Explaining the Meaning of a Swap on Forex: Examples of Use

Author : Victor Gryazin

Dear Clients and Partners,

In this article, we will discuss the use of swap on Forex. Swaps can influence the dynamics of currency pairs significantly and form long-term trends on the market.

What is a swap and how it works?

A swap on Forex is an operation of money depositing or withdrawal for moving an open position to the next day. On Forex, a marginal system of trading is used, which allows using loaned money in the form of large leverage. Thus, when a position is moved to the next day, the rules of interbank crediting come into force.

Swaps on Forex directly depend on the interest rates of Central banks for each currency. In might be said that the currency in the pair that is bought is deposited while the currency that is sold is loaned. The bigger the difference between the rates of the currencies in the pair - the bigger the swap. Depending on whether we are buying or selling a currency pair, a swap will be deposited on or withdrawn from our account:

• A positive swap is a swap that is deposited on the trader's account for each transfer of an open position. It emerges from buying a currency with a high interest rate against a currency with a low rate. For example, for selling USD/MXN, a positive swap will be deposited on your account. We sell the dollar with a low rate (of 0.25%) and buy the Mexican peso with a high rate (of 6.5%).

• A negative swap is a swap withdrawn from the trader's account for each transfer of an open position. It emerges from buying a currency with a low interest rate against one with a high interest rate. For example, for buying USD/ZAR, a negative swap will be withdrawn daily. We buy the dollar with a low rate (of 0.25%) and sell the African (RSA) rand with a high rate (of 5.25%).

The size of swaps depends on the difference between the rates of the currencies and the conditions on which your broker works with crediting organizations. Thus, the size of swaps for the same pairs may differ significantly depending on the broker. In the case of currency pairs having more or less equal interest rates, both the swaps for buys and sells may be negative.

The swap for a currency pair is deposited/withdrawn every day (normally, at midnight server time). There is one peculiarity: Wednesday night, the swap is tripled, while Friday night, when the position is transferred to Monday, the swap remains single. This is since the position opened on Wednesday the valuation date (the date when the trade conditions are fulfilled) is Friday.

If you plan to hold your position for a rather long time, it will be wise to evaluate the influence of swaps on your position. Study the information on the website of your broker company carefully. In a popular trading terminal MetaTrader 4, to see the size of swaps, right-click the currency pair in the MarketReview window and choose the menu line "Contract specification".

How to make money on swaps?

Thanks to the difference between the interest rates, swaps allow receiving extra profit and can even form long-term trends on the market. The strategy based on using positive swaps is called Carry trade. The idea of the strategy is in holding positions with a positive swap for as long as possible.

To get maximal swaps, we choose a currency pair with a large difference between the interest rates of the currencies it contains. Buying the currency with a high interest rate against the one with a low interest rate, you can every day receive a good positive swap for holding this position.

Carry trade works well when things go smoothly on the market, stock indices grow stably. Investors have no reason for worrying, so the enjoy the opportunity to make money investing in the high-yielding currencies of developing markets. Investing in profitable currencies may form a long-term market trend.

There was a time (before the crisis of 2008) when it was popular to buy GBP/JPY as an instrument of carry trade. The British pound is one of the leading world currencies and had quite a high interest rate of 5.0% at that time. The Japanese yen is a low-yielding currency and has had an interest rate of 0.0% for a long time.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

Top 3 Stocks From the S&P 500 List with the Highest Dividend Yields in 2023

Author : Eugene Savitsky

Dear Clients and Partners,

In June 2022, the annual inflation in the US reached 9.1%, a level not witnessed by Americans since the 1980s. The Federal Reserve System (Fed) began swiftly increasing the interest rate, leading to a reduction in inflation to 3% by August 2023. While this value still exceeds the regulator's target by 1%, it can be acknowledged that the efforts of Jerome Powell, the head of the Fed, have proven effective.

Nevertheless, it is crucial to note that even a 3% inflation rate will yearly erode the purchasing power of money. One of the tools capable of generating returns equal to or surpassing the inflation rate is stocks. There are two ways to profit from this asset class: firstly, through the appreciation in the stock value, and secondly, through dividend payments.

Identifying a company whose stock value will significantly increase is notably more challenging than finding a company that offers substantial dividends. Today, we will delve into three issuers that are part of the S&P 500 list and pay dividends exceeding the inflation rate, namely Pioneer Natural Resources Company (NYSE: PXD), Coterra Energy Inc. (NYSE: CTRA), and Diamondback Energy Inc. (NYSE: FANG).

