The financial sector is poised to closely monitor significant economic releases this week, with particular attention on RBNZ Rate Statement and FOMC Meeting Minutes. These essential reports play a critical role in guiding traders through the markets and enabling them to make well-informed decisions.

Germany, UK and US Flash Manufacturing PMI (23 May)

In April 2023, Germany’s Manufacturing PMI experienced a slight upward revision to 44.5, marking the sector’s poorest performance since May 2020. Meanwhile, the UK Manufacturing PMI was adjusted higher to 47.8, and the US Flash Manufacturing PMI saw a downward revision to 50.2, compared to March’s reading of 49.2.

For May 2023 data, due on 23 May, analysts predict German Manufacturing PMI at 43.6, UK’s at 48.8, and US’s at 50.3.

EU, UK and US Flash Services PMI (23 May)

In April 2023, US Services PMI was revised to 53.6, the year’s largest expansion, while Germany’s reached 56, its fastest growth in a year. The UK Services PMI rose to 55.9, highlighting continuous sector expansion throughout the year.

For May 2023 data, set to be released on 23 May, analysts forecast Germany’s Flash Services PMI at 56.6, UK’s at 54.3, and US’s at 53.

Reserve Bank of New Zealand Rate Statement  (24 May)

During its April meeting, the Reserve Bank of New Zealand increased its official cash rate by 50bps to 5.25%, reaching its highest level since December 2008.

For the upcoming meeting on 24 May, analysts predict that the RBNZ will implement an additional 25bps hike, raising the rate to 5.5%.

UK Consumer Price Index (24 May)

The consumer price inflation rate in the UK eased to 10.1% year-on-year in March 2023 from 10.4% in February 2023.

As for the year-on-year CPI data set to be released on 24 May, analysts anticipate a further decline, projecting it to drop to 8.5%.

US FOMC Meeting Minutes (24 May)

The Fed implemented a 25bps increase in its funds rate during its meeting on 3 May, adjusting it to a range of 5%-5.25%. This adjustment represents the 10th hike.

Analysts await the release of the next FOMC Meeting Minutes on 24 May, where they expect to find indications from the Fed about the ongoing tightening cycle. They anticipate the removal of a statement sentence that suggests the need for further policy firming.

US Core PCE Price Index (26 May)

US Core PCE prices, excluding food and energy, experienced a 0.3% month-over-month increase in March 2023, maintaining the same growth rate as the previous month.

The data for April 2023 is set to be released on 26 May, with analysts expecting the same growth rate as March 2023 at 0.3%.

What is Copper? 

Copper is a widely used hard commodity that finds applications in various sectors, including technology, construction, plumbing, and wiring. While it may be less expensive compared to precious metals like silver and gold, copper’s exceptional properties as a conductor of heat and electricity make it an attractive asset for trading. 

Major copper production is concentrated in South America, with Chile and Peru being the primary producers, followed by China as the world’s leading producer of refined copper. However, the global supply of copper can be easily disrupted due to its diverse geographic origins and the involvement of developing countries as key suppliers. This vulnerability, combined with high demand from various industries, contributes to the highly liquid and volatile nature of the copper market. 

What is Copper trading?

Copper trading capitalises on the market’s volatility and liquidity, offering opportunities for profit through speculation and price fluctuations. However, it’s crucial for traders to be aware of the factors that influence copper prices. 

Copper serves as a reliable indicator of global economic health due to its strong connection to infrastructure development. During periods of economic growth, investments in major infrastructure projects drive up the demand for copper. Conversely, economic downturns often result in a decline in copper prices as construction and infrastructure projects are put on hold. 

In addition to global economic trends, several other factors impact copper trading prices: 

• ^{Supply disruptions: Since most copper production comes from developing countries, political, social, or economic upheavals in these regions can quickly disrupt global supply chains. Changes in labour laws or nationalization efforts, as observed in Bolivia in 2006, can lead to significant price fluctuations.} 
• ^{Emerging markets: The rise of new markets with substantial investments in infrastructure development drives increased demand for copper. As these emerging markets experience growth, copper prices tend to rise. Conversely, when growth slows down, copper prices can predictably decline.} 
• ^{Material substitutions: The market rarely tolerates a continuous rise in copper prices. As copper becomes more expensive, manufacturers and investors seek cheaper alternatives to reduce costs. Substitutes like aluminium, nickel, and lead are utilized until copper prices become more affordable. Traders should be cautious of potential shifts in demand caused by material substitutions.} 
• ^{US housing market: The sheer scale of the US housing market plays a pivotal role in copper demand. Copper is extensively used in electrical wiring and plumbing for housing construction. Therefore, when the US housing market experiences growth, copper demand follows suit.} 

