Forex & Commodities

Foreign exchange is the largest and most liquid market in the world today. Forex daily trading turnover value is equivalent to approximately $4 trillion — three times larger than the average for stock and bond markets combined. The forex market operates 24 hours a day through a global network of banks across Asia, Europe and America. There is no centralized exchange for forex, which means that the market is an over-the-counter or decentralized financial market. Traders profit from forex trading by speculating the relative strength of one currency against another.

Cash flow in commodity market is quite high since commodity transaction is one of the most popular trading instrument by most global investment managers.

Commodities can be understood more as a physical substance. In general, commodities are divided into two categories. The first commodities are hard commodities such as gold, silver, oil, an others. These hard commodities are limited and requiring significant investment to extract. The second are soft commodities such as agricultural products like sugar, rice, cocoa, and coffee, to name a few.

Commodities are easier to understand because a lot depends on supply and demand fundamental conditions. Pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option for traders. What makes commodities so much more interesting and risky to trade compared with stocks is the amount of leverage available to the trader. Practically, the risk of trading in the commodity market will not be more than the risk you set yourself. 

Foreign Exchange (FX)

The foreign exchange market (known as forex or FX) is a global worldwide decentralized financial market for trading currencies. Currencies are important to people whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. A foreign exchange transaction can be undertaken between various participants around the world including private individuals, institutions or governments. Foreign exchange transactions may fulfil a number of purposes, from maintaining foreign exchange reserves, to hedging purposes, or profiting from price movement.

Monex provides foreign exchange trading under the alternative trading system (ATS) in the forex market. It allows all kinds of parties to trade with much smaller capital in a highly liquid market. You can trade major currencies as well as cross-currencies — those other than the US dollar.  The online forex market has been designed to comply with major financial markets across the world (Tokyo, London and New York) almost 24 hours a day on weekdays.

Advantages 

  • Large number of market participants with the largest transaction volume.
  • Very liquid with instant execution for both buy and sell orders.
  • Market open almost 24 hours on weekdays.
  • Very tight spreads and competitive pricing.
  • The ability to sell currencies without obligation to buy in advance (short sell).
  • No time limit applied for both long and short holding positions.
  • Amount of capital required to participate is only 1% of the actual contract value.
  • Online trading via the Monex Trader platform.

Illustration:

Contract Size: 100,000/lot
Profit/loss calculation: 
Assuming that you are expecting the euro to strengthen against the US dollar, you buy 2 lots of EUR/USD at 1.40000. The euro actually does strengthen against US dollar during the same day and you liquidate your position at the price of 1.41000.
Your profit or loss will be calculated as per below:
= (Selling Price – Buying Price) x Contract Size x Lot
= (1.41000 - 1.40000) x 100,000 x 2 lots = $2,000*

* The calculation above was made as an illustration only. Transaction costs and commission fees are excluded. Results may vary depending on the direction of the price movement.

Gold - Loco London (XAU/USD)

Gold is one of the most popular commodities for investment or trading purposes. Investors typically buy gold to hedge against inflation or as a safe haven during times of economic, political or social instability. Gold trading can be executed under the ATS on the Loco London market. Its contract size is worth 100 troy ounces — equal to 3110.35 g (3.1 kg) — but no physical delivery is required for settlement.

Advantages 

  • No delivery and storage fees required.
  • Standard contract size: 100 troy ounces.
  • Low spread.
  • High liquidity with instant execution for both buy and sell orders. 
  • Short selling on bearish market is allowed.
  • Market open for almost 24 hours on weekdays.
  • Low margin requirement, which can significantly enhance return on investment (ROI).
  • Online trading via the Monex Trader platform.

Illustration:

Contract size: 100 troy ounces/lot
Profit/loss calculation: 
= (Selling Price – Buying Price) x Contract Size x Lot
Assuming that you are expecting the price of gold to strengthen against the US Dollar, you buy 2 lots of XAU/USD at $1.200. The gold price actually strengthens against USD during the day and you liquidate the position at the price of $1.215.
Your profit or loss will be calculated as per below:
= (1,215 – 1,200) x 100 x 2 lots = $3,000*

* The calculation above was made as an illustration only. Transaction costs and commission fees are excluded. Results may vary depending on the direction of the price movement.

Silver (XAG/USD)

Silver is another product which has gained popularity over the years and is offered by Monex. It is also traded under ATS on the Loco London market. It trades on a standard contract size of 5,000 troy ounces with no requirement for physical delivery. 

Advantages 

  • No delivery and storage fees required.
  • Standard contracts: 5.000 troy ounces.
  • Low spread.
  • High liquidity with instant execution for both buy and sell orders.
  • Short selling on bearish market is allowed.
  • Market open for almost 24 hours on weekdays.
  • Low margin requirement, which can significantly enhance your ROI.
  • Online trading via the Monex Trader platform.

Illustration

Contract size: 5,000 troy ounces/lot
Profit/loss calculation: 
= (Selling Price – Buying Price) x Contract Size x Lot
Assuming that you are expecting the price of silver to weaken against the US Dollar, you sell 2 lots of XAG/USD at $29.20 and during the day, the price of silver drops and you liquidate your position at the price of $28.60
= (29.20 – 28.60) x 5,000 x 2 = $6,000*

* The calculation above was made as an illustration only. Transaction costs and commission fees are excluded. Results may vary depending on the direction of the price movement.

Crude Oil (CO-LS/USD)

Crude oil futures are among the most popular and widely watched future markets. There isn’t a day without the mention of crude oil prices on television, in newspapers or magazines. Crude oil futures are traded under the ATS system on the New York Mercantile Exchange (NYMEX) market. The standard contract size is denominated in 1,000 barrels and does not require any physical settlement.

Advantages 

  • No delivery and storage fees required.
  • Standard contract size: 1,000 barrels.
  • Low spread.
  • High liquidity with instant execution for both buy and sell orders.
  • Short selling on bearish market is allowed.
  • Market open for almost 24 hours on weekdays.
  • Low margin requirement, which can significantly enhance your ROI. 
  • Online trading via the Monex Trader platform.

Illustration

Contract size: 
1,000 barrels/lot (CLS10C) 
Profit/loss calculation: 
= (Selling Price – Buying Price) x Contract Size x Lot
Assuming that you are expecting the price of crude oil to rise against the US dollar, you buy 1 lot of CLS10C/USD at $96.00 During the day, the price of crude oil actually rises and you liquidate your position at the price of $99.00
= (99,00 – 96,00) x 1,000 x 1 = $3,000*

* The calculation above was made as an illustration only. Transaction costs and commission fees are excluded. Results may vary depending on the direction of the price movement.