What is Forex Trading?

The foreign exchange (forex or FX) market is a global marketplace for exchanging national currencies. Due to the worldwide reach of trade, commerce, and finance, forex markets tend to be the world’s largest and most liquid asset markets.

What Currencies are traded?

Forex always involve 2 currencies: one currency being bought, in exchange for another currency. Together, the 2 currencies are called a currency pair.

The US Dollar or USD forms part of most forex transactions. The largest currency pairs are:

We can also have currency pairs which does not involve USD. For example, British Pounds against Japanese Yen.

Understanding Pips

The unit of measurement to express the change in value between two currencies is called a “pip.”

A pip equals 1/100 of 1%, or .0001.
Most pairs go out to 4 decimal places, but there are some exceptions like Japanese yen pairs (they go out to two decimal places).

What is a Lot in Forex?

Forex is commonly traded in specific amounts called lots, or basically the number of currency units you will buy or sell.

In ProsperUs, our platform allows you to trade as low as Micro Lots which is 1,000 units.

Margin in Forex Trading

ProsperUs will require a deposit, also known as “margin”.

Once you have deposited your money, you will then be able to trade. We will also specify how much margin is required per position (lot) traded.

For instance, if the margin requirement is 5% of the position value and you wish to trade a position worth $100,000, but have $10,000 in your account.

ProsperUs would set aside $5,000 as the margin requirement for you to execute the trade. If market fluctuations cause your margin to become insufficient, a margin call or margin close-out mechanism will be triggered.

Of course, any losses or gains will be deducted or added to the remaining cash balance in your account*.

*Gains or losses are amplified due to the leveraged nature of FX trading.

How to trade Forex Pairs?

A large part of the daily turnover comes from trading done by banks. However, smaller investors and speculators can also participate in the market using ProsperUs platform. They can profit from making trades on one currency gaining or weakening against another.

Let’s use the Euro against US Dollar for example:

Forex allow you to do both BUY and SELL direction, hence allow you to take advantage of the market volatility on both directions.

There is no commission charged to trade Forex however there is a spread which is the difference between the buying and selling price known as the Bid and Offer. The tighter the spread the quicker your trade can move into profit.

How do I calculate Profit/ Loss?

If we forecast Euro will appreciate against US Dollar, the rate will go up, we can enter into BUY Mini Lot (10,000 units) of EUR/USD at 1.0741. Shortly, the market goes in our favour and the rate goes up to 1.0745. Our profit is 4 pips, and because we trade Mini Lots, each pips is equivalent to USD 1.00 and the profit is USD 4.00.

In this trade our notional value will be EUR 10,000 when we enter the trade and another EUR 10,000 when we close off the trade, total notional value to be EUR 20,000.

Benefits of FX Trading

How can I manage my risk?

Why Trade FX with ProsperUs?

This infographic does not constitute an offer or solicitation to buy or sell any security or instrument, or an invitation or a recommendation to enter into any transaction. All capital market products contain risks and may not be suitable for everyone. Please refer to the Risk Disclosure Statement in the General Terms and Conditions of CGS International Securities Singapore Pte. Ltd. (Co. Reg 198701621D) for more details.