Advantages of trading Copper

Traders choose to invest in copper for several reasons: 

• ^{Safe haven investment: Copper is considered a physical commodity that retains its value even during economic downturns. Consequently, it is often viewed as a safe haven investment alongside assets like gold.} 
• ^{Portfolio diversification: Adding copper to an equity-focused portfolio helps diversify holdings and reduce overall volatility. By including a commodity like copper, traders can benefit from a more balanced investment approach.} 
• ^{Inflation hedge: Copper’s value is not tied to any specific currency, allowing it to retain its worth in the face of inflation. Many traders utilize copper as a hedge against inflation, protecting their portfolios from the eroding effects of rising prices.} 
• ^{Speculation opportunities: The liquidity and volatility of the copper market create opportunities for traders to profit through copper CFDs (Contracts for Difference). While high speculation can yield substantial rewards, it also carries inherent risks.} 

Getting started with Copper trading in four steps 

If you are interested in trading copper, follow these four steps to get started: 

Step 1. Select the Copper Asset 

While copper bullion and coins can be traded, most copper trading occurs through futures contracts, CFDs, and ETFs. You can choose from various copper futures markets, such as COMEX copper on the New York Mercantile Exchange or LME copper on the London Metal Exchange. Consider the trading hours of different exchanges when monitoring your positions. 

Step 2. Choose Your Trading Method 

Copper futures typically involve physical delivery, which may not suit all traders. Derivative products like copper CFDs provide an alternative by allowing traders to speculate on the price difference between opening and closing positions without owning the underlying asset. Copper CFDs offer leverage, enabling traders to trade with a fraction of the total asset value and potentially amplify both profits and losses. 

Step 3. Establish a Risk Management Strategy 

Given the potential for magnified losses in leveraged trading, it’s essential to have a risk management strategy in place. Utilise tools like stop-loss orders and limit close orders to automatically close positions when they reach predetermined thresholds for acceptable losses or profits. 

Step 4. Open Your First Copper Trade 

Download a powerful trading platform like MetaTrader 4 or its upgraded version, MT5, to execute trades quickly and gain a transparent view of the market. 

Understanding different copper markets 

The strategies employed in copper trading depend on the type of market you are dealing with. Generally, two types of markets exist: trending and consolidating. 

• ^{Trending markets are characterized by significant price fluctuations and volatility. These markets align with the beginning and end of copper market cycles, where increased demand or the completion of large infrastructure projects impact prices.} 
• ^{Consolidating markets, on the other hand, exhibit more stability. They indicate a balance between supply and demand and tend to keep prices within defined support and resistance levels. Despite the relative stability, consolidating markets still offer traders opportunities for profits through short-term movements.} 

Start trading copper with VT Markets 

VT Markets provides a comprehensive trading environment for copper and a wide range of other instruments across various asset classes. Backed by advanced trading tools, in-depth analysis, expert advisors, and technical signals, VT Markets enables traders to open and close copper trading positions effectively. 

Whether you are a seasoned trader or just beginning your trading journey, VT Markets offers exceptional client services and the necessary resources to support your portfolio building and trading aspirations. 

Gold has long been a highly prised precious metal, known for its lustrous appearance, unique properties, and historical use as a form of currency. While many global currencies were once backed by gold under the gold standard, this system was abandoned in the UK in 1931. However, gold continues to hold value as a stable asset, especially during times of economic uncertainty. With the global demand for gold steadily increasing, investing in or trading gold has become an attractive proposition for many investors. 

Step 1: Understanding Gold Trading and Investing 

Before you start trading gold, it’s crucial to have a solid understanding of the different types of gold assets available. These assets can involve physically owning the metal or trading it without possession. 

Physical Gold 

The traditional method is to buy physical gold, which can include gold bullion, coins, or jewellery. However, this option requires security measures, logistics, and insurance, making it more common among banks and financial institutions rather than individual investors. 

