By utilizing a small margin, a Forex trader can control a significant amount of currency, like stock speculation and futures. The margin requirements for Forex trading are approximately 1%, whereas the margin requirements for trading futures are around 5% of the total value of the holding or 50% of the total value of the stocks. For every $100,000, the margin required to trade Foreign Exchange is $1,000. Therefore, a currency trader's funds can be leveraged 50 times more than a Stock trader, or 5 times as much value of product as a futures trader's. This can be a highly profitable strategy for investment, but it is crucial to understand the associated risks. It is important to thoroughly comprehend how your margin account will function. Make sure to carefully review your margin agreement with your clearing firm before proceeding further. If you have any uncertainties, consult your account representative or email to cs@siegfund.com.
If the available margin in your account drops below a predetermined amount, there is a possibility that your account may be partially or fully liquidated. It is not necessary for you to receive a margin call before your positions are liquidated. Therefore, it is important to regularly monitor your margin balance and use stop-loss orders on every open position to limit potential losses, it’s a mandatory requirement in Sieg Challenge.
When trading in futures, it is necessary to pay exchange and brokerage fees. However, one advantage of Forex trading is that it can be done without paying commissions. The currency trading market, which operates worldwide between banks, allows buyers and sellers to be matched instantly. Although there are no commissions charged by brokers to match buyers with sellers, the spread is typically higher compared to trading futures.
Forex trading carries less risk compared to trading futures. For example, in the case of an outbreak of Mad Cow Disease in US cattle, the price of live cattle experienced a significant decline, resulting in a drop in the limit for several days. This decline in price could have led to a complete loss of equity in your account. As the price continued to fall, you would have needed to find additional funds to cover the deficit in your account. It is important to plan ahead and decide whether to roll over your trades before futures contracts expire. In the case of Forex positions, they expire every two days, requiring you to rollover each trade to maintain your position.
Trading in futures is limited to specific hours each day that the market is open. When major news stories break while the markets are closed, you have no choice but to wait until the market reopens. On the other hand, the Forex market operates 24 hours a day, allowing you to trade at any time from Monday to Friday. With an average daily turnover of around $1.2 trillion, the Foreign Exchange market is the largest market in the world, approximately 46 times larger than all the futures markets combined. It is even difficult for governments to control the price of their own currency due to the high number of people involved in Foreign Exchange trading.
Beginner
Beginner
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