Currency trading (FX Spot instrument) allows for bets to be made on exchange rate fluctuations. FX Spot is a high leverage instrument, which allows the trader to generally trade with leverage of 20 to 40 times.
- For example, betting on fluctuations involving the EUR-GBP currency pair, it is possible to use leverage of 30 times. Therefore, in order to assume a 50,000 € position, it is necessary to have at least 1665 € in cash equity on your account.
FX Spot allows both long- and short-term positions to be taken in relation to a currency pair. For example, when purchasing EUR/USD FX Spot you are betting on the strengthening of the Euro in relation to the Dollar and when selling EUR/USD you are betting on the strengthening of the Dollar in relation to the Euro.
Transaction fees apply to FX Spot transactions in the event that the size of the position remains smaller than the commission threshold. For example, in the case of the EUR/USD the threshold is a 50,000 € position, i.e. in the case of larger transactions a separate transaction fee does not apply. It should be noted that there is always a spread between the purchase and sale prices of an instrument. This means that in order to earn a profit the price of the position must change enough to offset the given spread.
- For example, at the same time the EUR/USD purchase (ask) price may be 1.1709 € (price, at which the client purchases) and the sales (bid) price is 1.1707 (price, at which the client can sell), in which case the range is 2 points (one point = a pip, i.e. the smallest digit in the price of the currency pair). When purchasing at the purchase price and selling the position at the sales price at the same moment in time, the position loses 0.017% (1,1707/1,1709-1) of its value, which means that in order for the position to become profitable the market price of the currency pair must rise by more than 0.017%.
Interest income or interest charges shall be applied to overnight positions based on the interest environment for associated currencies (Tom/Next swap points). If the client has a long position, for example, in US dollars, where the interest rates are significantly higher than in a short position currency, for example, the Euro, then the client may earn interest income on the position (and vice versa). In addition, interest income or interest charge shall be calculated for the profit/loss of the position based on the interest environment for the currency (financing interest). The acquisition cost of the position shall be adjusted by the revenue and expenditures associated with maintaining the position, which in turn affects the gain or loss of the position.
Additional information on the functioning and costs of FX Spot can be found in the key information document (KID) for the instrument, the trading rules, the price list and the trading platform.