Spot Price Purchasing 

This involves buying or selling gold upfront at the current market price per troy ounce. It allows active investors to gain exposure to gold without physical ownership. 

Gold Futures 

Futures contracts establish a fixed price for gold and specify a future date for the exchange. Investors speculate on market movements to achieve profitable returns. 

Gold Options 

Unlike futures, gold options do not require an exchange but provide the option to do so. There are two types: calls (buyers have the right to exchange) and puts (sellers have the right to exchange). 

Gold ETFs 

Exchange-traded funds (ETFs) are passive investments that track the movement of a basket of shares in gold-related companies. They offer investors broader exposure and portfolio diversification. 

Gold Stocks 

Investing in gold stocks involves buying shares in companies involved in gold production, mining, funding, or sales. Gold stocks may not always correlate directly with the price of gold, requiring a nuanced understanding of their price trends. 

Step 2: Understanding Price Drivers for Gold 

To trade gold successfully, it’s important to grasp the factors that influence its price movements. Some major drivers include: 

Mining 

Gold mining affects the supply of new gold in the market. Although gold can be recycled, it remains a finite resource, and mining activity has slowed down globally. As demand increases and mining reserves dwindle, prices are likely to rise. 

Demand 

Gold demand has consistently increased over the years, driven primarily by jewellery consumption and gold ETFs. As supply declines, demand becomes a critical factor impacting gold prices. 

Global Currencies 

Gold often exhibits an inverse relationship with major world currencies, such as the US dollar, Japanese yen, or British pound. When gold rallies against these currencies, it is considered an opportune time to buy gold. 

Interest Rates 

Interest rate fluctuations affect gold prices. Rising interest rates tend to lower gold’s value as investors shift towards fixed-income assets. Conversely, declining interest rates drive investors back to the perceived security of gold. 

Political, economic, and security issues 

Gold is considered a safe haven investment during times of market volatility, political instability, financial stress, or global events like the COVID-19 pandemic. These factors can cause significant spikes in gold prices. On the other hand, periods of economic prosperity and positive financial markets may reduce the demand for gold in favour of other assets. 

Step 3: Choosing Your Gold Trading or Investment Approach 

Based on your investment goals and risk tolerance, select the most suitable method for trading or investing in gold: 

• ^{Trading: Trading gold allows for maximizing exposure and taking shorter-term positions. Spot trading, gold futures, and gold options are ideal for active traders looking to leverage their investments and hedge their portfolios.} 
• ^{Investing: Investing in gold is geared towards long-term gains and portfolio diversification. Gold ETFs and gold stocks provide exposure to the gold market and are better suited for investors seeking a broader investment horizon.} 

Step 4: Opening Your Gold Trading or Investment Account 

After practicing with a risk-free demo account, you can start trading in live markets by creating a live forex account. Setting up an account with VT Markets is a straightforward process, taking just a few minutes, even for beginners. 

Step 5: Identifying Trading Opportunities 

With your trading or investment account, you’ll have access to various tools, technologies, and market analysis. Platforms like MetaTrader 4 and MetaTrader 5 offer features to help you identify the right opportunity for trading gold based on technical indicators and market trends. 

Step 6: Executing Your First Gold Trade or Investment 

When opening a gold trade, it’s essential to manage risk and avoid overexposure. Implement tools like stop-loss orders or limit-close orders to automatically close your trade when it reaches a predetermined threshold. Depending on your strategy and outlook, choose between spot trading, gold futures, gold options, gold ETFs, or gold stocks. 

Step 7: Developing Your Strategy and Closing Your Position 

Monitor your trade’s profit or loss position using the trading platform’s powerful tools. Stay informed about broader market trends and make informed decisions to close your position at an advantageous point according to your investment and trading strategy. 

Ready to Start Trading Gold? 

If you’re ready to embark on your gold trading journey, VT Markets is an ideal platform offering exceptional customer service and an intuitive trading platform accessible from your computer or mobile device. Whether you want to learn how to trade gold, access market analysis, or receive Forex signals, VT Markets simplifies the process of market trading. Create your gold trading account today or contact us for further information about our trading tools. 

What are commodities? 

In simple terms, commodities are the raw materials that are harvested, collected, and processed into everyday goods and services used by humans. 

