Markets

About Forex Trading

Forex trading, or currency trading, or FX trading, as it can be also abbreviated, are all terms that describe the currency exchange market as we know it today, which in simple language refers to the global, decentralized marketplace where individuals, companies and financial institutions exchange currencies for one another at floating rates.

The current floating rates system, which we know today, was adopted after World War II and has been in effect ever since. Prior to the current forex trading rates system, a monetary management system called the Bretton Woods Agreement was in existence, in which the exchange prices of currencies against each other were tied and correlated to the reserves of gold in possession of the two countries that were the originators of the actual currencies related to a transaction.

Forex Trading Marketplace

The forex trading marketplace, as it stands today, is the world’s largest and most liquid market due to a number of factors which include, but are not limited to, ease of performing transactions over the internet, the modern development of travelling, ease of international communication and modern transportation, which have made our world a smaller place.

By making our world a smaller and more global place, this automatically means that people, goods and services can travel faster and more easily. This also means that a necessity of currencies to be traded against each other is needed in order for this to happen. All these factors have determined a growing forex trading marketplace, which will only continue to grow and become more dynamic, liquid and responsive.

Online Forex Trading

Among the main participants of the forex trading market, one of the most growing segments of the total pool of participants of the marketplace, are retail foreign exchange traders (individuals) who participate in online forex trading for mainly speculative reasons with the ultimate goal of generating a profit from currency fluctuations (market changes), or hedging unwanted currency risk.

This segment participates in the forex trading marketplace via a broker (like DT Broker), or via a bank. In this case, the bank or the broker will issue the retail client a trading account that will be funded in a base currency (usually the local currency of the region where the client is domiciled), and the client will have the opportunity to buy and sell currencies both online and over the phone with the goal of deriving profit.

Forex Trading via a Broker

Participating in the forex trading market via a broker like DT Broker means that the client receives access to real-time pricing of the forex market and is quoted buy and sell prices for a number of instruments via an online trading platform. The client has the freedom to decide at which price they decide to buy or sell, and vice versa, and can execute a transaction at any time they wish.

Dividends Adjustments on Shares

Shares are subject to dividend adjustments.

When a company pays dividends to its shareholders it is essentially reducing the value of the company by the amount of the dividend.

This is reflected by a reduction of the share price at the market open on the ex-dividend date (the day that the company stock starts trading without the value of the dividend).

If you hold a stock that pays a dividend, then you will be credited the after-tax amount of the dividend on the ex-dividend date.

The applicable tax rates for dividends are as follows:

Germany: 25%

UK: 0% (i.e. no tax is applicable on dividends)

US: 30%

Your long positions will receive an amount calculated as follows:

Dividend Adjustment = stock dividend declared x position size in shares x (1 — the applicable tax rate)

US: 30% (By default, all individuals are subject to 30% withholding tax under the US regulations. However, the US signed tax treaties with certain countries that may entitle you, where eligible, to a reduced rate of withholding tax. In order for us to apply the relevant rate in accordance with the treaty you may be under, DT Broker has an obligation to obtain the necessary documentation from you, which is the W-8BEN form)

 

Corporate Events

In the table below you can view all the symbols of instruments that are expected to have corporate actions this week. All figures shown below represent the expectations of our liquidity providers and are thus subject to change.