Criteria for selecting companies with the highest dividend yields

1. Dividend Yield: This signifies the ratio of the annual dividend per share to its cost, expressed as a percentage. It serves to assess the attractiveness of a security in terms of receiving passive income from owning it – higher percentage values denote enhanced attractiveness.

2. Debt Load: A minimal or absent debt load indicates that the company's profits are ample both for business development investments and dividend disbursements. This can be gauged through the Long-Term Debt/Equity ratio.

This ratio mirrors the issuer's financial risk and leverage degree, revealing its reliance on borrowed funds. A lower ratio indicates a better scenario, as it implies the company relies more on its equity capital rather than borrowed funds. The optimal Long-Term Debt/Equity ratio varies by industry and business specifics, but a ratio of 0.5 generally indicates financial stability.

1. Pioneer Natural Resources Company

• Dividend yield – 10.18% per annum

• LT Debt/Eq ratio – 0.23

• Founded in – 1997

• Included in the S&P 500 – 2008

• Registered in – the US

• Headquarters – Irving, Texas

• Market capitalisation – 54.5 billion USD

Pioneer Natural Resources Company is engaged in hydrocarbon exploration and production and is one of the largest independent oil and gas companies in the US in terms of reserves and production.

Due to the decline in oil prices, Pioneer Natural Resources Company’s net profit for Q2 2023 decreased by 53% to 1.1 billion USD compared to the corresponding period last year, and earnings per share dropped 47% to 4.42 USD.

Pioneer Natural Resources Company pays two types of dividends: fixed and variable. Based on the Q2 results, the fixed dividend amounted to 1.25 USD per share, and the variable one was 0.59 USD.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

Economic Indicators - The Basis for Forex Trading Strategy

Author : Timofey Zuev

Dear Clients and Partners,

Let us have a look at the main economic indicators and their influence at the currency rates. The knowledge and understanding of these indicators are the basics of fundamental analysis and forecasting of price movements.

Interest Rate

Interest rate is an efficient instrument of credit and monetary policy of the state. Increasing interest rates, Central banks regulate demand for loans, reducing it, which decreases the expenses of people and impedes economic development. This measure is meant, first and foremost, for reducing the inflation rate and for prevention of overproduction of goods.
Decreasing interest rates leads to an increase in demand for loans, enhancing economic development.

The size of the interest rate is the basis for other economic parameters — rates of state and corporate bonds, credit rates for individuals and legal entities, etc. Central banks do not frequently change interest rates: this is a major market event, and all market players track such changes very carefully.

Gross Domestic Product (GDP)

The GDP is generalized data about the sum of the added value, produced by all producers in the country during a set period of time. The GDP surplus demonstrates the economic development of the country, its speed. Stable growth of the GDP is characteristic of stable economic development and also strengthening of the national currency, while a slowdown of the GDP growth means problems with the country's economy. The market reaction on the news about the GDP, the initial as well as corrected, is rather active and usually leads to serious movements of currency rates.

A report on the GDP is a wide analysis of all sectors of a country's economy. That is why different market players pick up the paragraphs that are of interest to them and make conclusions about the state of development of this or that country.

Consumer Price Index (CPI)

Consumer price index (CPI) is the main indicator of inflation in the country. For its calculation, the prices of the consumer goods basket during a certain period of time are used. In each country, the set of goods in the basket is different and is formed on the basis of statistical data. Such goods may be food, everyday objects, services, etc.

The prices for food and energy sources are the most volatile, so along with the CPI a so-called Core CPI is calculated, the latter including this category of goods from the consumer goods basket.

The CPI data is normally published on the tenth workday of each month as the percentage of the changes that have happened. In other words, what is published is the information by how many percent the current values have changed in comparison with the previous ones. The news about a change of a CPI value by just 0.2% leads to rather strong fluctuations of currency rates.

Producer Price Index (PPI)

Producer price index (or PPI) is an indicator of the price changes for the goods produced by national producers. The index includes the price for the raw materials, produced in the country and imported, on the intermediate products, on the finished products. The index includes all stages of goods production, as well as all spheres of production and agriculture. The difference from the CPI is that it does not include services and provides the analysis of price changes only at the level of primary wholesale trade.