Unlike stocks or bonds, commodities are physical materials and goods. Trading commodities can be potentially profitable due to their price fluctuations, but they also carry more risk compared to bonds and the stock market. Successful commodities trading requires specialised knowledge and staying informed about the market. 

Before you start trading commodities, you’ll need to choose which commodity you’re interested in. They are typically divided into two categories. 

• ^{Hard commodities: These are natural resources extracted from the earth, such as natural gas, coal, oil, and precious metals like gold and silver.} 
• ^{Soft commodities: Unlike hard commodities, soft commodities are grown or harvested. Examples include livestock like hogs and cattle (used for food, leather, gelatine) and agricultural crops like coffee, cocoa, wheat, palm oil, and timber.} 

hard commodities, soft commodities

How to trade commodities 

Commodities trading is one of the oldest forms of trade and is the original basis for what modern investing has become today. The process might have started with farmers negotiating prices for their goods outside of harvest time, but these days, wanting to trade commodities involves a more sophisticated process. 

When it comes to trading commodities, there are several options to consider: 

Commodities futures 

Futures contracts allow investors to buy and sell commodities at a predetermined future price. Profits can be made from the difference between the agreed price and the actual price when the contract expires. However, this approach is based solely on price changes and does not involve the physical goods themselves. 

Purchasing physical commodities 

Some commodities can be physically acquired by investors. However, this option is typically reserved for high-value commodities like precious metals, as it can be more costly compared to other investment methods. 

Commodities stocks 

Trading commodities stocks allows investors to gain exposure to the commodities market through companies producing the assets. The relationship between commodity prices and stock prices can vary, and it’s essential to understand the underlying principles of each company. 

Commodities ETFs 

Exchange traded funds (ETFs) offer an opportunity to diversify your portfolio by holding a basket of commodities. ETFs aim to mimic the price movements of the underlying commodities, but they may not always perfectly reflect the actual market conditions. 

Factors that might affect commodity trade 

To trade commodities successfully, it’s crucial to consider various factors that can influence the market: 

• ^{Geopolitics: International political situation can significantly impact commodities trading worldwide. For example, the most recent war in Ukraine has affected the grain prices. Or in the past several decades, the political situation in the Middle East has been closely tied to the performance of oil as a commodity.} 
• ^{Domestic politics: Changes in labour laws, regulations, or policies within a country of origin can have a significant impact on commodity prices.} 
• ^{Weather: Weather events such as rainfall, droughts, or extreme temperatures can impact commodity values. Unpredictable weather conditions can disrupt production, affecting supply and demand.} 
• ^{Market competition: Technological advancements and the entry of new competitors can disrupt traditional commodity markets. For instance, the rise of renewable energy sources can affect the demand for fossil fuels.} 
• ^{Seasonality: Soft commodities like agricultural crops and livestock can be influenced by seasonal factors. Harvest and slaughter times can create oversupply or scarcity in the market, affecting prices.} 
• ^{Macroeconomics: Economic indicators such as GDP, inflation rates, interest rates, and industry performance can have a significant impact on commodity prices.} 
• ^{Other environmental factors: Commodities are susceptible to disruptions in the supply chain caused by unforeseen events. Natural disasters, accidents, or shipping disruptions can affect commodity markets. Events like the 2021 Suez Canal obstruction, in which the Ever Given blocked the crucial shipping route for six days, is one such example of this.} 

Building a strong portfolio with trade commodities 

Commodities trading offers unique opportunities but also carries higher risks. Many investors choose to allocate a portion of their portfolio to commodities trading, typically around 20%. This helps balance risk and potential gains while diversifying their investment portfolio. 

Ready to create your commodity trading account? 

If you’ve been following a commodities market, buffing up on your knowledge of political and environmental factors that might affect it and reading expert insights from financial journalists, you may be eager to open a commodity trading account. At VT Markets, we offer beginner-friendly and globally recognised trading platforms in a user-friendly interface, so you can trade commodities using a transparent and trusted forex trading environment that’s totally secure. 

Want to know more about how we’ve designed our systems to meet the needs of clients? Get in touch and we’ll help you with anything you need, from choosing your account type to managing your investment size and leveraging the right commodities trading options to suit you. 

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com

The financial industry anticipates major economic reports this week, focusing on the US Retail Sales and Australia Wage Price Index and Employment Change. These reports are crucial for traders navigating the markets and making informed decisions.

