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What is the forex margin trading?

Width to the cost

When we say the width to the cost in the forex market, it stands for the cost arising from the spread and the commission fees. It also indicates how many points market movement brings about situation under which the investor would be made to have no loss. In case of USD-JPY, it is usually expressed by points. If your width to the cost is 10 points, the purchase at 120.55 needs 10 points increase toward 120.65, where you are ready to take profit. The narrower width to the cost is, the more chance for advantageous situation for all investors. In case of the forex market, it is easily calculated the width to the cost should be equal to summation of the spread on the price quotation and a round trip commission fees.

The round trip commission fees

The commission fees cost on both side whether you would buy or sell. Make sure in advance if the commission fees appearing on the pamphlet is based on only one way or on the round trip. You should take the width to the cost into consideration to make money from the forex market.

Narrower width to the cost and the higher chance

The price movement of 10 points brings about 10,000 JPY on the profit or loss if the trading position is 0.1 million USD-JPY. In the same way, the one point difference in the width to the cost should have got one thousand JPY, and it will affect to the investors psychologically whether the commission fees could be fully covered or not. When your position gets in favor, you will encounter the break even point where your are free from any trading cost. This is just the first significant phase you may face after taking position. You will feel easy when the market goes beyond this break even point.

The most important thing starts from here. If you feel the market movement is somehow strange, you must be annoyed where to exit or cut your position safely just after taking position. Sound judgment and immediate action are indispensable to withdrawal from the forex market. It is possible to get out easily without damage if the commission fees have already been covered up. As you can see, the narrower width to the cost would make you easier to get out of the forex market. As is often the case, some beginners are seen to fail into the depth to hell because they cannot take the relevant action to cut their position when needed.

Attractive commission fees

The forex margin trading is much attractive in the commission fees as well. Speaking of USD-JPY, the foreign currency deposit has 200 points spread due to the gap between the TTS and the TTB rate although it does not call for any commission fee. The width to the cost of the forex margin trading should be 1/10 at worst or 1/20 at best as small as the foreign currency deposit. Thus, the lower commission fees system makes you possible to trade forex more actively in a day.

 

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