Forex is traded using margin, starting from 1.30% with CMC Markets, which could be referred to as 77:1 leverage. Trading on margin can be a more efficient use of your capital because you only have to provide a percentage of the overall value of your position, while maintaining full exposure to the market. In effect, you are increasing your profit and loss potential. For example, with $1,000 as position margin, you could enter a position that has an overall value of $77,000. Remember that increased leverage enhances losses as well as profits. Additionally, markets can move against you and losses can exceed your initial deposit due to rapid price movements.
View our Forex trading example.
Forex is an over-the-counter (OTC) market, which means trades do not take place through a centralised exchange. Forex trading takes place around the world, whenever the markets are open. Unlike any other financial markets, investors can respond to currency fluctuations caused by economic, political and social events as they occur without having to wait for exchanges to open. Forex markets offer price volatility 24 hours a day so whatever your trading strategy, you could find numerous trading opportunities. However this also means that the markets are constantly moving, placing even more emphasis on monitoring your positions and using the appropriate risk management tools.
The Forex market is the most heavily traded financial market in the world, with a daily average turnover in excess of US$4 trillion. With so many market participants trading over 24 hours, the currency markets are more liquid than any other financial market.