NY Empire State Manufacturing Index | US (15 May)
The NY Empire State Manufacturing Index unexpectedly jumped to 10.8 in April 2023 from -24.6 in March 2023.
Analysts expect a reading of 8 for May 2023.

Claimant Count Change | UK (16 May)
The number of people claiming for unemployment benefits in the UK rose by 28,200 in March 2023, the first increase in three months, and the biggest since February 2021.
The UK Claimant Count Change for April will be released on 16 May, with analysts expecting a decrease of 15,000.

Consumer Price Index | Canada (16 May)
Canada’s CPI increased by 0.5% in March 2023 compared to February 2023 figures.
Data for April will be released on 16 May, with analysts expecting an increase of 0.3%.

Retail Sales | US (16 May)
US retail sales dropped 0.6% in March 2023, after falling 0.7% in February 2023.
Analysts project a 0.7% increase for April 2023, with the data set to be published on 16 May.

Wage Price Index | Australia (17 May)
Australia’s seasonally adjusted Wage Price Index jumped 3.3% year-on-year in Q4 2022, after an upwardly revised 3.2% growth in Q3 2022.
Data for Q1 2023 will be released on 17 May, with analysts expecting another increase of 3.5%.

Employment Change | Australia (18 May)
Australia’s employment rate increased to 13.88 million, with a surge of 53,000 in March 2023. The unemployment rate stood at 3.5%.
The data for April 2023 is set to release on 18 May, with analysts expecting the employment rate to increase by 25,000. The unemployment rate is likely to remain at 3.5%.

Forex trading is a global market that operates 24 hours a day. And it is important to know the best times to trade in order to maximise your profits. 

The Forex market can be divided into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session.  

The Forex market opens in New Zealand on Monday morning, while it is still Sunday in most parts of the world. The market operates continuously from Monday to Friday, and there are no formal closing times during the week. 

As one region’s Forex market closes, another region’s market opens or is already open, resulting in overlapping trading periods, which are often the most active times in Forex trading. 

Apart from weekends, there are only two public holidays when the Forex market remains closed worldwide: Christmas and New Year’s Day. 

You should be aware that the opening hours of the Forex market may vary in March, April, October, and November due to different countries’ daylight savings schedules. This is an important consideration if you plan to trade during those times. 

Traditionally, the Forex market has had three main trading sessions that traders tend to focus on instead of trading all day and night. This is referred to as the “Forex 3-session system”, which includes the Asian, European, and North American sessions, also known as Tokyo, London, and New York. 

Tokyo session 

The Tokyo session starts at 12:00 am GMT. Japan is the world’s third-largest Forex trading centre. During the Asian session, around 20% of all Forex trading volume occurs. 

Economic data from Australia, New Zealand, China and Japan are released early in the session, and this could provide an excellent opportunity to trade news events. 

The Tokyo session’s moves could set the tone for the rest of the day, and traders in later sessions often evaluate what strategies to take in other sessions 

London session 

London’s strategic location benefits from its time zone, as its morning overlaps with late trading in Asia, and its afternoon overlaps with New York City. 43% of all Forex transactions happen in London. 

The London session is also known as the “European” trading session. Other major financial centres such as Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam are also open during this time. 

Most trends begin during the London session and continue until the beginning of the New York session. 

Due to the high volume of transactions, the London session is typically the most volatile, making almost any pair tradable. However, sticking to the major pairs (EUR/USD, GBP/USD, USD/JPY, and USD/CHF) is generally best due to their tight spreads.

New York Session 

The US session begins at 8:00 am EST (12:00 pm GMT). New York is responsible for about 17% of all Forex transactions. 

This session is also referred to as the “North American” trading session, as major financial centres like New York, Toronto and Chicago in North America are open at the same time. 

Economic reports are usually released at the start of the New York session, with 85% of all trades involving the dollar. Hence, significant US economic data releases can move the market. 

During the US and European markets’ simultaneous opening, abundant liquidity allows traders to virtually trade any pair. During the afternoon US session, volatility and liquidity tend to drop when European markets close. 

So, when is the best time to trade forex?

According to the analytical reports, the most favourable trading time is around 10 am and 3 pm London time (10 am NY time) when there is optimal liquidity. This is the busiest time of day when traders from London and New York engage in trading, and it can be affected by news reports from the US, Canada, and Europe. 

