What Is Margin in Forex Trading and Why Does It Matter

In this article, we will explore what margin in forex trading is, how it functions, and its significance in trading. Margin plays a crucial role in allowing traders to control larger positions with a smaller initial investment. We’ll also cover how margin affects leverage, the risks involved, and why it’s important for successful forex trading strategies. Understanding margin is key to managing both opportunities and risks effectively in the dynamic world of forex trading.

What is Margin in Forex?

Margin is a fundamental concept in forex trading that allows traders to control substantial positions with a relatively small investment. It acts as collateral provided to a broker to open and maintain trades. Unlike a fee or cost, margin is a portion of your account balance temporarily set aside by the broker to cover potential losses. Understanding what margin is in forex is essential for navigating the complexities of leveraged trading and managing risks effectively.

For example, if a trader wants to open a position worth $100,000 with a leverage ratio of 1:100, they only need $1,000 as margin. This ability to amplify exposure without committing large amounts of capital makes margin an attractive feature of forex trading.

Learn what forex trading is and how it works.

How Margin Works in Forex Trading

Margin works closely with leverage to enable traders to control large positions. Leverage multiplies the buying power of your capital, while margin represents the portion of your account balance used as collateral. For instance, with a leverage ratio of 1:100, every $1 in your account allows you to control $100 worth of trading volume.

When a trade is initiated, the broker sets aside a portion of your balance as margin. The remaining funds are known as free margin, which is the amount available for opening new trades or absorbing potential losses. Monitoring free margin in forex is crucial, as insufficient free margin can lead to a margin call, where the broker may require additional funds or liquidate positions to cover losses.

Learn how to trade forex for beginners. 

Difference Between Margin and Leverage

While margin and leverage are closely related, they are distinct concepts in forex trading that serve different purposes. Understanding their differences is crucial for effective trading.

Margin refers to the amount of money a trader must deposit with a broker to open a position. It acts as collateral to cover potential losses and is expressed as a percentage of the total trade value. For example, if a broker requires a 1% margin to trade $100,000, you need to deposit $1,000 in your account.

Leverage, on the other hand, is a tool that allows traders to control a larger position with a smaller investment. It is expressed as a ratio, such as 1:50 or 1:100, indicating how much market exposure you can gain relative to your margin. For instance, with 1:100 leverage, every $1 in margin allows you to control $100 worth of trading volume.

How to Calculate Margin in Forex Trading

Calculating margin involves a simple formula:

Margin = Position Size / ​Leverage

For example, if a trader opens a 1-lot position in EUR/USD (worth $100,000) with a leverage ratio of 1:100, the margin required is:

Margin = (100,000 / 100) = $1,000

This calculation helps traders understand how much of their balance is allocated as margin, ensuring they don’t overcommit their capital. Learning how to calculate margin is a critical step for managing risks effectively.

Learn how to trade EUR/USD for beginners.

What is Margin Requirement?

The margin requirement is the percentage of a trade’s total value that a broker requires as collateral. For instance, a 1% margin requirement means you need $1,000 to open a $100,000 position.

Margin requirements vary depending on the broker, the currency pair, and market conditions. During periods of high volatility, brokers may increase margin requirements to protect against drastic price movements. Traders should familiarise themselves with these requirements to avoid unexpected margin calls.

Types of Margin in Forex Trading

Margin in forex trading can be divided into two main types, each serving a distinct purpose in managing trading positions:

1. Initial Margin

This is the amount of money required to open a trade. It acts as a deposit that ensures you have sufficient funds to cover potential losses when the trade begins. For example, if a broker requires a 1% initial margin on a $100,000 position, you need to deposit $1,000 to initiate the trade. The initial margin varies based on the broker, currency pair, and leverage offered, making it essential to understand what margin is in forex before entering the market.

2. Maintenance Margin

Once a trade is open, the maintenance margin is the minimum amount required to keep it active. This ensures the broker has enough security to manage the risk associated with your open positions. If your equity falls below the maintenance margin due to losses, you may face a margin call, requiring you to deposit additional funds or close positions. 

For instance, if the maintenance margin for your trade is $500 and your account equity drops to $400, the broker might liquidate the position to prevent further losses. By understanding these types, traders can better manage their accounts, ensuring they always meet the broker’s requirements and avoid forced liquidations. Having a clear grasp of what is margin level in forex and what is free margin in forex further aids in maintaining account stability and trading effectively.

What is Free Margin in Forex Trading?

Free margin in forex is the amount of your account balance available for opening new trades or absorbing losses. It is calculated using the formula:

Free Margin = Equity − Used Margin

For example, if your account equity is $5,000 and your used margin is $1,000, your free margin is $4,000. Maintaining sufficient free margin ensures flexibility in trading and reduces the risk of receiving a margin call. Traders who understand what free margin is in forex can better manage their accounts during periods of market volatility.

What is Margin Level in Forex Trading?

Margin level in forex is a percentage that reflects the relationship between equity and used margin. It is calculated as:

Margin Level = (Equity / Used Margin) × 100

For instance, if your account equity is $5,000 and your used margin is $1,000, the margin level is:

Margin Level =($5,000 / $1,000) × 100 = 500%

Brokers typically set a minimum margin level (e.g., 100%) to ensure accounts remain funded. If your margin level falls below this threshold, your positions may be liquidated to prevent further losses. Knowing what the margin level in forex is is vital for maintaining account stability.

What is Margin Call in Forex Trading?

A margin call in forex trading is a notification from your broker that your account equity has fallen below the required margin level to maintain your open positions. It serves as a warning that your account no longer has enough funds to support existing trades due to losses, and immediate action is required to restore the balance.

Example: You open a $50,000 position with $1,000 as margin. Market losses reduce your account equity to $900, which is below the broker’s margin requirement. The broker sends a margin call, asking you to deposit more funds or close positions. If no action is taken, the broker may forcibly close your trades to prevent further losses, known as a stop-out.

Benefits of Trading on Margin

Margin trading comes with several advantages that make it appealing to forex traders, especially those looking to maximise their market opportunities:

Increased Market Exposure: Margin allows traders to control positions much larger than their initial investment. For example, with $1,000 and a leverage ratio of 1:100, you can control a $100,000 trade. This expanded exposure enables traders to benefit from market movements that would otherwise be inaccessible with their limited capital.

Efficient Use of Funds: By using margin, traders can allocate less of their account balance to individual trades, leaving more capital free for diversification. For instance, instead of committing $10,000 to a single position, a trader could use $1,000 in margin and invest the remaining funds in other trades, spreading the risk across multiple opportunities.

Amplified Returns: The leverage tied to margin magnifies profits when the market moves in your favour. For example, a 1% movement in a $100,000 position results in a $1,000 profit, even though the trader only invested $1,000 as margin. This potential for higher returns is one of the primary attractions of trading on margin.