Along with the PPI, the Core PPI data is also published; it does not include the prices for the goods of food and energy industries due to their high volatility. The PPI is published monthly on the tenth workday simultaneously with the CPI.

Trade Balance

Trade Balance, or International Trade, is the difference between the sum of export of goods and services and the sum of the import.

It influences exchange rates directly and reveals the competitiveness of the goods and serves, produced in the county, on the international market. Favorable trade balance (the situation when export surpluses import) signifies inflow of capital into the country, production development and, on the whole, has a positive influence on the economy.

Conversely, a deficit of trade balance, i.e. the situation when import surpluses export, signals low development of production, a lack of competitiveness of the national goods and is a generally negative factor for the country. This leads to the growth of the national debt as well as has a negative influence upon the exchange rate of the national currency, because its supply increases due to the necessity to buy more currency of the exporting state.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

GBP/USD Analysis: Will Downward Momentum Persist in Autumn 2023?

Author : Victor Gryazin

Dear Clients and Partners,

GBP/USD (British pound versus US Dollar) experienced steady growth since the beginning of 2023, hitting an annual high of 1.3142 in July, followed by a downward reversal and a correction. Today we will examine the key factors influencing the GBP/USD pair’s trajectory under the current conditions and analyse whether the downward trend is expected to continue.

Overview of the GBP/USD currency pair

GBP/USD is one of the major currency pairs and ranks among the top three most demanded and traded pairs in the foreign exchange market alongside EUR/USD and USD/JPY. The base currency is the pound sterling, and the quote currency is the US dollar.

The behaviour of the GBP/USD quotes reflects the comparative state of the current economic conditions in the US and the UK. A rise in quotes indicates the strength of the pound and the weakness of the US dollar.

Given that the pound sterling is considered one of the most aggressive currencies in the financial market, the GBP/USD pair is characterised by a high level of volatility, which attracts traders and investors.

Trading characteristics of the GBP/USD pair

• The pair is traded round the clock from Monday to Friday, with significant trading volumes during the European and American sessions, leading to major movements

• The currency pair is characterised by high average daily volatility within the range of approximately 1,000-1,300 pips. During times of market force majeure, it has the potential for strong movements exceeding 2,000 pips per day

• The spread for GBP/USD is considered minimal, thanks to its high liquidity, and typically ranges around 10 pips in a calm market

GBP/USD dynamics in 2023

This year, the GBP/USD currency pair showed a moderate upward trend, starting 2023 at the 1.2070 mark. The pair later reached its lowest value near 1.1800, followed by a rise to the annual high of 1.3142. However, this gave way to a subsequent downward correction, with the quotes currently hovering around 1.2600. At the time of writing, it can be concluded that the pound sterling has been showing growth against the US dollar from January to August inclusive.

This year, the GBP/USD currency pair showed a moderate upward trend, starting 2023 at the 1.2070 mark. The pair later reached its lowest value near 1.1800, followed by a rise to the annual high of 1.3142. However, this gave way to a subsequent downward correction, with the quotes currently hovering around 1.2600. At the time of writing, it can be concluded that the pound sterling has been showing growth against the US dollar from January to August inclusive.

Factors influencing the GBP/USD exchange rate

The Bank of England’s monetary policy

This is the pivotal factor influencing the valuation of the pound sterling in the global currency market. The main tool of the Bank of England, the country’s central bank, to control inflation and affect the national currency exchange rate is the decisions on interest rates. If the interest rate increases, the exchange rate appreciates, while a decrease in the interest rate leads to a decline in the exchange rate.

Since December 2021, the UK regulator has been tightening the monetary policy in an attempt to curb rapidly rising inflation. The interest rate has increased from 0.1% to 5.25% over this period. The Bank of England’s Monetary Policy Committee is focused on achieving the inflation target of 2%. In June 2023, the CPI inflation index rose by 7.9% compared to last year’s statistics.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

NZD/USD Forecast: Will the Decline Continue in 2023?

Dear Clients and Partners,

NZD/USD (New Zealand Dollar versus US Dollar) has been on a decline since the beginning of 2023. On 2 February, the pair reached a yearly high at 0.6534, followed by a gradual drop in price and eventually hit a low of 0.5887 on 29 August. At the time of writing, the quotes are within a correction phase at the level of 0.5979.

