Forex (Foreign Exchange)

THE FOREIGN EXCHANGE MARKET

The foreign exchange market is a vast, global market with activities including all transactions in which the currency of one country is exchanged for that of another. Therefore, an exchange rate is simply the rate of exchange or price of one currency in terms of another. The world’s foreign exchange market is difficult to measure and no accurate figures exist about its size but the market’s daily turnover should have involved approximately three trillions of US dollars transaction. London is the world’s largest foreign exchange market, Tokyo comes next and New York is the third. The foreign exchange activities has increased most rapidly in recent years in the Asia-Pacific region, markets such as Australia, Hong Kong and Singapore also rank among the top ten most active centers in the world.

THE FOREIGN EXCHANGE MARKET DEALER

Foreign exchange business is akin to money market trading in that the dealer communicates by telephone, telex and facsimile machine, operating from banks, corporations and brokerage houses. It is worldwide network of traders, electronically linked and trading around the clock. A transaction that is begun in, say, Hong Kong can be carried over into the European and London trading day. Later in the London trading day, New York comes in, then the US west coast. New Zealand opens in time to catch the close of the New York trading day, closely followed by the Australian centers of Sydney and Melbourne. A few hours later the Asian centers open, and Tokyo, Hong Kong and Singapore come into the market. The foreign exchange dealers, therefore, has to keep pace with the clock for 24 hours.

THE FOREIGN EXCHANGE MARKET PARTICIPANTS

• major banks;
• corporations;
• central banks;
• foreign exchange brokers;
• financial institutions such as pension funds and insurance companies;
• individual investors.

AVAILABLE TRADING CURRENCIES AND CONTRACT SIZE

ITEM	EURO DOLLAR	DOLLAR YEN	EURO YEN	SWISS FRANCH	AUSTRALIAN DOLLAR	BRITISH POUND
CODE	EUR/USD	USD/YEN	EUR/YEN	USD/CHF	AUD/USD	GBP/USD
CONTRACT SIZE	€100,000	US$100,000	€100,000	US$100,000	AUS$100,000	GBP100,000
MINIMUM FLUCTUATION	0.0001	0.01	0.01	0.0001	0.0001	0.0001
MARGIN REQUIREMENT	US$1,000	US$1,000	US$1,000	US$1,000	US$1,000	US$1,000
COMMISSION	US$25	US$25	US$25	US$25	US$25	US$25
TRADING HOUR	Trading starts on Monday 05:30AM (West Indonesia Time) and ends on Saturday 03:00AM (during summer time) and 04:00AM (during winter time).

The content of this trading facts are subject to change with prior notice, in accordance with prevailing market condition.

TRADING HOUR

Trading starts on Monday 06:30AM (Western Indonesian Time) and ends on Saturday 02:30AM (during summer time) and 3:30AM (during winter time).

MARGIN REQUIREMENT

The minimum requirement of margin or fund for every trading currency contract is between 1 to 2 percent of its contract size.

US DOLLAR BASIS

The investment, such as initial deposit margin, premium or discount or commission shall be all in terms of US dollar.

PREMIUM AND DISCOUNT

There shall be premium or discount for the roll over contracts. Since the foreign exchange trading is financed in terms of US dollar, the roll over premium or discount shall be the interest differential between US dollar and the trading currency unit.

TRADING EXAMPLE

1. For British Pound, Australian dollar and Euro dollar 

Assume an investor buys two British Pound contracts at rate 1.9800 and settles the two contracts by selling at rate 1.9900, then the trading profit shall be calculated as below:-

Trading Profit     = (selling rate – buying rate) x contract size x units
= US$(1.9900 – 1.9800) x 100,000 X 2
= US$2,000

2. For Japanese yen and Swiss francs

Assume an investor buys three Dollar-Swiss contract at rate 1.0400 and settles the three contracts by selling at 1.0500, then the trading profit shall be calculated as below :-

Trading Profit     = (selling rate – buying rate) x contract size x units
—————————————————————–
Settlement rate
= US$((1.0500 – 1.0400) x 100,000 x 3) / 1.0500
= US$2,857.14

The illustration does not include commission and premium/discount.

contoh : forex

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