Drawbacks of Trading on Margin

While trading on margin offers significant advantages, it also carries risks that traders must be cautious about:

Amplified Losses: Margin trading magnifies not only your profits but also your losses. A small adverse market movement can lead to significant losses, potentially exceeding your initial deposit. For instance, if you control a $50,000 position with $1,000 in margin and the market moves 1% against you, you could lose $500, half of your initial investment.

Margin Calls: If your account equity falls below the broker’s required margin level, you may receive a margin call. This often forces traders to either deposit additional funds or have their positions liquidated. Margin calls are especially common during volatile market conditions, where rapid price changes can deplete your free margin quickly.

Psychological Pressure: Margin trading can add stress, particularly during market volatility. The potential for rapid gains and losses may lead to emotional decision-making, such as overtrading or holding onto losing positions longer than necessary.

How to Manage Margin Effectively in Forex Trading

Managing margin in forex trading is simple. Most trading platforms offer tools to track your margin level and free margin in real-time. Here’s a quick guide:

1. Monitor Margin Levels

Your margin level reflects the health of your account. Calculated as a percentage, it shows the relationship between your account equity and the margin you’ve used. If this level falls below your broker’s minimum (often 100%), your positions could be liquidated. Think of the margin level as a warning system. A higher margin level, such as 300%, means you have plenty of buffer. A lower level, like 110%, signals that your account is close to trouble. Regularly check your margin level through your trading platform. Many platforms provide real-time updates, helping you stay informed. Knowing what is margin level is in forex helps you make decisions before reaching critical levels.

2. Use Stop-Loss Orders

Stop-loss orders automatically close trades if the market moves against you, limiting potential losses. For example, if you buy EUR/USD at 1.1200, setting a stop-loss at 1.1150 caps your loss at 50 pips. Stop-loss orders protect your equity, ensuring you maintain sufficient free margin for other trades. By incorporating stop-loss orders into your strategy, you can safeguard your capital and avoid unnecessary margin calls.

Discover the different types of orders in forex trading. 

3. Choose Appropriate Leverage

Leverage determines how much of a position you can control with your margin. While high leverage offers greater exposure, it also increases risk. Beginners should start with lower leverage, such as 1:20 or 1:50, to minimise the impact of adverse market moves. For instance, with 1:50 leverage, controlling a $50,000 position requires just $1,000 in margin. However, a small market movement of 1% can lead to a $500 gain or loss. Choosing the right leverage helps maintain a balance between opportunity and risk.

4. Maintain a Healthy Free Margin

Free margin is the amount of funds available for opening new trades or absorbing losses. If your free margin drops too low, your broker may issue a margin call, requiring you to deposit more funds or close positions. Keeping a comfortable buffer of free margin ensures flexibility and reduces stress during volatile markets. Understanding what free margin is in forex and monitoring it regularly can keep your account stable and ready for new opportunities.

Conclusion

Margin trading in forex allows traders to control larger positions with smaller capital, offering both opportunities and risks. By understanding what margin is in forex, what margin level is in forex, and what is free margin in forex, traders can manage their accounts effectively, minimise risks, and avoid margin calls. Combining knowledge with discipline is the key to sustainable trading success.

Learn More with VT Markets

VT Markets offers everything you need to enhance your trading journey. Access our online courses to learn forex trading, designed to help traders of all levels build their knowledge and skills. Benefit from 24/7 customer support to address your queries anytime, and utilise advanced ProTrader tools and expert advisors to optimise your trading strategies. Start trading with VT Markets today and empower yourself with the tools and resources for smarter trading.

Frequently Asked Questions (FAQs)

1. What is a margin in forex?

Margin in forex trading is the amount of capital required to open and maintain a leveraged position. It is essentially a security deposit that allows traders to control larger positions than their available capital would allow.

2. What is the margin level in forex?

Margin level is the ratio of your equity to the used margin, expressed as a percentage. It indicates how much of your account balance is tied up in margin. A higher margin level means a healthier account, while a lower level may trigger a margin call.

3. What is a free margin in forex?

Free margin is the amount of capital available in your account for opening new trades. It is the difference between your equity and used margin, and it is crucial for determining how much you can trade without increasing your risk.

4. How does margin trading work?

In margin trading, you borrow funds from your broker to increase your position size. You only need to deposit a small percentage of the total trade value (called the margin). The broker provides the rest, amplifying both potential profits and risks.

5. How is the margin level calculated in forex?

Margin level is calculated using the formula:

Margin = Position Size / ​Leverage

A higher margin level means you’re not using much of your available capital, while a lower margin level means you’re closer to a margin call.

6. How can I manage margin in forex effectively?

To manage margin effectively, you should:

• Monitor Margin Levels
• Use Stop-Loss Orders
• Choose Appropriate Leverage
• Maintain a Healthy Free Margin

Margin Trading Explained: What It Is and How It Works

In this article, you’ll discover what margin trading is and how it works, learn the difference between margin and leverage, explore key terms like margin level and margin call, uncover the benefits and drawbacks of trading on margin, and gain insights on how to start margin trading effectively.

What is Margin in Trading?

Margin in trading is the amount of money a trader must deposit to open and maintain a position in the market. Acting as collateral, margin enables traders to leverage their capital, controlling larger trades than their initial deposit. For instance, if the margin requirement is 2%, a $100,000 trade would require only $2,000 as a deposit. Understanding what margin is in trading is essential for traders looking to optimise their resources while managing risks effectively.

What is Margin Trading?

Margin trading is a strategy that allows traders to borrow funds from their broker to increase their trading power. This means traders can control larger positions than they could with their own capital alone. For example, with a margin of $1,000 and leverage of 1:100, a trader can control a $100,000 trade. However, margin trading comes with risks, as losses are magnified alongside profits. Gaining a clear understanding of what margin trading is is crucial for anyone aiming to make informed trading decisions.

How Does Trading on Margin Work?

Margin trading allows traders to control a much larger position with a smaller upfront deposit. Let’s say a trader wants to open a position worth $100,000 in the EUR/USD currency pair. If their broker requires a margin of 2%, the trader must deposit $2,000 as collateral.

Suppose the EUR/USD price moves from 1.2000 to 1.2100, a 100-pip increase. In this case, with a standard lot (100,000 units), each pip is worth $10. A 100-pip movement results in a profit of $1,000. Thanks to margin trading, the trader only needed to invest $2,000 to generate this $1,000 profit—a 50% return on their capital.

However, if the market moved against the trader by 100 pips, their equity would drop by $1,000, leaving them with only $1,000 in the account. If the losses continued and their equity fell below the broker’s margin requirement, the trader would receive a margin call, requiring them to deposit more funds or risk having their position liquidated.