In this article, we will examine the key factors affecting the NZD/USD movements. We will conduct a technical analysis of the chart, share expert forecasts for 2023-2024, and aim to understand whether the decline of the pair will continue.

Overview of the NZD/USD currency pair

NZD/USD is one of the major currency pairs, with the New Zealand dollar ranking as the 14th most traded currency in the world according to a survey by the Bank for International Settlements (BIS), published in October 2022. It has held the number 10 spot since 2010 but was eventually overtaken by the Singapore dollar, Swedish krona, Korean won, and Norwegian krone.

The base currency in the NZD/USD pair is the New Zealand dollar, the country’s monetary unit and the quoted currency is the US dollar. The behaviour of the pair’s quotes depends on economic and political events in the two countries.

Trading characteristics of the NZD/USD pair

• The currency pair is traded round the clock from Monday to Friday, with the highest activity observed between the American and Asian sessions

• The pair is characterised by low average daily volatility within the range of 700-1,000 pips, with maximum movements in 2023 reaching 1,600 pips per day

• It is considered quite liquid in the foreign exchange market, which is why the spread for NZD/USD is minimal

Dynamics of the NZD/USD currency pair in 2023

The NZD/USD currency pair has been demonstrating a moderate downward trend, starting the year at the 0.6337 mark, and hitting an annual high near 0.6534 on 2 February. By March, the quotes had reached 0.6084, which was followed by a prolonged correction that lasted for 5 months. During this correction phase, the upper boundary was at the 0.6380 level, while the lower boundary hovered near 0.6065.

In July 2023, following the third test of the 0.6380 level, the NZD/USD quotes headed downwards and gained a foothold below 0.6065 on 11 August. At the time of writing, it can be concluded that the New Zealand dollar has been experiencing a gradual decline against the US dollar from January to August inclusive.

Factors influencing the NZD/USD price

Economic data

According to an economic review by the New Zealand Parliament, the country’s economy contracted by 0.1% in Q1 2023. Data for Q4 2022 was revised upwards with the contraction value increasing from 0.6% to 0.7%.

According to Stats NZ, in Q1 2023, 9 out of 16 industries saw a decline in economic activity, with the business services sector shrinking by 3.5%. It is worth noting that the country’s economy has been contracting for the second consecutive quarter.

This is primarily driven by high inflation. For example, prices of fruits and vegetables rose by 18.4% over a year, while prices of meat, poultry, and fish added 11.7% with inflation on food products remaining over 12%. According to economists, other reasons include reduced consumer spending and a weakening real estate market.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

Basics of Risk Management in Trading. How to Avoid Losing Money?

Dear Clients and Partners,

Sooner or later, all traders who make deals on financial markets have second thoughts and ask themselves a question: “How do I more efficiently use my trading account in order to get profit and avoid losing money?”

As a rule, these thoughts don’t go any further and when beginner traders make transactions, they often risk all their money, “at full throttle” so to say, without following important rules for market operations. As soon as they get a little free money, beginners open another position and, when it comes to the crunch, lose all their orders and entire deposit. To avoid such situations, people created and developed some specific rules to manage their capital and risks. No matter how much money you have on your account – losing all will be unpleasant anyway.

Rules of risk management

Let’s see into all these rules and recommendations, which are intended to help us save money and avoid unnecessary risks.

Use available amount of money

First of all, one should open a trading account at one’s own available money. This is a sum, which a trader can afford to lose without any drastic consequences to their personal or family budget. At the same time, the amount of money should be enough to provide a trader with a freedom of making trading decisions. A deposit opened with borrowed funds or the last of a trader’s money is “doomed” from the start. The reason is very simple: in case of losses, a trader will try to win back their money, which means that a well-thought strategy will transform into a reckless pursuit with logical sad results. Hardly anybody wants to face such outcome in their trading careers.

Use Stop Loss orders

Secondly, one should understand the Stop Loss system. Ignoring Stop Loss orders is one of the most common mistakes made by both beginners and experienced traders. Many traders think that they can “outlast” a loss-making deal and the price may return to previous levels. In reality, these expectations often fall short and after losing time and money, a trader closes this position in the red. Or it might be much worse – the positions is automatically closed after Stop Out.