Additionally, this is the time when the WM/Refinitiv Spot Benchmark Rate is set, also known as the “London fix”. Banks and financial institutions use it as a reference point for daily currency exchange rates. For traders, there may be a surge in market activity before the fixing time that abruptly disappears exactly at the fixing time. 

In general, it is recommended to trade in the middle of the week when the most action occurs. Fridays are generally busy until 04:00 pm GMT, and then the market becomes quiet until it closes at 9:00 pm GMT. 

There are several ways to trade Forex, and each method has its own advantages and disadvantages.  

The most popular financial instruments used in Forex trading include retail Forex, spot FX, currency futures, currency options, currency exchange-traded funds (or ETFs), Forex CFDs, and Forex spread betting. 

Retail Forex is a way for individuals to participate in the Forex market through forex trading providers or brokers. These brokers trade on behalf of the retail traders in the primary OTC market by finding the best prices and adding a markup before displaying them on their trading platforms. Retail Forex trading involves trading contracts to deliver underlying currency rather than the currency itself. 

Retail Forex trading is leveraged, meaning traders can control large amounts of currency with a small initial required margin. For example, with $2,000, traders can open a position valued at $100,000. However, this also means that traders can potentially lose more than their initial investment. 

To avoid the physical delivery of currency, retail Forex brokers automatically “roll” client positions by entering into an equal but opposite transaction. This rolling process is known as Tomorrow-Next or “Tom-Next” and results in either interest being paid or earned by the trader, known as a swap or rollover fee. 

Retail Forex trading is considered speculative, as traders are trying to profit from the movement of exchange rates without taking physical possession of the currencies they buy or sell. It is important for traders to understand the risks involved and to have a solid understanding of the market before participating in retail Forex trading. 

Spot FX is an OTC market where customers trade directly with a counterparty. Unlike centralised markets, spot FX contracts are private agreements between two parties, and most trading is done through electronic trading networks or by telephone. 

The primary market for FX is the interdealer market, which is dominated by banks and accessible only to institutions that trade in large quantities. 

In the spot FX market, traders buy or sell contracts to make or take delivery of a currency at the current exchange rate. The price of currencies in the spot market is determined by several factors, such as current interest rates, economic performance, geopolitical sentiment, and price speculation.  

The finalisation of a deal in the spot market is known as a spot deal, which is a bilateral transaction between two parties. A position in the spot market is settled in cash, but it takes two business days for the actual transaction to be settled. 

Although the spot FX market operates 24 hours a day, it is not where retail traders trade. 

Currency futures are contracts that allow traders to buy or sell a certain amount of currency at a set price and date in the future. 

They were introduced in 1972 by the Chicago Mercantile Exchange (CME) and are traded on centralised exchanges. 

The contracts have standard details, such as the amount of currency, the date when the trade will happen, and the smallest price change allowed. The exchange makes sure that both sides of the trade are settled. Traders can buy or sell currency futures based on a fixed size and date at commodities markets. 

The market is well-regulated, and you can easily get information about prices and trades. Currency futures are used by traders to protect against currency value changes or to predict future changes. 

Currency options are financial agreements that give the holder the right, but not the obligation, to buy or sell a specific amount of currency at a fixed exchange rate or before a future date. 

These options are available for trading on popular exchanges such as the Chicago Mercantile Exchange (CME), the International Securities Exchange (ISE), and the Philadelphia Stock Exchange (PHLX). 

In general, currency options are commonly used to protect against unfavourable changes in exchange rates by corporations, individuals, and financial institutions. At the same time, traders can use currency options to speculate on currency movements. 

Currency ETFs are managed investments in one or multiple currencies. They are created and managed by a financial institution and traded like a stock. 

Currency ETFs serve various purposes: speculation, diversification, and hedging. But they come with macroeconomic risks like geopolitical risks and interest rate hikes. 

Despite the limitations of trading, currency ETFs offer a convenient way to invest in the Forex market without the burden of managing investments. 

Forex CFDs, also known as Contracts for Difference, are financial instruments that allow traders to speculate on whether the price of an underlying asset, like a currency pair, will rise or fall. When a trader enters into a CFD contract, they agree with a provider to exchange the difference in the value of the asset between the opening and closing of the trade. 