Difference Between Margin and Leverage

Margin and leverage are interconnected concepts, but have distinct meanings. Margin refers to the initial deposit a trader needs to open a position, while leverage indicates the borrowing ratio provided by the broker. For example, a leverage of 1:100 means the trader controls $100 for every $1 of margin deposited. Leverage amplifies trade size and potential returns, but margin ensures the trader has collateral to secure the position. When learning what margin is in trading, it’s important to grasp how leverage plays a role in the overall strategy.

What is a Margin Call?

A margin call occurs when the equity in a trading account falls below the broker’s required margin level. For instance, if a $1,000 margin requirement is not maintained due to losses, the broker may issue a margin call, requesting additional funds or closing positions. Managing your margin trading account carefully is key to avoiding margin calls, which often occur during volatile market movements. Understanding what margin trading is and how margin calls work can help traders manage risks effectively.

What is Margin Level?

Margin level reflects the health of a trading account and is calculated as:

Margin Level = (Equity / Margin) × 100%

For example, if your account equity is $5,000 and your required margin is $1,000, your margin level is 500%. A margin level below 100% signals insufficient funds to maintain open positions and often results in a margin call. Knowing what margin is and how to calculate margin levels ensures traders can monitor their accounts effectively, maintaining sufficient free margin to support their strategies.

How to Trade on Margin

Trading on margin involves borrowing funds from your broker to control a larger position. Follow these steps to start trading on margin:

Step 1: Select a Broker

Choosing the right broker is crucial for successful margin trading. A reliable platform like VT Markets provides transparent margin requirements, competitive spreads, and flexible leverage options to suit different trading strategies. Ensure the broker is regulated and offers tools such as margin calculators, educational resources, and responsive customer support to help you make informed decisions.

Step 2: Open & Fund Your Account

Once you’ve selected a broker, the next step is to open a trading account. Follow the broker’s registration process, which typically involves submitting identification documents for verification. After your account is approved, fund it with an amount that aligns with your trading goals and risk tolerance. Many brokers, including VT Markets, offer multiple deposit methods for convenience, such as bank transfers, credit cards, and e-wallets.

Not ready to trade live yet? Practice risk-free with the VT Markets demo account!

Step 3: Understand Requirements

Before engaging in margin trading, it’s essential to fully understand what margin is in trading, margin levels, and how they impact your account. Familiarise yourself with terms such as initial margin, maintenance margin, and free margin. Study the broker’s policies regarding margin calls and stop-out levels to avoid surprises during volatile market conditions.

Step 4: Start with Small Positions

Beginners should start trading with smaller positions and use lower leverage to minimise risk. Small trades allow traders to test their strategies and understand how margin works without exposing themselves to significant losses.

Step 5: Monitor Your Account

Regularly check your account’s equity, free margin, and margin level to ensure you’re not at risk of a margin call. Use your broker’s trading platform to stay informed about your account health and market conditions. Set up alerts for margin levels or account balance thresholds to take preemptive actions.

Step 6: Use Stop-Loss Orders

A stop-loss order is a critical risk management tool that automatically closes your position if the market moves against you by a specified amount. This helps protect your account from excessive losses and ensures you don’t lose more than you’re willing to risk.

Learn how to start trading for beginners. 

Benefits & Drawbacks of Margin Trading 

Uncover the benefits and drawbacks of margin trading to navigate its opportunities and risks effectively.

Benefits

1. Amplified Returns

Margin trading allows traders to magnify their exposure to the market, meaning small price movements can lead to higher profits compared to trading without leverage. For instance, if a trader invests $1,000 and achieves a 1% return on a trade, their profit is $10. However, with a margin of $1,000 and leverage of 1:100, the trader controls $100,000, making a 1% price move equivalent to a $1,000 profit.

Example: A trader buying EUR/USD at 1.2000 with 1:100 leverage sees the price increase to 1.2100. The 100-pip move results in a significant profit compared to using only the trader’s initial capital.

Learn what pips are in trading and how they work. 

2. Capital Efficiency

Margin trading requires traders to deposit only a fraction of the trade’s full value, freeing up capital for other investments or trades. This efficiency allows traders to diversify their portfolios and explore more opportunities simultaneously.

Example: A trader with $5,000 in their account can open positions worth up to $500,000 with 1:100 leverage, leaving additional funds for risk management or other trades.

3. Market Access

Margin trading lowers the barrier to entry, enabling traders with smaller capital to participate in high-value markets like forex. Without margin, significant market exposure might be unaffordable for many individuals.

Example: A new trader with $500 can access positions worth $50,000 using a margin of 1% and leverage of 1:100, providing access to trading opportunities that would otherwise be out of reach.

Learn how to trade forex for beginners. 

Drawbacks

1. Magnified Losses

While margin trading can amplify returns, it also magnifies losses. If the market moves against a trader’s position, the losses are proportionate to the leveraged amount rather than the initial margin.

Example: Using 1:100 leverage, a 1% adverse move on a $100,000 position ($1,000 margin) results in a $1,000 loss, wiping out the entire margin deposit.

2. Margin Calls

When a trader’s equity falls below the required maintenance margin, brokers issue a margin call, requiring additional funds to maintain open positions. If funds are not added, the broker may close positions to minimise risk.

Example: A trader with $1,000 in equity sees losses reduce their balance to $800 while the required margin remains $1,000. The broker issues a margin call, and the trader must deposit $200 or risk their position being closed.

3. High Stress Levels

Trading on margin requires constant monitoring of market conditions, account equity, and margin levels. The pressure of managing amplified risks can lead to emotional trading, increasing the likelihood of errors.

Example: A trader holding a leveraged position overnight faces unexpected market volatility, reducing their equity and triggering stress as they rush to manage the situation.

Conclusion

Understanding what margin trading is and the mechanics of trading on margin is essential for forex traders. These concepts unlock the potential to magnify returns while also presenting risks that require careful management. By familiarising yourself with margin levels, leverage, and margin calls, you can trade with confidence while protecting your capital.

Trade now with VT Markets

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Frequently Asked Questions (FAQs)

1. What is a margin in trading?

Margin in trading refers to the amount of money a trader must deposit with their broker to open and maintain a position. It acts as collateral and allows traders to leverage their capital to control larger positions. 

2. What is margin trading?

Margin trading involves borrowing funds from a broker to trade financial assets, enabling traders to take larger positions than they could with their available capital alone. This practice amplifies both potential profits and losses. 

3. How does margin trading work?

When a trader opens a margin account, they deposit an initial margin, which is a percentage of the total trade value. The broker lends the remaining amount, allowing the trader to control a larger position. The trader must maintain a minimum balance, known as the maintenance margin, to keep the position open.

4. What is a margin call?

A margin call occurs when the value of a trader’s account falls below the broker’s required maintenance margin. The broker will request the trader to deposit additional funds or close positions to bring the account back to the required level. 

