GLOSSARY
Base Currency: The numerator
of the traded pair.
Terms Currency (quote price): The denominator
of the pair to which the price of the pair is quoted.
Buy (long): In the
forex
market long means that you buy the base currency and at the same
time you sell the terms currency.
Sell (short): In the
forex
market short means that you sell the base currency and at the same
time you buy the terms currency.
Bid: The best (highest) price which
is offered by the buyers.
Ask: The best (lowest) price which is
offered by the sellers.
Lot size: Measures the amount of the
trade and refers to the base currency. This amount is standardized to 100,000 (1
standard lot), 10,000 (1 mini lot) or 1,000 (1 micro lot).
When you trade a currency pair, the amount that you trade refers to the base
currency, so if you sell 100,000 EUR/USD, you practically sell 100,000 EUR, and
if you buy 100,000 EUR/USD, you buy 100,000 EUR. This amount (100,000) is called
face value or nominal value.
Pip: A pip is the smallest price increment
in
forex
trading. Most currencies are traded to four
decimal points, so that a pip is 0.0001 or 1/100 of a cent. The exception to the
four decimal points is the Japanese Yen which is normally traded to two decimal
points.
Pip Value: To express the value in the terms currency, multiply 1 pip with the lot size.
·
EURUSD
pip = 0.0001 X 100,000 = $10.00
(for standard
lots)
EURUSD pip = 0.0001 X 10,000 = $1.00
(for mini lots)
To convert to the base currency divide by the exchange rate:
Say EURUSD exchange rate = 1.4750, then
$10.00 / 1.4750 = 6.78€
·
GBP / JPY pip = 0.01 X 100,000 = 1000
¥
(for standard lots)
To convert to an account’s currency (e.g. USD) divide by the exchange rate $/¥:
If $/¥ = 82.12 then
1000
¥ / 82.12 = 12.17$
.
Tip: In order to convert to an account’s currency
divide by the pair
which has as numerator the currency of the account
and as denominator the same as the traded pair.
Profit Loss Calculation: P/L (long)
= [lots size * (close price – open price) * conversion rate] / close price
P/L (short) = [lots size * (open price – close
price) * conversion rate] / close price
Conversion rate:Is the rate which converts the results of the trade (Profit
/ Loss) into the account’s currency e.g. suppose that we hold an account in USD
and that we entered in a long British Pound position against the Japanese Yen at
130.423 and that the position has closed at 130.957. The traded amount is 5mil or
50 lots and the GBP/USD rate at the time of closing is 1.58465 (this is the conversion
rate which allows the transition to our account’s currency, taking into account
any triangle arbitrage opportunities).
P/L = [5mil*(130.957 – 130.423)*1.58465] / 130.957 = $32,308.43
Margin Requirement: The minimum amount
which is escrowed in order to open a position. Margin depends on the account’s leverage.
E.g. If the leverage is 1:100 then you are able to trade a position a hundred times
larger than the escrow amount.
Leverage: Determines the percentage
of a trade’s nominal value that is required as margin.
Swap (Rollover fees): In order to avoid
any riskless profit related to the embedded compensation from the interest rates
difference of the two involved currencies, an amount must be credited or debited
according to short term interest rates.
Swap = [lot size * (Buy rate – sell rate)] / (365*price)
For example, assume that an investor owns 10,000 CAD/USD. The current exchange rate
is 0.9155, the short-term interest rate on the Canadian dollar (the base currency)
is 4.25% and the short-term interest rate on the U.S. dollar (the quoted currency)
is 3.5%. In this case, the rollover interest is $22.44 [{10,000 x (4.25% - 3.5%)}
/ (365 x 0.9155)].
This is the general simple compound formula that has been used for rollover calculation.
So, if the currency bought has a higher short term interest rate (e.g. LIBOR) than
the currency sold,
then
the respective amount will be
credited to the investment account.
A triple storage is charged /added for the passing of a position from Wednesday
into Thursday. This is because a position opened on Wednesday has Friday as a value
date. So, when a position is passed from Wednesday into Thursday, the value date
is moved not by 1, but by 3 days and becomes Monday.
The rollover amount (USD per std lot) appears on a daily basis at the AAAFx website.
This amount will either be credited or debited, for each currency pair, depending
on the position (buy / sell).
Margin call: When the equity of an account
reaches or falls below the level of margin requirement.
Stop out: The situation in which all
open positions in an account are closed by the broker because the equity reaches
a pre-specified level of margin requirement. In AAAFx
this level is the 70% of the margin requirement.E.g. if the margin requirement
is 1,000$ and the equity of the account is 700$ then all of the open positions will
be closed automatically.