Unlike traditional investments, CFD investors don’t actually own the underlying asset; instead, they receive revenue based on the price change of that asset. 

The advantages of trading Forex CFDs include access to the underlying asset at a lower cost than buying it outright, ease of execution, and the ability to take both long and short positions. 

Forex spread betting is a way to predict if a currency’s price will go up or down in the future without owning it. The price is based on the currency’s value in the FX market. 

Spread betting providers allow this type of trading and consider three factors: the trade direction, the bet size, and the spread of the instrument traded. 

One benefit of forex spread betting is that traders can use leverage to potentially make a larger profit from a smaller investment. However, if the market moves against you, you could lose more than your initial investment. 

Each of these trading methods has its advantages and disadvantages, and traders should choose the method that best suits their trading style and risk tolerance. 

To be short, the answer is “currencies”. 

When we want to talk about different types of currencies, we use three-letter symbols to represent them. The first two letters in the symbol tell us which country the currency comes from, and the third letter tells us the name of the currency. For example, USD stands for United States Dollar. These codes are called ISO 4217 Currency Codes. 

The most actively traded currencies are the US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), Swiss Franc (CHF), Canadian Dollar (CAD), and New Zealand Dollar (NZD). These currencies are often referred to as the “majors” and are traded in high volumes due to their liquidity and stability. 

The US Dollar plays a central role in the Forex market, with over 50% of the trades involving it. 

The US Dollar is crucial in the global economy for several reasons. Firstly, it has the largest economy and most liquid financial markets globally, making it a powerhouse for international trade. Secondly, it is the primary global reserve currency and is used in half of all international loans and bonds and in cross-border transactions, including petrodollars. Lastly, the US’s stable political system and sole military superpower status make it a safe haven for investors. 

It is important to understand that currencies are always traded in pairs. A currency pair is the exchange rate between two different currencies. For example, the EUR/USD currency pair represents the exchange rate between the Euro and the US Dollar. 

There are three main categories of currency pairs: the “majors”, the “crosses”, and the “exotics”. The popularity of currency pairs can vary depending on market conditions, so it’s important for traders to stay informed about which pairs are currently in demand. 

While there are eight major currencies, only seven major currency pairs exist. That is because US Dollar must always be present in the pair. This currency group involve EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD. The last three pairs are also called commodity currency pairs. The “majors” are usually the easiest for beginners to trade. 

The “crosses” are currency pairs that do not involve the US Dollar. Cross-currency pairs consist of two major currencies: the Euro and the Japanese Yen (EUR/JPY) or the British Pound and the Japanese Yen (GBP/JPY). Crosses are typically less liquid than the majors, but they can still provide opportunities for profitable trades. 

The “exotics” are currency pairs that involve a major currency paired with a currency from an emerging or developing country. Exotic currency pairs are considered more volatile and less liquid than the majors and crosses. Examples of exotic pairs include the USD/MXN (US Dollar/Mexican Peso) and the USD/ZAR (US Dollar/South African Rand). 

Understanding currency pairs is crucial for forex trading because buying one currency means simultaneously selling another. For example, if you buy the EUR/USD currency pair, you are essentially buying Euros and selling US Dollars. Trading currency pairs allows traders to speculate on the exchange rate between two currencies and potentially profit from the difference in price. 

Forex speculation is the practice of buying and selling currency pairs in order to profit from the fluctuations in their exchange rates. Speculators aim to buy currencies when they are undervalued and sell them when they are overvalued, making a profit on the difference in the exchange rate. 

Exchange rates are the values at which one currency can be exchanged for another. These rates are determined by the supply and demand of each currency in the market. When demand for a currency is high, its value increases, and when demand is low, its value decreases. Exchange rates are expressed as a ratio, such as 1.20 EUR/USD, which means that one euro is worth 1.20 US dollars. 

There are several factors that can affect exchange rates, including: 

Economic Factors: The state of a country’s economy can have a significant impact on its currency’s value. Factors such as inflation, interest rates, and economic growth can all affect exchange rates. 

Political Factors: Political stability and government policies can also affect exchange rates. For example, a country with a stable government and sound economic policies may have a stronger currency than a country with political turmoil and uncertain economic policies. 

Market Sentiment: The mood of the market can also influence exchange rates. If traders are optimistic about a currency’s prospects, its value may increase, while pessimistic sentiment can lead to a decline in value. 