5. What are the risks of margin trading?

The primary risks of margin trading include the potential for amplified losses, the possibility of a margin call, and the obligation to repay borrowed funds even if the trade results in a loss. Traders should use margin cautiously and ensure they understand the risks involved. 

6. How can I manage risk in margin trading?

Risk management strategies in margin trading include setting stop-loss orders, using appropriate leverage levels, diversifying positions, and regularly monitoring account balances to avoid margin calls.

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.

As this year steps to an end, the week from Monday, 9 December, to Friday, 13 December 2024, presents several notable opportunities and risks in the forex market, shaped by varying global economic trends, central bank policies, and geopolitical developments.

KEY ECONOMIC INDICATORS

U.S. Nonfarm Payrolls:

• Resilient job market: Expectations suggest that the U.S. economy added approximately 200,000 jobs in November, recovering from the slower October growth affected by strikes and hurricanes. December’s preliminary numbers show an even more substantial increase of 216,000 jobs, surpassing expectations of 170,000.
• Impact of Fed’s decision on rate cuts: While the Fed recently held interest rates steady at 4.50%-4.75%, it signalled no imminent reductions until confidence in inflation nears its 2% target. Strong employment growth might support this hawkish outlook, bolstering the U.S. dollar.

Central Bank updates:

• European Central Bank (ECB): The ECB cut its policy rates by 25bp on 17 October, lowering the rate to 3.40%. We expect a further 25bp cut at December’s governing council meeting and quarterly 25bp cuts throughout 2025 (in March, June, September, and December), for a total of 100bp for the year.
• The Bank of Canada (BoC): The Bank of Canada cut its key interest rate by 50bps to 3.75% in its October 2024 decision, as expected, signalled that it will continue to lower its rate should the economy develop as expected. The decision increased the pace of rate cuts following three 25bps slashes, aligning with recent data that indicated a sharp slowdown in Canadian inflation. Headline price growth fell to 1.6% in September, below the target of 2% for the first time in three years.

Energy markets and geopolitics:

Crude oil prices remain sensitive to geopolitical developments and potential OPEC production shifts. Any new tensions or supply disruptions could affect energy stocks and broader inflation expectations.

MARKET MOVER

XAU/USD – (bearish outlook)

• Daily momentum has paused, shifting our bias to neutral.
• Current levels are at overbought extremes.
• Market activity has been choppy and volatile.
• The 2657.3 level has acted as a key pivot.
• Overnight dips were met with buying interest, leading to sustained upward pressure.

Trade Opportunity: Target 1: 2605.5 // Target 2: 2595.5 // Expires: 07 December 2024

GER40 DAX – (bullish outlook)

• Price action has pushed to a new all-time high at 20,376.
• There are no clear signals suggesting the upward momentum is losing steam.
• A breakout above the recent high of 20,376 could pave the way for further upside.
• Our outlook remains bullish.
• We anticipate gains to extend further today.

Trade Opportunity: Target 1: 20685 // Target 2: 20785 // Expires: 07 December 2024

EUR/USD – (bearish outlook)

• Sustained upward momentum from 1.0472 led the pair to post net daily gains yesterday.
• While bullish momentum remains intact, the pair has paused near a prior swing high at 1.0597.
• Upcoming economic data could negatively impact the short-term technical outlook.
• A Fibonacci confluence zone is identified at 1.0380.
• A decisive break below 1.0542 is required to confirm continued downward momentum.

Trade Opportunity: Target 1: 1.038 // Target 2: 1.035// Expires: 07 December 2024

USD/JPY (bullish outlook)

• A five-wave bullish structure has been completed at 151.23.
• Selling pressure emerged during the Asian session.
• The decline has been mixed and volatile, typical of corrective patterns.
• Overnight gains were met with selling interest, leaving room for further bearish pressure this morning.
• Economic data releases could negatively impact the short-term technical outlook.

Trade Opportunity: Target 1: 151.01 // Target 2: 151.69 // Expires: 07 December 2024

MARKET NEWS

Foreign exchange

• The U.S. Dollar Index dropped 0.57% to 105.72 ahead of today’s U.S. nonfarm payrolls report, which is expected to show a 194,000 increase for November.
• Despite weaker eurozone data, EUR/USD rose 77 pips to 1.0587, retail sales down 0.5% (vs. -0.4% expected) and Germany’s factory orders falling 1.5% (vs. -2.1% forecasted).
• GBP/USD climbed 55 pips to 1.2757.
• USD/JPY fell 51 pips to 150.09, and USD/CHF declined 61 pips to 0.8780.
• AUD/USD gained 23 pips to 0.6451, while USD/CAD slid 53 pips to 1.4020.

Commodities and Stocks

• U.S. equity markets closed lower on Thursday as investors exercised caution ahead of key jobs data. The S&P 500 fell 11 points (-0.19%) to 6,075, the Dow Jones Industrial Average dropped 248 points (-0.55%) to 44,765, and the Nasdaq 100 declined 67 points (-0.31%) to 21,425.
• The materials and industrial sectors led the losses, while consumer discretionary and consumer staples outperformed.
• On the economic front, weekly initial jobless claims rose to 224,000, exceeding the 214,000 forecasts. Later today, nonfarm payrolls are projected to grow by 194,000 in November, with the unemployment rate expected to hold steady at 4.1%.
• The 10-year U.S. Treasury yield held steady at 4.182%.
• European equities advanced, with the DAX 40 up 0.63%, the CAC 40 gaining 0.37%, and the FTSE 100 rising 0.16%.
• In commodities, gold dropped $18 (-0.68%) to $2,632, while WTI crude oil slipped $0.24 (-0.35%) to $68.30 after OPEC+ announced a three-month delay in production increases, now set for April.

Asian Session Updates

• During Asian trading, EUR/USD and GBP/USD remained steady at 1.0580 and 1.2750, respectively.
• USD/JPY edged lower to 149.85, as Japan’s household spending declined 1.3% year-on-year in October, beating the expected 2.4% drop.
• Gold touched an intraday low of $2,641 before recovering to $2,632.

Click here to open account and start trading.

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.

Forex Trading: What Is Forex Trading and How Does It Work?

In this article, you’ll learn what forex trading is and how it works, explore key forex trading strategies, uncover its benefits and drawbacks, understand concepts like leverage and lot sizes, and discover the different groups of currency pairs for informed trading decisions.

What is Forex Trading?

Forex trading, or foreign exchange trading, is the process of exchanging one currency for another in the global marketplace. It is one of the most popular forms of trading CFDs (Contracts for Difference), allowing traders to speculate on currency price movements without owning the underlying asset. Known as the largest financial market globally, forex trading sees over $7.5 trillion traded daily. Unlike stock markets, forex operates 24 hours a day, five days a week, across major financial hubs such as London, New York, and Tokyo. Its decentralised structure allows traders to access the market at their convenience, no matter where they are.