There is a simple approach that helps avoid such situations. All you have to do is follow the rules below:

1. Don’t open a position using all your money.
2. Before opening a position, one should estimate not only possible profit, but possible losses as well. Ideally, it should be 1 to 3 ratio or more, where there is 1 USD of possible loss to 3 USD of potential profit. At the same time, Stop Loss value in the account currency shouldn’t be more than 2% of the account funds. For example, there are 10,000 USD of funds on the account, which means that in the first transaction the loss amount for a single open position shouldn’t exceed 200 USD. The same math is applied further: after losing 200 USD, there will be 9,800 USD left on the account, so the next time the loss amount shouldn’t be more than 196 USD. In this case, you should estimate the loss amount based on 9,604 USD on the account (minus 2% again, etc.). A possibility that all positions will be loss-making is rather low, and while a trader has a reasonable approach to trading and follows the above-mentioned ratio, they have more chances to find themselves “in the black”. It’s definitely not difficult. In no way one should ignore Stop Loss and in no way one should change the Stop Loss level downwards in hopes of reverse. However, Stop Loss orders may and should be modified, but only in cases when the price is moving in favorable direction.

Typical mistakes of traders

Sometimes traders come up with an idea to average out when a position is in drawdown. However, this is another trap: such strategy will surely result in increase of the current loss amount, although there might be some very rare cases when this method helps traders avoid losses and get profit. Still, in most cases investors, who use this approach, are moving towards failure in quantum leaps. Not less and sometimes more problems may be delivered by so called locks (locking an open position with an order of the same volume but different direction). I don’t mind this method, but for successful outcome it requires rich trading experience and careful planning, that’s why inexperienced traders may only stave off their inevitable failure.

Attempts to win back their money ruined trading careers of many beginners. To avoid this, one should clearly define goals for the current trading session before starting to trade. Everything should be very concrete and specific: goals should consider not only forecasts on profit, but on losses as well. In case any of the planned scenarios turns into reality, one should stop all trading operations for the day.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

RoboForex: upcoming changes to the trading conditions

Dear Clients and Partners,

We are informing you that, starting from 9 October 2023, revised trading conditions will be implemented for specific account types.

New trading conditions from 9 October 2023

ProCent accounts

• Stop Out value: set at a 30% margin level

• Maximum order volume: 1,000 cent lots*

*- Larger positions opened before these changes take effect will remain open until closed by the client or Stop Out. At the same time, orders to open new positions with a volume exceeding 1,000 cent lots will be rejected.

Pro accounts

• Stop Out value: set at a 40% margin level

ECN accounts

• Stop Out value: set at a 50% margin level

Please take note of the above information as you plan your trading activity, and use it to make timely adjustments to your strategies, algorithms and expert advisors.

Sincerely,
The RoboForex team

USD/CHF Forecast: Will the Swiss Franc Rise in 2023?

Dear Clients and Partners,

USD/CHF is one of the major currency pairs in the international foreign exchange market. In this article, we will examine the key factors affecting the pair’s exchange rate, analyse the USD/CHF performance in 2023, and explore the short-term and medium-term forecasts provided by experts.

Overview of the USD/CHF currency pair

USD/CHF shows the ratio of the US dollar (USD) to the Swiss franc (CHF). Its quotes indicate how many Swiss francs need to be paid for one US dollar. When the exchange rate of the pair rises, this means that the US dollar is strengthening against Switzerland’s currency. When the exchange rate drops, this signals that the CHF is on the rise against the US dollar.

Trading characteristics of the USD/CHF pair

• Trading hours – The USD/CHF pair is traded round the clock from Monday to Friday, with the highest trading volumes observed during the European and American trading sessions when key economic indicators are released, potentially impacting the pair's exchange rate and leading to significant movements for USD/CHF

• Volatility – USD/CHF is a moderately volatile pair, characterised by average daily fluctuations ranging from 500 to 800 pips. However, during times of crises and stock market declines, the pair can experience substantial movements exceeding 1,500 pips per day

• Spread – As one of the major currency pairs, USD/CHF benefits from high liquidity and moderate volatility, resulting in minimal spreads. In popular ECN accounts, spreads commonly remain below 10 pips

Fundamental factors influencing the USD/CHF quotes

The Swiss central bank’s monetary policy

The Swiss National Bank (SNB) has been tightening its monetary policy since 2022 to combat inflation. During the tightening cycle, the Swiss central bank raised the key rate by 250 basis points from -0.75% in March 2022 to 1.75% in June 2023. At the last meeting on 21 September, the rate remained unchanged at 1.75% despite expectations of another hike to 2%.