Brexit is a prime example of how political events impact a nation’s currency exchange rate. The UK’s decision to leave the EU in 2016 resulted in uncertainty and instability, leading to a decline in the value of the British pound. Before the referendum, the pound traded at 1.50 USD, but after the decision, it fell to 1.30 USD. Prolonged negotiations between the UK and the EU added to the volatility, further weakening the pound against other currencies. 

Understanding these basics of Forex trading is essential for anyone looking to enter the market. VT Markets provides its clients with daily market analysis to keep them up to date with the latest news and help make informed decisions about their investments. 

Forex is a short term for “foreign exchange,” which means changing one currency to another. 

Let’s say you’re travelling from France to the United States. You’ll need to change your euros to US dollars. When you go to the bank, you’ll see a big board with names of different currencies and numbers. This board shows exchange rates, which are the price of one currency compared to another. For instance, the exchange rate for €1 is $1.2. 

Suppose you exchange €1000 for $1200 before your trip. This means you participated in the Forex market. 

However, when you’re on vacation, you’ll notice that the exchange rate has changed, and now €1 is worth less in US dollars than when you exchanged your money. As a result, your €1000 is now worth only $1100 instead of $1200. This means your euros can buy fewer things in the United States than you initially thought. 

In the financial world, Forex traders aim to profit from the changes in exchange rates by buying and selling currencies at the right time. 

The Forex market is the world’s largest and most liquid financial market. It is estimated that the daily trading volume of the Forex market has reached $7.5 trillion USD. To put this into perspective, the stock market in the United States has a daily trading volume of around $400 billion USD, which is just a fraction of the Forex market’s volume. 

To help you visualise just how big the Forex market is, imagine the world’s largest shopping mall on Black Friday, with millions of people buying and selling goods all at once. Now, imagine that happening every single day, 24 hours a day, 5 days a week, all over the world. That’s how big the Forex market is. 

To facilitate trading around the clock, the Forex market has several financial centres located in different parts of the world, including New York, London, Tokyo, and Sydney. Each financial centre has its opening and closing hours, which overlap to create a continuous trading session. 

For example, when it’s morning in New York, and the Forex market opens, it’s already afternoon in London, where the market is already open. This overlap in market hours allows traders to trade in multiple markets simultaneously and take advantage of the increased liquidity and volatility. 

Forex plays a crucial role in facilitating international trade and investment by allowing businesses and individuals to exchange one currency for another. Without Forex trading, it would be difficult to conduct international transactions, as businesses and individuals would have to rely on their own country’s currency. 

The forex market is decentralised, meaning that it does not have a central location like the New York Stock Exchange or the London Stock Exchange. Instead, it operates through a global network of big commercial banks, central banks, multinational corporations, investors, hedge funds, and individual traders who buy and sell currencies electronically. 

Commercial banks are the biggest players in the Forex market. They trade currencies for lots of different clients, such as other banks, big companies, and people who want to exchange money for their travels. When they trade currencies, they help to set the prices for all the other traders in the market. The big players that significantly influence the market are called market makers. 

The Forex market operates through two main channels: the interbank market and the over-the-counter (OTC) market. 

The interbank market is where banks and financial institutions trade currencies with each other, acting as both buyers and sellers. For example, if a bank needs to exchange US dollars for euros, it will turn to the interbank market to find another bank willing to sell euros and buy US dollars. 

On the other hand, the OTC market is where trades are conducted directly between two parties without using a centralized exchange or clearinghouse. For example, if you’re travelling to another country and need to exchange your currency for the local currency, you might go to a currency exchange booth at the airport. The currency exchange booth acts as an OTC market maker, buying your currency from you and selling you the local currency at a markup. 

Forex brokers like VT Markets play a crucial role in the Forex market by providing a platform for traders to buy and sell currency pairs. They act as intermediaries between traders and the market, executing trades on behalf of their clients. 

As a broker’s client, you have the opportunity to earn profits by speculating on the movement of currency pairs. Brokers also offer various tools and resources to help traders make informed decisions, such as market analysis, educational materials, and trading signals. 

Choosing a reputable and regulated broker is important, as the Forex market is known for its volatility and potential risks. However, with the right knowledge and strategy, trading Forex can be a lucrative opportunity for those willing to put in the effort to learn and practice.