Forex trading involves trading currency pairs like EUR/USD or GBP/JPY. Each pair consists of a base currency (e.g., EUR) and a quote currency (e.g., USD). Traders speculate on whether the base currency will strengthen or weaken against the quote currency. For example, if you expect the euro to rise against the US dollar, you might buy EUR/USD, profiting if the price moves in your favour. Understanding what forex trading is and how it works is essential for anyone looking to participate in this market.

Learn how to trade EUR/USD for beginners. 

How Does Forex Trading Work?

Forex trading works by taking advantage of price fluctuations in currency pairs. Trades are executed through brokers or platforms like MT4 or MT5, which provide tools for analysing price movements such as charts, indicators, and economic calendars. For example, a trader might buy GBP/USD at 1.2500 and sell it at 1.2550, earning a 50-pip profit.

To fully grasp how forex trading works, traders need to understand factors like liquidity, volatility, and how different trading sessions impact price movements. For instance, during the overlap of the London and New York sessions, trading activity increases, leading to more opportunities for profit.

Key Concept in Forex Trading 

Leverage in Forex Trading 

Leverage allows traders to control large positions with relatively small capital. For instance, with 100:1 leverage, a $1,000 deposit enables a trader to control a $100,000 position. While leverage amplifies potential profits, it also increases the risk of substantial losses. A small price movement in a leveraged trade can significantly impact your account, so it’s crucial to use leverage cautiously. Understanding what forex trading is helps traders manage this tool effectively.

Spread in Forex Trading

The spread is the difference between the bid and ask price of a currency pair and represents the cost of trading. For example, if EUR/USD has a bid price of 1.1000 and an ask price of 1.1003, the spread is 3 pips. Tight spreads are advantageous for traders as they lower transaction costs and increase profitability. Recognising the importance of spreads is key to understanding forex trading and how it works.

Pip in Forex Trading

A pip, short for “percentage in point,” is the smallest price movement in forex trading. Most currency pairs are quoted to the fourth decimal point, making 0.0001 equal to 1 pip. For instance, if EUR/USD moves from 1.1000 to 1.1005, the price has risen by 5 pips. Pips are critical for calculating profits and losses, especially in leveraged trades. 

Learn what pips are in forex trading and how they work.

A lot in Forex Trading

In forex trading, a lot represents the volume or size of a trade. The common lot sizes are:

Standard Lot: 100,000 units (1 pip = $10)

Mini Lot: 10,000 units (1 pip = $1)

Micro Lot: 1,000 units (1 pip = $0.10)

For example, trading a standard lot of USD/JPY means a 10-pip move results in a $100 profit or loss. Mastering lot sizes is a critical step in understanding how forex trading works. 

Learn what lots are in forex and how to calculate lot sizes.

Why do people trade forex?

High Liquidity in the Forex Market: The forex market is the most liquid financial market globally, with daily trading volumes exceeding $7.5 trillion. This liquidity ensures that traders can enter and exit positions without delays or price disruptions. For instance, trading major pairs like EUR/USD or USD/JPY allows for quick execution, making forex ideal for strategies such as scalping or day trading.

Leverage Opportunities: Forex trading offers leverage, enabling traders to control large positions with minimal capital. For example, a $1,000 deposit with 100:1 leverage lets a trader manage a $100,000 position. While leverage increases profit potential, it also heightens risk, requiring disciplined risk management. This amplifies profit potential, making forex trading attractive for individuals looking to maximise returns on limited funds. However, traders must be cautious as leverage also increases the risk of significant losses.

24/5 Market Availability: Forex markets operate 24 hours a day, five days a week, across financial hubs like London, New York, Tokyo, and Sydney. This global availability means traders can participate at any time, whether during the London session or the Tokyo session. The overlap between sessions, like London-New York, often provides higher volatility and more trading opportunities.

Different groups of currency pairs

1. Major Currency Pairs

Major pairs are currency pairs that include the US dollar (USD) and another leading currency such as the euro (EUR), British pound (GBP), or Japanese yen (JPY). These pairs are the most traded currency pairs in the forex market, accounting for the majority of global trading volume. They are known for their high liquidity, tight spreads, and relatively lower volatility compared to other pair types.

Examples: EUR/USD (euro vs. US dollar), USD/JPY (US dollar vs. Japanese yen), and GBP/USD (British pound vs. US dollar).

Why Forex Traders Choose Them: The high trading volume ensures ease of execution and minimal price slippage, making these pairs ideal for beginners and professionals alike. For instance, EUR/USD is the most popular pair due to its liquidity and predictable market behaviour.

2. Minor Currency Pairs

Minor pairs, also called cross-currency pairs, exclude the US dollar but include other major currencies like the euro, yen, or pound. These pairs are less liquid than major pairs, leading to slightly wider spreads. However, they still offer significant trading opportunities due to their relative stability compared to exotic pairs.

Examples: EUR/GBP (euro vs. British pound), AUD/JPY (Australian dollar vs. Japanese yen), and EUR/AUD (euro vs. Australian dollar).

Why Forex Traders Choose Them: Traders often use minor pairs to diversify their portfolios or hedge against major currency risks. For example, EUR/GBP might be chosen during periods of eurozone and UK economic updates, offering unique trading opportunities not directly tied to the US dollar.

3. Exotic Currency Pairs

Exotic pairs include one major currency and one currency from an emerging or smaller economy. These pairs are less traded compared to majors and minors. Exotic pairs are known for their high volatility and wider spreads due to lower liquidity and higher market risk.

Examples: USD/TRY (US dollar vs. Turkish lira), EUR/SEK (euro vs. Swedish krona), and USD/ZAR (US dollar vs. South African rand).

Why Forex Traders Choose Them: Traders who prefer higher risk-reward opportunities are attracted to exotic pairs. For instance, USD/TRY can offer substantial profits during periods of political or economic turbulence in Turkey, but the risks of sharp price movements and low liquidity must be managed carefully.

How do I Start Forex Trading?

To begin your journey in Forex trading, carefully follow the essential steps outlined below. These steps will guide you through the process, from understanding the market to executing your first trade, ensuring you build a solid foundation for successful trading.

Step 1: Understand the Forex Market 

Begin by learning the basics of forex trading, including key concepts like currency pairs, pips, leverage, and spreads. Familiarise yourself with how trades are executed, the factors influencing price movements, and the role of major players in the market. For example, understanding how economic data like interest rates or GDP affects currency values is crucial for making informed trading decisions.

Step 2: Choose a Regulated Broker

Select a broker that is trustworthy and regulated to ensure a secure trading experience. Look for brokers like VT Markets, which offer competitive spreads, advanced platforms such as MT4/MT5, and strong regulatory compliance. A good broker also provides educational resources to help you improve your trading knowledge.