The SNB’s decision to leave the interest rate at the same level shows that the central bank does not see strong reasons for further increases, and the pause may extend. Some analysts note that the SNB has every reason to gradually end the tightening cycle given low inflation in the country, a strong franc, and slowing economic activity in Switzerland and the world.

The Federal Reserve’s monetary policy

The US Federal Reserve is also looking to bring down mounting inflation by tightening monetary policies. Since the beginning of 2022, the interest rate has gradually risen from 0.25% to 5.5%, significantly affecting the exchange rate of the US dollar, which had strengthened against a number of world currencies over this period.

On 20 September 2023, the Fed left the interest rate unchanged at 5.5%. The central bank of the US noted that economic activity continues to grow steadily, and although job gains have slowed, it is still impressive. The Fed’s chair emphasised that the inflation rate remains high with inflation risks being the focus of attention. Analysts predict that the US will see one more interest rate hike by the end of 2023.

USD/CHF performance in 2023

The USD/CHF pair shows mixed trends in 2023, trading within a wide sideways range. In March 2023, the upper boundary of this range was set at the 0.9440 mark while the lower formed in July at 0.8555. At the time of writing, USD/CHF quotes are experiencing a robust upward momentum on the daily chart, hovering at approximately 0.9200, the same level as at the beginning of 2023.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

Which Market to Choose?

Dear Clients and Partners,

If you are a beginner trader, you are sure to be asking a question to yourself: Which market to choose for trading? The options are actually scarce: you can choose from Forex and stock market. Each of the above are virtually the same in terms of difficulty level, and each of the assets you can find there, be it a stock, a currency or a futures contract, acts in the same way for building an investment portfolio. In order to decide where to trade, you as a trader have to be knowledgeable not only about the markets as such, but also about your counterparts, or trading partners.

Trading is all about buying and selling assets, and you can either trade Forex or stocks only or trade all markets at the same time. It is worth mentioning that all these markets are highly liquid, which means a trader may buy or sell any asset at any time, within the trading hours. The traditional exchanges, however, work only specific hours Monday to Friday, which somewhat limits the way you can trade, while the decentralized Forex market works 24/5.

In terms of choosing the asset to trade, stock market is well ahead of the others, as you can pick any of dozens of thousands of company stocks and their derivatives. Forex is number two here, as the number of major pairs and crosses is not that large.

If you ask where you can make the most money in the easiest way, you won't get any answer. Everything depends on your strategy, discipline, and the current market conditions. After all, there are no bad markets out there, one can trade and earn everywhere.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

RoboForex added new commission schemes for CopyFX Traders on MT5 accounts

Dear Clients and Partners,

We are thrilled to announce that two new commission schemes, the "Performance Fee" and "Subscription Fee", are now available for CopyFX Traders using MT5 accounts.

Under the "Performance Fee" scheme, Traders receive a share of the overall profit generated by subscribed Investors through all copied deals.

With the "Subscription Fee" scheme, Traders receive a fixed commission once a week if Investors have made a profit from copying deals.

What's beneficial for Traders and Investors?

• Popular and familiar schemes for earning and sharing from MT4 CopyFX are now available in MT5 CopyFX

• Skilled traders who were earning money in MT4 CopyFX can start earning in the new MT5 CopyFX

• New growth opportunities: bringing in new Investors for Traders and expanding a variety of strategies for Investors

• The commission earned depends on whether Investors' profits were achieved by copying Traders’ transactions

• Investors have the freedom to select the Top Traders, while Traders are motivated to improve their trading performance

Why choose CopyFX in MT5?

• It's convenient - you can trade using one of the best terminals on the market with cutting-edge analytical tools and lowest ping VPS from MetaQuotes available for you

• It's easy - all you need is an MT5 hedge account

• It's flexible - offering user-friendly investment management

Are you ready to start earning from your investments?

Sincerely,
The RoboForex team

What is Margin and How to Trade with Leverage?

Dear Clients and Partners,

When it comes to margin, people who are not knowledgeable in trading usually think it's the difference between the buying and the selling price. While this is true for most other cases, in trading, margin means a collateral you've got to pay in order to open your position.

In the trading window on your terminal, you will see Margin and Free Margin sections, among others. Not all understand what it is, though. Let's see then.