CFDs
|
CFD
|
Symbol
|
Contract size (multiplier)
|
Margin %
|
Trading
Hours*
|
Break
Time*
|
|
INDICES
|
ESP35
|
1 €
|
6
|
Daily 08.00 – 16.30
|
none
|
|
GER30
|
1 €
|
4
|
Daily 07.00- 21.00
|
none
|
|
US30
|
1 $
|
4
|
Sun 23.00 – Fri 21.15
|
daily from 21.15 until 21.30
|
|
ITA40
|
1 €
|
4
|
Daily 08.00 – 16.40
|
none
|
|
JPN225
|
100
¥
|
6
|
Daily 00.00 - 21:15
|
none
|
|
NAS100
|
1 $
|
5
|
Sun 23.00 – Fri 21.15
|
daily from 21.15 until 21.30
|
|
SWE30
|
100 SEK
|
2,3
|
Daily 09.00 – 17.20
|
none
|
|
SPX500
|
10 $
|
4
|
Sun 23.00 – Fri 21.15
|
daily from 21.15 until 21.30
|
|
AUS200
|
1 AUD
|
5
|
Daily 00.50 – 21.00
|
daily from 07.30 until 08.10
|
|
FRA40
|
1 €
|
5
|
Daily 07.00 – 21.00
|
none
|
|
UK100
|
1 GBP
|
4
|
Daily 08.00 – 21.00
|
none
|
|
EUSTX50
|
1 €
|
3
|
Daily 7:00 - 21:00
|
none
|
|
COMMODITIES
|
USoil
|
100 b
|
9.5
|
Sun 23.00 – Fri 21.00
|
daily from 22.15 until 23.00
|
|
UKoil
|
100 b
|
8
|
Mon 01.00 – Fri 21.45
|
daily from 22.15 until 01.00
|
|
XAU/USD
|
1 oz
|
1.5
|
Sun 23.00 – Fri 21.45
|
Daily 22.00 until 23.00
|
|
XAG/USD
|
50 oz
|
1
|
Sun 23.00 – Fri 21.45
|
Daily 22.00 until 23.00
|
|
XPD/USD
|
1 oz
|
1.5
|
Sun 23.00 – Fri 21.45
|
Daily 22.00 until 23.00
|
|
XPT/USD
|
1 oz
|
1.5
|
Sun 23.00 – Fri 21.45
|
Daily 22.00 until 23.00
|
|
Copper
|
1000 lbs
|
1.5
|
Sun 23.00 – Fri 21.45
|
Daily 22.00 until 23.00
|
|
NGAS
|
1000 mmBtu
|
3
|
Sun 23.00 – Fri 21.45
|
Daily 22.15 until 23.00
|
|
TREASURY
|
Bund
|
100 €
|
1
|
Daily 07.00 – 21.00
|
none
|
P/L Calculation (long): [(close price
– open price)*contract size*lots]/conversion rate
.
Example 1: buy 5 lots JPN225 open at 10615, close at 10960.
Account’s currency is USD and the conversion rate is $/¥ = 82.9.
P/L = [(10960-10615)*100¥*5]/82.9
= 2080.8$
.
Example 2: Buy 10 lots
USoil.
Open at 96.05 closes at 96.62. Account’s currency USD
P/L = [(96.62 – 96.05)*100b*10]/1$ = 570$
Margin Calculation:
(lots* contract size*price*margin) / conversion rate
.
Example: The necessary margin for the example 2 is:
Margin = (5*100¥*10615*0.06)
/ 82.9 = 3841$
·
In general the contract size or multiplier gives
meaning to the underlying product (index, commodity)
·
The multiplier of indices converts points into
money
·
The multiplier in commodities determines the
quantity of the underlying product
Rollover: Applied to all of the CFD
symbols except Oil, NGAS and Bund. Rollover depends on 3 months LIBOR.
·
e.g. Client is long 10 US 30
·
The current roll (Buy) is -$0,88
·
The client will be assessed a charge of $8.80
(-$0.88 * 10) for the particular trading day.
Index positions will incur a 3 day rollover on Friday (22:00 GMT)
Metal positions will incur a 3 day rollover on Wednesday (21:00 GMT)
Expiration dates:
Oil and Natural Gas have a monthly expiration (please see the table below). Open
positions will be closed at bid/offer at 22:15
GMT.
The only consequence of this is that clients will
realize
any floating P/L at the time the position is closed. There are no rollovers for
any oil contracts offered.
Also all
pending stop and limit orders that are associated with the expiring contract will
be cancelled.
|
Expiration Dates
|
|
|
US Oil
|
UK Oil
|
NGAS
|
|
2012
|
18-Oct
|
15-Oct
|
26-Oct
|
|
14-Nov
|
14-Nov
|
27-Nov
|
|
17-Dec
|
13-Dec
|
21-Dec
|
|
2013
|
17-Jan
|
15-Jan
|
25-Jan
|
|
18-Feb
|
12-Feb
|
25-Feb
|
|
18-Mar
|
13-Mar
|
25-Mar
|
|
18-Apr
|
12-Apr
|
25-Apr
|
|
17-May
|
15-May
|
28-May
|
|
18-Jun
|
12-Jun
|
25-Jun
|
|
18-Jul
|
15-Jul
|
26-Jul
|
Treasury products have a quarterly expiration (please see the table below). Clients
that hold an open position on the Expiration Date will be closed at our bid/offer
at 21:00 GMT for BUND, the only consequence of this is the client will realize any
floating P/L at the time it is closed. There are no rollovers for all Treasury contracts
offered.
|
BUND Expiration
Dates
|
|
2012
|
5-Dec
|
|
2013
|
6-Mar
|
Copper is the only metal to have a once every other month expiration.
|
Copper Expiration
Dates
|
|
2012
|
29 Nov
|
|
2013
|
27 Feb
|
|
29 Apr
|
|
27 Jun
|
|
29 Aug
|
|
28 Nov
|