Step 3: Open and Fund Your Account

Open a live account to enter the forex market and fund it with your chosen deposit amount, ensuring you only risk money you can afford to lose. For instance, many beginners start with a small deposit, such as $500, to gain experience before scaling up.

Step 4: Choose the Forex Pair

Select the currency pair you want to trade, based on your analysis and market research. Major pairs like EUR/USD or GBP/USD are ideal for beginners due to their high liquidity and lower spreads. For example, if you expect the euro to strengthen against the dollar, you might choose to trade EUR/USD.

Step 5: Execute the Trade

Place your trade using the broker’s platform, setting appropriate stop-loss and take-profit levels to manage risk. Monitor your trade and adjust your strategy if market conditions change. For instance, if the EUR/USD pair reaches your target price, close the trade to lock in profits.

Step 6: Constantly Learn and Monitor

Forex trading requires ongoing learning to adapt to changing market conditions and improve your skills. Monitor your trades, analyse your performance, and keep up with economic news and trends. For example, reviewing your trading history can help you identify patterns and refine your strategy for better results.

Learn the step-by-step guide on how to trade forex for beginners and master essential trading concepts with ease.

Types of Forex Trading Strategies

1. Scalping

Scalping is a short-term trading strategy that involves making quick trades to profit from small price movements. Traders using this method open and close positions within minutes, sometimes seconds, aiming for small gains that accumulate over multiple trades. For instance, a scalper might target 5-10 pips per trade, relying on high market liquidity and tight spreads for efficiency. Scalping requires a disciplined approach, a fast-paced mindset, and advanced tools such as MT4 or MT5 to monitor market movements effectively.

2. Day Trading

Day trading focuses on opening and closing trades within the same trading day, eliminating the risks associated with overnight price gaps. Traders aim to capitalise on intraday price movements by using technical analysis and observing market trends. For example, a day trader might trade EUR/USD during the London session to take advantage of heightened volatility. Understanding how forex trading works is critical for day traders, as timing and quick decision-making play a significant role in this strategy.

3. Swing Trading

Swing trading involves holding positions for several days, sometimes weeks, to benefit from medium-term price trends. This strategy combines technical analysis, such as chart patterns and indicators, with fundamental factors like economic reports. For example, a swing trader might buy GBP/USD after observing a bullish breakout and hold the position until the trend shows signs of reversing. Swing trading is ideal for traders who cannot monitor the market constantly but want to benefit from broader price movements.

4. Position Trading

Position trading is a long-term strategy where traders hold positions for weeks, months, or even years. This approach relies heavily on macroeconomic analysis, such as central bank policies, interest rate trends, and geopolitical developments. For instance, a position trader might short USD/JPY based on expectations of yen strength due to Bank of Japan policies. Position trading requires patience and a comprehensive understanding of what forex trading is and its long-term dynamics.

Discover the 9 best forex trading strategies and techniques. 

Benefits of Forex Trading

High Liquidity: The forex market is the most liquid financial market globally, with daily trading volumes exceeding $7.5 trillion. This liquidity ensures that trades are executed efficiently at the desired price levels, even for large orders. For example, traders can easily buy or sell popular currency pairs like EUR/USD without worrying about market impact or delays. High liquidity also allows traders to execute strategies like scalping and day trading with ease.

Leverage Amplifies Profit Potential: Forex trading allows traders to use leverage, enabling them to control larger positions with smaller capital investments. For instance, with 100:1 leverage, a deposit of $1,000 can control a $100,000 trade. While this increases the potential for profits, traders must exercise caution, as it also magnifies losses. Leverage is a key component of understanding forex trading and how it works, as it impacts risk and reward significantly.

Global Accessibility: The forex market operates 24 hours a day, five days a week, across major financial hubs like London, New York, Tokyo, and Sydney. This round-the-clock availability makes forex trading convenient for traders from all regions and time zones. For instance, traders in Asia can trade during the Tokyo session, while those in Europe or the US can take advantage of the London and New York sessions. This accessibility allows traders to enter the market at times that suit their schedules.

Drawbacks of Forex Trading

Volatility in Currency Prices: Forex trading involves significant price fluctuations due to factors like economic data releases, central bank decisions, and geopolitical events. While volatility creates opportunities for profit, it also increases the risk of rapid and unexpected losses. For example, during major announcements like non-farm payrolls or interest rate decisions, currency pairs such as EUR/USD can swing wildly within minutes, posing challenges for traders.

Leverage Increases Risk: Although leverage allows traders to control larger positions with less capital, it also magnifies potential losses. A small unfavourable price movement on a highly leveraged trade can result in losing the entire capital invested. For instance, a 1% price drop on a $100,000 trade leveraged at 100:1 could wipe out a $1,000 deposit. Traders must understand forex trading thoroughly to manage this risk effectively.

Complexity of the Forex Market: The forex market requires a deep understanding of technical analysis, fundamental analysis, and trading strategies to succeed. Beginners often face a steep learning curve, needing time and discipline to master key skills. For example, understanding how to read charts, apply indicators like MACD, and interpret economic reports is essential but takes consistent effort to develop.

In Summary

Forex trading presents traders with significant opportunities due to its liquidity, leverage, and accessibility. However, success in forex trading demands a cautious approach, continuous education, and disciplined risk management to navigate the market’s challenges effectively. Understanding what forex trading is and how it works is crucial for developing the skills needed to thrive in this dynamic market.

Why Trade Forex with VT Markets?

VT Markets stands out as a preferred broker for forex trading for several reasons. It offers competitive spreads, which help reduce trading costs, particularly in volatile market conditions. The broker provides access to advanced platforms such as MT4 and MT5, equipped with cutting-edge tools and features for seamless trading. Traders can trust VT Markets as it is regulated, ensuring a secure trading environment. Additionally, the broker offers exceptional customer support, providing traders with assistance whenever needed to ensure a smooth trading experience.

Not ready for the live forex market yet? Open a VT Markets demo account to build your confidence and enhance your trading knowledge.

Frequently Asked Questions (FAQs)

1. What is Forex trading?

Forex trading, also known as foreign exchange trading, is the process of buying and selling currencies in the global financial market. The goal is to profit from the fluctuations in currency exchange rates. Forex trading is the most liquid and largest financial market in the world.

2. How does Forex trading work?

Forex trading involves trading currency pairs, where one currency is exchanged for another. Traders buy one currency and sell another, predicting the movement in currency exchange rates. For example, when trading EUR/USD, a trader is buying euros while simultaneously selling US dollars.

3. What is the Forex market?

The Forex market is a decentralized global marketplace where currencies are traded. It operates 24 hours a day, five days a week, and is the largest financial market in terms of trading volume. The Forex market is influenced by factors like interest rates, geopolitical events, and economic data.