What is Margin in trading

Margin is an amount that represents a collateral to keep your positions open. In the trading platform, it is usually shown in the base account currency as a single figure, even if you have quite a few active positions. If you opened a long one-lot trade on EUR/USD, you'll have the respective collateral amount in the Margin section. If your account currency is the dollar, and the EUR/USD pair is now at 1.2000, your margin is 1.2000 x 100,000 (one lot) = $1,200. Your leverage is not shown here. (Don't worry, we'll cover it a bit later on). Once you've closed your position, you are getting your margin collateral back, adjusted on profit and loss. So, in case you got a $100 profit, you will get $1,300.

Your free margin is the amount you still can use as collateral to open new positions. Say, if you've got $10,000 on your account and opened a trade for $1,200, you still have $8,800 as your free margin. This is floating, however, as it depends on your active positions profits and losses. When your open positions are losing, your free margin will be down, and, conversely, with profiting positions, you will have more free margin. Many open a lot of positions at a time, using nearly all of their free margin. This may often lead to a margin call, and the positions being automatically closed.

What is leverage

Leverage is the amount of money your broker is willing to loan you for trading in the market. The leverage depends on the market you are operating in, as well as on the broker and the trader themselves. In the stock market, you can have 1:1 or 2:1 leverage or more, but very rarely can it be over 20:1. In Forex, however, a 500:1 or even 1000:1 leverage is not something beyond understanding. But wait, what do these figures actually mean, you may ask. Well, let's see.

Leverage is a very important vehicle for most retail traders. Few are those who can open a few-thousand-dollar account; with leverage, however, you'll be able to operate large amounts even with a few hundreds of bucks. Whether this is good or bad, is disputable. With such a tool, a trader gains an opportunity to actually trade the markets, but there's a downside: with leverage, the potential loss is magnified, too. So, you've got to be sensible when trading with leverage.

Leverage amount

The most popular leverage on FX out there is 100:1. This means, you can operate with $100,000 having just $1,000 on your account. Thus, the number of instruments you can trade increases drastically. On the other hand, you can't lose money that is not yours, so once you've reached your limit (that is determined by every broker individually), your positions will be closed automatically, because the broker will want their money back.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

How Much Should Be the First Deposit Amount?

Dear Clients and Partners,

After doing some demo trading and conquering the virtual market, every trader starts sooner or later thinking about opening a real account and depositing their hard-earned money. The question of 'How much should I deposit?' arises soon, and the answers are many. The first one may think of is funding the account with the minimum deposit amount or the minimum investment amount defined by the broker. However, when choosing this option, one should understand this may lead to losing the deposit quickly if the market goes against you. Meanwhile, the losses at early stages are very bad for any trader's psychology, and overcoming such losses is not an easy task. Thus, sometimes, continuing demo trading is much better than investing a minimum amount.

Setting goals for trading

Another popular option described across the web is that a trader should invest so much money as they are willing to lose. In other words, a trader ought to believe they will be wagering their money, rather than investing. This could be partly true, as deeming this money lost from the very beginning will solve any future emotional problems in case this money is really lost. On the other hand, however, this may make the trader think their trading activity is unimportant, as if it were a mere game of chance. This is actually why most novice traders do not trade but rather wager, and only one out of ten, on average, is successful.

We believe everyone asking themselves the How Much Should I Deposit? question should first understand their purpose. If you are in the markets only to play a game, it does not matter how much (or little) you are going to invest. Whether you play with a hundred or two of bucks in a cent account or even continue demo trading, makes virtually no difference.

Typical mistakes of a trader

Many beginner traders think they could turn $100 into millions in a month. Is it realistic? Long story short, you will have to double your deposit every single day. This is barely possible, even mathematically. So, every time you start thinking on saving up your cash and putting in a minimum deposit, multiply this amount by 10 or even 20. This won't guarantee you any profits either, but will at least allow your account to have some financial support, preventing it from getting 'blown' in a flash.

Conclusion

Rationally thinking, the first deposit amount should be in line with the average weekly or monthly gain the trading system is ready to provide you with. Thus, if you want to earn, say, $1,000 per month, and your system gives you 10% to 20% monthly, you should deposit between $5,000 and $10,000.

We all understand, however, that financial conditions of every single trader matter, too. Some would say $1,000 is a large amount, while for others 100,000 won't be enough. Everyone has to make their own choice, and should remember at all times that even a huge deposit does not guarantee profits without the appropriate attitude to trading.

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Sincerely,
RoboForex team