*Japanese FOREX CHANNEL
What is the forex margin trading?

Commodity futures market

Commodity futures market

According to the market convention in Japan, the Commodity futures is priced using both one-board trade and price-matching. Looking at the Tokyo Commodity Exchange, for example, the rubber futures are traded in the pit session by some men, while the crude lights or gold futures are traded in the electric session by computers. In case of one-board trade, it would be executed at the routine hours like the opening hour or the closing hour, where the prices on all demand are centralized toward the sole price.

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Commodity futures

Gold

Commodity futures are clearly defined as contracts in which the particular product should be settled on the specific date in the future, which is decided in advance like three months, 6 months or one year later. You can buy back or sell the futures contract as you like prior to such periods, by means of which you would not be necessary to settle the underlying assets or cash. This would make you easier to trade speculatively and actively to take profit from the forex market. Moreover, it is remarkable feature that you can trade bigger amount some times as much as you really own if your cash is placed for the margin account to the forex brokers. This is so called, the leverage effect, which makes you probable to take more profit than you expect, while you would lose more money.

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Difference between forex margin trading and commodity futures

He forex margin trading is fully equipped with automatic loss cut system, which is quite different from the margin call system in the Commodity futures practice. Additional margin would be claimed when the losses by the Commodity futures expands to some extent. It is an awful system because you should always meet the margin requirement and fill the shortage in the margin account, which is usually required when the revaluation loss reaches 50% of the margin requirement.

In the forex margin trading, most brokers adopt the automatic loss cut system, where you would be forced to cut all your position to avoid further losses. This system functions as a safety net for individual investors, and the brokers using this system won't claim any additional margin even if the account balance falls deficit.

The forex margin trading does not have the delivery month to settle off while the Commodity futures have. The Commodity futures have some delivery months in line with the last trading date, like March, June, September and December. On the other hand, the forex margin trading has no maturity date, and so, the position in the forex margin trading is automatically rolled over until liquidation. It could be carried over without any limit until the liquidation, so long as the account balance allows. You have to roll over the futures contract if you carry it toward the next delivery month, while you don't have to mind in the forex margin trading.

 

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