4. How do I start Forex trading?

To start Forex trading, follow these essential steps:

• Step 1: Understand the Forex Market
• Step 2: Choose a Regulated Broker
• Step 3: Open and Fund Your Account
• Step 4: Choose the Forex Pair
• Step 5: Execute the Trade
• Step 6: Constantly Learn and Monitor

5. What are the benefits of Forex trading?

Forex trading offers several advantages, including high liquidity, 24-hour market access, low transaction costs, and the ability to leverage trades. It also provides opportunities to profit in both rising and falling markets, making it an appealing option for many traders.

6. What is leverage in Forex trading?

Leverage in Forex trading allows traders to control a larger position with a smaller amount of capital. For example, with a 50:1 leverage, you can control $50,000 with just $1,000 in your account. While leverage can increase profits, it also magnifies potential losses.

7. What is a Forex trading strategy?

A Forex trading strategy is a plan that traders use to determine when to open a long or short position in currency pairs. It typically involves technical analysis, fundamental analysis, or a combination of both to predict market movements and make informed trading decisions.

8. What is the difference between Forex and stock trading?

The main difference between Forex and stock trading is the market itself. In Forex, traders buy and sell currencies, while in stock trading, traders buy and sell shares of companies. The Forex market is open 24 hours a day, while stock markets typically have set trading hours.

The world of investment is experiencing a seismic shift, with artificial intelligence (AI) emerging as the driving force that is radically transforming traditional stock market paradigms. As 2024 draws to a close, the S&P 500 has reached a remarkable milestone, climbing to a record high of 6,001.35 with a year-to-date gain of 25.8%.

Amidst global economic challenges including high inflation, supply chain constraints, and geopolitical tensions, AI stands out as a beacon of innovation and potential growth, offering investors a promising avenue for strategic investment.

The AI investment landscape

The investment world is experiencing a critical transition from AI speculation to substantive results. According to recent market research, global AI investment has surged to an estimated 200 billion USD in 2024, with venture capital firms and tech giants pouring unprecedented resources into the sector.

Investors are no longer satisfied with mere promises; they demand tangible evidence of AI’s value creation. Financial experts are calling this the “show me” moment for technology companies, where the focus has shifted from potential to actual revenue generation and strategic implementation.

A comprehensive analysis by McKinsey reveals that AI could potentially contribute up to 4.4 trillion USD annually to the global economy. This staggering figure underscores why investors are increasingly bullish about AI-related investments. The sector has seen a remarkable 67% increase in funding compared to the previous year, with semiconductor and cloud computing companies leading the charge.

This scrutiny comes at a time when technology giants are investing heavily in AI infrastructure. Cloud computing behemoths like Amazon, Microsoft, and Google are pouring billions into data centre expansions, AI chips, and research and development.

Industry estimates suggest that these companies have collectively invested over 50 billion USD in AI infrastructure in 2024 alone. The key question remains: how much incremental AI-related revenue are these investments generating?

Meta platforms: Social media’s AI transformation

Meta Platforms represents a compelling case study in AI-driven transformation. With a market capitalisation of 1.5 trillion USD, the company has leveraged artificial intelligence to revolutionise its core business model. Its AI-powered recommendation systems have demonstrably increased user engagement, with Facebook seeing an 8% rise and Instagram a 6% increase in user interaction.

More impressively, over one million advertisers now utilise Meta’s generative AI tools, boosting ad conversions by 7%. The company’s strategic hire of Clara Shih from Salesforce to head a new “Business AI” group underscores its commitment to AI innovation. The company’s AI assistant has already reached 500 million monthly active users, positioning itself as a potential global leader in conversational AI.

The open-source Llama AI model has seen extraordinary growth, with downloads reaching 350 million by August 2024 – a tenfold increase from the previous year. Meta is actively working on Llama 4 models, training them on massive GPU clusters, signalling a long-term commitment to AI development.

Financially, Meta presents a robust investment opportunity, with double-digit revenue growth and a healthy balance sheet boasting 70.9 billion USD in cash against 28.8 billion USD in debt. The stock has gained an impressive 62% in 2024, making it an attractive option for investors.

Microsoft: Powering enterprise AI

Microsoft continues to be a powerhouse in the AI ecosystem, its 13-billion-USD partnership with OpenAI proving transformational. The technology giant’s AI business is projected to cross 10 billion USD in annual revenue, making it the fastest-growing segment in the company’s history.

Azure cloud services have grown by 33% year-on-year, with AI services contributing significantly to this expansion. However, the company faces challenges with data centre capacity constraints, which have tempered growth expectations.

The company’s Microsoft 365 Copilot has gained substantial traction, with nearly 70% of Fortune 500 companies now utilising the service.

Despite some concerns about Azure’s revenue growth, Microsoft’s comprehensive approach to AI – spanning hardware, software, models, and frameworks – presents a compelling investment narrative. The stock has gained 12% in 2024, reflecting both challenges and opportunities in the rapidly evolving AI market.

Micron Technology: The memory backbone of AI

Micron Technology offers a different perspective on AI investment, focusing on the critical infrastructure that powers artificial intelligence. As a key provider of high-performance memory for data centres, Micron is strategically positioned in the AI ecosystem.

The high-bandwidth memory (HBM) market is expected to explode from 4 billion USD in 2023 to 25 billion USD by 2025, with Micron targeting a 20-25% market share. The company’s technological advancements, including transitions to advanced DRAM and NAND technologies, make it an intriguing option for investors.

Notably, Micron’s HBM chips are already sold out until 2025, providing exceptional revenue visibility and predictability. This demand underscores the critical role of memory technology in AI infrastructure.

Future outlook and investment considerations

The AI landscape continues to evolve rapidly. Software companies are increasingly pivoting towards AI agents, while semiconductor firms continue to outperform in AI-related investments. The market is witnessing a shift from AI model training to AI application inference, opening new avenues for technological innovation.

Ready to capitalise on cutting-edge investment opportunities? Open a live trading account with VT Markets today and position yourself at the forefront of emerging technological investments. With our advanced trading platforms and expert market insights, you can seamlessly translate these AI market trends into potential trading strategies.

Investors should remain cautious yet optimistic. The AI market is not without challenges, including regulatory scrutiny, potential capacity constraints, and the ongoing question of monetisation. The potential appointment of an “AI czar” under the new administration could further reshape the regulatory landscape.

As we approach 2025, the AI stock market presents a landscape of unprecedented opportunity. Meta, Microsoft, and Micron demonstrate how companies are not just adopting AI but fundamentally reimagining their business models. For investors willing to conduct thorough research and maintain a strategic approach, the AI sector offers exciting prospects for growth and innovation.

