What is Swap Point | Pips of Leveraged FX | Rakuten Securities HK
In leveraged FX, there are 2 types of possible income sources. One is possible capital gain by trade, so tight spread (less pips between the prices) is important. The other is swap point, which is known as rollover interest.
Basic concept of swap point and pips in leveraged FX
A forex swap comprises of two transactions, a spot forex transaction, and a forward forex transaction. These two transactions are performed at the same time for the same quantity and therefore counterbalance each other. The swap point specifies the difference between the spot rate and the forward rate. It is also known as pips.
A forex swap allows the investor to acquire currencies instantaneously and then sell them at a price which has been decided upon in the contract at the maturity date of the swap point.
One of the key reasons why people are so fascinated with trading in forex as compared to other financial instruments is that with forex, they have the chances of getting much higher leveraged FX than they would make with stocks. While you might have heard the term leveraged FX a number of times, do you know what its meaning is and how it works?
Swap Point or Pips
A regular forex account has definite lots and pips units. A lot can be defined as the minimum quantity of a security that could be traded. On the other hand, pips is the lowest amount by which a currency quote can vary. Normally, one lot is valued at $100,000, and a pips unit is quantified in the amount of $0.0001 for the currency pairs with U.S. dollar.
Pips value is the impact that a one-pip adjustment has on an amount of dollars. It is significant to see that the pips value does not change depending on the amount of leveraged FX used. Instead, the leveraged FX amount you have moves the pips value. Many brokers provide traders a 100:1 leverage. It means that for every $100,000 transaction, the broker will need you to have at least $1,000 in your account.
The monetary worth of each pip is determined by three main factors including the currency pair that is being traded, the scope and size of the trade, and the exchange rate. Depending on these factors, the variation of even a single pip can have a substantial impact on the value of the open position.
When you increase your leveraged FX, it also increases the volatility and unpredictability of your position because even the smallest changes in pips value can result in larger variations in your account value.
Rakuten Securities HK
Rakuten Securities HK is one of the largest forex brokers in the world and an innovator in leverage FX market trading in Hong Kong.
With the advantage of great financial capability and leading-edge technology, Rakuten Securities HK offers a high-quality online forex trading platform, Rakuten FX. It offers speedy performance, execution, interactive layout, and cutting-edge analysis tools.
Why swap point or pip is used
A pip is a unit which is used for quoting price changes and calculating profit or loss in the Forex market. Rakuten Securities HK quotes most of the currency pairs to five decimal places. The fourth place after the decimal point is usually watched out to count pips. For currency pairs related to Japanese Yen, prices are estimated up to 3 decimal places, although the second place after the decimal point is usually considered to calculate pips. Each point that place moves is regarded as 1 pip of movement.
Rakuten Securities Hong Kong office is straight forwardly accessible to the public and offers a friendly atmosphere to anyone who wants to discover the world of forex trading. Their expert forex consultants are always prepared to provide you with aiming trading demonstrations of their online trading platform.
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