect. Statistics show that most Forex traders lose their investment, but it is possible to reduce the risk.

To reduce risk, you must develop a trading strategy and strictly follow it, as well as to be determined and non-greedy. A trader must keep learning, be able to extract information from the news, know how to analyze it, and anticipate possible changes in the exchange rates. Technical analysis and trading robots that reduce errors can be of great help. You should also avoid using the entire deposit or maximum leverage for trading.

How safe is Forex trading?

The Forex market is global and operates 24 hours a day, 5 days a week; therefore, no one controls or regulates it. Forex is not under the control of, say, the Mexican CNBV or the American SEC. However, brokers who provide trading services in this market are issued licenses and being controlled by the financial regulators of the countries in which they are registered.

Often, advertising for the services of Forex brokers does not disclose all the risks that accompany currency trading.

For example:

Forex trading is conducted round the clock and you can earn money in your free time.

Indeed, you can conduct Forex trading at any time and in any convenient place, but this doesn’t mean that you can earn at any time. The choice of the moment of opening or closing a transaction is very important, and for this you will have to study the exchange rate charts, follow the news and wait for the best moment for buying and selling a certain currency pair. This moment does not necessarily coincide with your free time. If you really want to make good profit on Forex, you need to make it your full-time job.

Some people argue that Forex trading is the easiest and fastest way to increase income.

If everything were that simple, everyone would be making money on Forex, but this is not so. In financial markets, the profit of one trader is, as a rule, derived from the losses of other traders. At that, it is the inexperienced traders who most often lose their investments.

Risks in the foreign exchange market are high, and financial advisers recommend Forex to major investors who already have sufficient trading experience, a good understanding of both the macroeconomic and political situation and have the ability to diversify their investments.

The regulations for the service "Managed account (PAMM)" can be found on the Company's website (Home page – “Clients” – “Documents” – subsection “For investors” – “Procedure for provision of the “Managed account (PAMM)” service”).
 

Agreement with the Company and has an activated trading or investor account opened in his name.

Managed account (PAMM) — a trading account that allows the Manager to use their own capital and the total capital of Investors for Management in order to make a profit.

Investor account — a non-trading account intended exclusively for withdrawing and depositing funds to a Managed account (PAMM). Each participant has a Managed account (PAMM). One investor account can be used to withdraw and Deposit funds to an unlimited number of managed accounts (PAMM).

Manager — Managed account participant, a Client of the Company who passed the registration procedure as a Manager of a Managed account.

Investor — Managed account participant, a Client of the Company who passed the registration procedure as an Investor of a Managed account.

PAMM-agent — a Client of the Company who passed the registration procedure as a PAMM agent.

Management — the Manager performs speculative trading operations on the world financial markets using the funds of the Managed account (PAMM) in the interests of Investors and for remuneration in the form of a share of the earned profit.

Manager's Offer (Offer) — the specific Manager’s offer for potential Investors to invest in the Manager’s Managed account on specific terms, and for the potential PAMM agents – to attract investments to the Manager’s Managed account for a fee.

Balance transaction — withdrawing or depositing funds to a Managed account.

Managed account balance — sum of the Manager’s Capital, Investors’ Capitals and overall result (profit or loss) of all closed trading positions on a Managed account.

Equity of Managed account — actual total amount of funds of a Managed account, calculated as the amount of Balance and current (floating) profit (or loss) on open trading positions.

Margin — funds reserved as margin collateral for open trading positions.

Free margin — funds not reserved as margin collateral for open trading positions, calculated as the difference between Equity and Margin.

Manager’s Capital – Manager’s own funds deposited to a Managed account.

Manager’s Funds – actual amount of the Manager’s own funds on a Managed account, calculated as the Manager’s share in the amount of the Managed account funds. 

Investor’s Capital — Investor’s own funds deposited to a Managed account.

Investor’s Funds — actual amount of the Investor’s own funds on a Managed account, calculated as the Investor’s share in the amount of Funds of a Managed account.

Investment period — a period of time multiple of one week during which the Manager exercises Management of a Managed account and upon the expiration of which settlements and distribution of Profit and Fee between the Manager, Investors and PAMM agents take place.

Manager’s Profit — positive financial result of the Management of the Manager’s Funds.

Investor’s Income — positive financial result of the Management of the Investor’s Capital. It is subject to be distributed between the Manager and Investor upon the expiration of the Investment period.

Investor’s Profit — Investor’s Income minus the Manager’s Fee, minus penalty (if a penalty is prescribed in the Managed account offer).

Manager’s Fee — parameter of the Offer that determines the percentage of the Investor’s Profit to be paid to the Manager.

PAMM Agent’s Fee — parameter of the Offer determining the share of the Manager’s Fee payable to the PAMM agent.

Rating of Managed accounts — list of active Managed accounts on the Company’s site with the option to be rated by the main parameters (currency of account, Manager’s Capital,
total and daily profitability, Offer, etc.).

Liquidation of a Managed account — a current Managed account closure procedure initiated by the Manager or the Company.

The Time of the Company (FIBO Time, EET) — the time at which the Company’strading platform and its mobile versions operate. It meets Eastern European Time (EET).

Trading Day — any weekday when the Management of a Managed account is possible. Regarding to a Managed account service, trading days begin and end as follows (EET):

Monday: 00:35 on Monday till 00:35 on Tuesday
Tuesday: 00:35 on Tuesday till 00:35 on Wednesday
Wednesday: 00:35 on Wednesday till 00:35 on Thursday
Thursday: 00:35 on Thursday till 00:35 on Friday
Friday: 00:35 till 23:59:59 on Friday

Rollover Time — time for statistical data collection, calculations and Balance operations. Corresponds to 00:35 EET of the following days of the week: Tuesday, Wednesday, Thursday, Friday, 05:30 EET Saturday and 23:45 EET Sunday.

The total profitability (%) shows the total profit or loss of the Managed account on the running total basis from the moment of registration, and is calculated with the formula:
Y=(А1/А * В1/В * … * Z1/Z — 1) * 100%, where:
Y – Total Profitability;
А...А1, B...B1 - Periods between Balance transactions;
А - Initial Balance;
А1 - Equity right before the first following Balance transaction;
B - Equity immediately after the Balance transaction;
B1 — Equity right before the next following Balance transaction;
Z — Equity immediately after the last Balance transaction;
Z1 — Equity at the moment of calculation.
Daily (weekly, monthly) profit shows current profit or loss of the Managed account during particular trading day, current week and month accordingly. Are measured in percentage and calculated by the formula:
Yd (Yw,Ym) = ((Y2 + 1)/(Y1 + 1) - 1) * 100 %, where:
Yd (Yw,Ym) — Daily (weekly, monthly) profit;
Y2 – General Profit at the end of the trading day* (week*,month*) (decimal fraction);
Y1 – General Profit on the beginning of the trading day (week, month) (decimal fraction).
* for current trading day (week, month) - at the moment of calculation.