Noob Question

[knowledgeiskey]

Hi Guys,

I have a very noob question to ask and would appreciate any explanation towards the matter..

So a CFD contract on an index (lets use asx 200) allows you to purchase the contract with only 5-10% margin (depending on the broker).
Assuming the asx200 is worth 5000 points it would be around $25-$50 per contract to put up for the margin.

With the FX market (say AUD/USD) does it work similarly ?? so if you are buying a lot (i think 10,000 in a lot ?) and the exchange rate is AUD is buying 1 USD, then the 1 lot on the FX platform should cost you $10,000 but are the margins the same as cfd indexes or stocks? is the leverage the same thing as a margin (1:400 = 0.25% margin ?)

Any clarification would be much appreciated :cheesy:

 

[barneydunn]

Hi Guys,

I have a very noob question to ask and would appreciate any explanation towards the matter..

So a CFD contract on an index (lets use asx 200) allows you to purchase the contract with only 5-10% margin (depending on the broker).
Assuming the asx200 is worth 5000 points it would be around $25-$50 per contract to put up for the margin.

With the FX market (say AUD/USD) does it work similarly ?? so if you are buying a lot (i think 10,000 in a lot ?) and the exchange rate is AUD is buying 1 USD, then the 1 lot on the FX platform should cost you $10,000 but are the margins the same as cfd indexes or stocks? is the leverage the same thing as a margin (1:400 = 0.25% margin ?)

Any clarification would be much appreciated :cheesy:

In traditional forex a full lot is usually 100,000 of base currency and the margin depends on your leverage. Leverage of 500 to 1 means you would need 200 of whatever currency to open a 1 lot trade.

10000 position / 500 leverage = 200

I believe that most spread bet brokers charge 1% margin on forex pairs so if the price of audusd is 0.98 you need to put up £98 to open a trade at £1 per point.

Leverage doesn't apply with spread betting, the margin is calculated as above.

 

[knowledgeiskey]

thanks barney !