While past performance does not guarantee future results, these companies showcase the potential of strategic AI implementation. Diversification, careful analysis, and a long-term perspective remain key to navigating this dynamic investment landscape.

The world of investment is experiencing a seismic shift, with artificial intelligence (AI) emerging as the driving force that is radically transforming traditional stock market paradigms. As 2024 draws to a close, the S&P 500 has reached a remarkable milestone, climbing to a record high of 6,001.35 with a year-to-date gain of 25.8%.

Amidst global economic challenges including high inflation, supply chain constraints, and geopolitical tensions, AI stands out as a beacon of innovation and potential growth, offering investors a promising avenue for strategic investment.

The AI investment landscape

The investment world is experiencing a critical transition from AI speculation to substantive results. According to recent market research, global AI investment has surged to an estimated 200 billion USD in 2024, with venture capital firms and tech giants pouring unprecedented resources into the sector.

Investors are no longer satisfied with mere promises; they demand tangible evidence of AI’s value creation. Financial experts are calling this the “show me” moment for technology companies, where the focus has shifted from potential to actual revenue generation and strategic implementation.

A comprehensive analysis by McKinsey reveals that AI could potentially contribute up to 4.4 trillion USD annually to the global economy. This staggering figure underscores why investors are increasingly bullish about AI-related investments. The sector has seen a remarkable 67% increase in funding compared to the previous year, with semiconductor and cloud computing companies leading the charge.

This scrutiny comes at a time when technology giants are investing heavily in AI infrastructure. Cloud computing behemoths like Amazon, Microsoft, and Google are pouring billions into data centre expansions, AI chips, and research and development.

Industry estimates suggest that these companies have collectively invested over 50 billion USD in AI infrastructure in 2024 alone. The key question remains: how much incremental AI-related revenue are these investments generating?

Meta platforms: Social media’s AI transformation

Meta Platforms represents a compelling case study in AI-driven transformation. With a market capitalisation of 1.5 trillion USD, the company has leveraged artificial intelligence to revolutionise its core business model. Its AI-powered recommendation systems have demonstrably increased user engagement, with Facebook seeing an 8% rise and Instagram a 6% increase in user interaction.

More impressively, over one million advertisers now utilise Meta’s generative AI tools, boosting ad conversions by 7%. The company’s strategic hire of Clara Shih from Salesforce to head a new “Business AI” group underscores its commitment to AI innovation. The company’s AI assistant has already reached 500 million monthly active users, positioning itself as a potential global leader in conversational AI.

The open-source Llama AI model has seen extraordinary growth, with downloads reaching 350 million by August 2024 – a tenfold increase from the previous year. Meta is actively working on Llama 4 models, training them on massive GPU clusters, signalling a long-term commitment to AI development.

Financially, Meta presents a robust investment opportunity, with double-digit revenue growth and a healthy balance sheet boasting 70.9 billion USD in cash against 28.8 billion USD in debt. The stock has gained an impressive 62% in 2024, making it an attractive option for investors.

Microsoft: Powering enterprise AI

Microsoft continues to be a powerhouse in the AI ecosystem, its 13-billion-USD partnership with OpenAI proving transformational. The technology giant’s AI business is projected to cross 10 billion USD in annual revenue, making it the fastest-growing segment in the company’s history.

Azure cloud services have grown by 33% year-on-year, with AI services contributing significantly to this expansion. However, the company faces challenges with data centre capacity constraints, which have tempered growth expectations.

The company’s Microsoft 365 Copilot has gained substantial traction, with nearly 70% of Fortune 500 companies now utilising the service.

Despite some concerns about Azure’s revenue growth, Microsoft’s comprehensive approach to AI – spanning hardware, software, models, and frameworks – presents a compelling investment narrative. The stock has gained 12% in 2024, reflecting both challenges and opportunities in the rapidly evolving AI market.

Micron Technology: The memory backbone of AI

Micron Technology offers a different perspective on AI investment, focusing on the critical infrastructure that powers artificial intelligence. As a key provider of high-performance memory for data centres, Micron is strategically positioned in the AI ecosystem.

The high-bandwidth memory (HBM) market is expected to explode from 4 billion USD in 2023 to 25 billion USD by 2025, with Micron targeting a 20-25% market share. The company’s technological advancements, including transitions to advanced DRAM and NAND technologies, make it an intriguing option for investors.

Notably, Micron’s HBM chips are already sold out until 2025, providing exceptional revenue visibility and predictability. This demand underscores the critical role of memory technology in AI infrastructure.

Future outlook and investment considerations

The AI landscape continues to evolve rapidly. Software companies are increasingly pivoting towards AI agents, while semiconductor firms continue to outperform in AI-related investments. The market is witnessing a shift from AI model training to AI application inference, opening new avenues for technological innovation.

Ready to capitalise on cutting-edge investment opportunities? Open a live trading account with VT Markets today and position yourself at the forefront of emerging technological investments. With our advanced trading platforms and expert market insights, you can seamlessly translate these AI market trends into potential trading strategies.

Investors should remain cautious yet optimistic. The AI market is not without challenges, including regulatory scrutiny, potential capacity constraints, and the ongoing question of monetisation. The potential appointment of an “AI czar” under the new administration could further reshape the regulatory landscape.

As we approach 2025, the AI stock market presents a landscape of unprecedented opportunity. Meta, Microsoft, and Micron demonstrate how companies are not just adopting AI but fundamentally reimagining their business models. For investors willing to conduct thorough research and maintain a strategic approach, the AI sector offers exciting prospects for growth and innovation.

While past performance does not guarantee future results, these companies showcase the potential of strategic AI implementation. Diversification, careful analysis, and a long-term perspective remain key to navigating this dynamic investment landscape.

Dear Client,

As part of our commitment to providing the most reliable service to our clients, we will be optimising specific product configurations this weekend.

Optimised Products:
SOLJPY, ADAJPY, BCHJPY, XLMJPY, XRPJPY, BTCJPY, BTCEUR, LTCJPY, ETHJPY, GRTUSD, IOTUSD, ZECUSD, NEOUSD, BTCBCH, ETHBCH, BTCETH, BTCLTC, ETHEUR, ETHLTC

Optimisation Hours:
07th of December 2024 (Saturday) 00:00–03:00 (GMT+2)

Please note that the following aspects might be affected during the optimisation:

1. The price quote and trading management for the optimised products will be temporarily disabled during the optimisation period.You will not be able to open new positions, close open positions, or make any adjustments to trades.

2. There might be a gap between the original price and the price after optimisation.Gaps between Pending Orders, Stop Loss, and Take Profit will be filled at the market price once the maintenance is completed. It is suggested that you manage the account properly.

Please refer to the MT4 & MT5 software for specific optimisation completion and market opening times.

Thank you for your patience and understanding regarding this important initiative.

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

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.