FOREX CHANNEL > What is the forex margin trading? > Foreign currency deposit
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What is the forex margin trading?

Let's compare to other investment

Foreign currency deposit is a kind of financial products, which forces you to convert your own domestic currency into foreign currency and make a deposit. You can enjoy the interest earning from the foreign currency. Some foreign currencies can offer you the higher yielding than the savings account. The conversion rate is usually fixed at 10 AAM once a day, and the TTS rate is applied for the new deposit and the TTB rate is for the withdrawal. Some banks make it a rule to decide the fixing rate every hour. TTS rate should be set one full point higher than the fixing rate which to apply for the new deposit, On the other hand, TTB should be set one full point lower than the fixing rate which to apply for the withdrawal. Therefore, it will cost at least two full points on the round trip through placement and withdrawal.

Foreign currency deposit away from insurance

The deposit insurance system is to protect the depositors under the condition where the deposit might not be paid back due to the financial institutes' bankruptcy. Deposit Insurance Corp, which is established by a government, the Bank of Japan and some other private sections, runs this system based on the Deposit Insurance Act. One thing should be taken into account that the foreign currency deposits are not applied for by this system. Please pay attention to the following misleading: "The deposit in the bank is all safe".

Difference between forex margin trading and foreign currency deposit

The forex rates keep moving although 24 hours long, but the most forex authorized banks usually set the fixing rates only once a day. Foreign currency deposit is unsuitable to the short term trading although some banks seem to decide the fixing rates every hour. The forex margin trading just costs about 10 points or 20 points as per side for US dollar, which is quite contrary that the foreign currency deposit does above 200 points on the round trip basis. As a result, the forex margin trading makes you enable to trade forex about 80 percent cheaper than the foreign currency deposit if you have intention to get revaluation gains from it. This fact means that the forex margin trading is regarded as quite day trade oriented even if the market movement is less than expected.

The bank myth that the bigger bank never be collapsed does not go through nowadays, as many banks hold enormously huge amount of bad loans. Assuming the case of bankruptcy, you could lose several money in the forex margin trading, while you would lose all the money in the foreign currency deposit.

 

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