Dividends Adjustments on Stocks CFDs

CFDs on Stocks are subject to dividend adjustments. When a company pays dividends to its shareholders, it is essentially reducing the value of the company by the amount of the dividend. This is reflected by a reduction of the share price at the market open on the ex-dividend date (the day that the company stock starts trading without the value of the dividend). Holders of CFDs on Stocks do not own the underlying stock. However, they are impacted by reductions of share prices. Therefore, to ensure no impact on positions, a dividend adjustment is made before the market open on the trading accounts of clients who hold CFD positions on Stocks. The trading hours for each stock can be found in the table above. Buy trades will receive an amount calculated as follows: Dividend Adjustment = stock dividend declared x position size in shares Sell trades will be charged an amount calculated as follows: Dividend Adjustment = stock dividend declared x position size in shares Due to new tax regulations under U.S. section 871 (m), non-US residents, holders of long positions on US equity derivatives (including CFDs) are taxed on dividend adjustments in the same way as non-US holders of the real US dividends. Particularly, in every dividend paid for an in-scope position, we calculate the dividend adjustment and deduct the 30% withholding rate (or less when a relevant treaty rate was applied to the account). Clients which are affected must fill in a W-8BEN form to be able to continue or start trading on the in-scope instruments. For more information, please visit the IRS website.

Corporate Events

In the table below you can view all the symbols of instruments that are expected to have corporate actions this week. All figures shown below represent the expectations of our liquidity providers and are thus subject to change.

Gold Trading and The Precious Metals Market

Gold Trading and other precious metals, along with crude oil, copper or petroleum, are hard commodities that play a major role in the commodities market and are contract-based tradable goods. The contracts based on precious metals can include futures, spot prices, forwards and options. The intermediary that enables futures contracts to be negotiated is the futures exchange, or commodity, market. Investors worldwide can access about 50 major commodity markets, with precious metals such as gold, silver, platinum and palladium as the leading tradable assets due to their high economic value and durability. While Asia is the worldwide largest precious metals market (China, India and Singapore being the top consumers of these commodities), the commodities market is dominated by European and American corporations, with the biggest precious metals companies based in Canada and Germany. The futures exchanges market, where besides currencies and stock indices gold and other precious metals are also actively traded, is available 24 hours a day, except weekends. Generally, precious metals are purchased in two main ways: on spot contracts and on futures contracts. While spot contracts involve the physical buying or selling of these commodities for payment and delivery on the spot date (typically two business days following the trade date), futures are standardized contracts, mutually agreed on by two parties to buy or sell precious metals of a specific quantity and quality for a price agreed on (called futures price) with delivery and payment on a later date in future (called delivery date). The buying and selling of futures takes place without the actual physical ownership of the commodities traded and done via online trading.

Trading Gold and Precious Metals

The most frequently traded precious metals are gold, platinum, palladium and silver, and the high trading volume on these commodities is attributed to their retained intrinsic value, regardless of economic conditions. The preference for the online purchase, and even physical ownership, of precious metals as long-term investment has tremendously increased in recent decades. Trading precious metals also presents opportunities for those interested in short-term investment since derivatives and exchange-traded contracts are a less capital-intensive and simpler way to take a position on their price movements. Unlike most commodities that are mainly dependent on production and consumption levels, gold trading prices, for instance, are not: they follow the pulse of political changes and make it possible for gold to function as a hedge against other markets in times of uncertainty. Along with gold, platinum, palladium and silver are also valuable assets and traded by investors who regard them as stores of value in times of monetary uncertainty. There are several factors that affect price fluctuation and can cause volatility in the precious metals market. One of the most important factors are global financial institutions, whose investments are speculative in nature and can cause upward or downward price movements. Another factor that influences the market is the end-user trends, mainly triggered by jewellery buyers: the demand in jewellery makes precious metal markets prices to rise. Economy also has an impact on market prices. In a globally well-performing economy the level of wealth is directly correlated to the demand for gold and other precious metal jewellery: when investors search for investment options that present a higher risk, the prices of certain precious metals is lowered while the price of others rises. Last but not least, the changes in demand for some other financial assets apart from precious metals also contribute to price fluctuations.

Historical Overview of Gold Trading and Precious Metals

Precious metals, and gold in particular, have always the symbol of wealth. As far as prehistoric times, when gold was used in bartering, and throughout the centuries, whether in the form of coins, or bars and billions of fixed purity and weight, gold has been a valuable and much sought-after asset. The first gold coins were struck in 600 BC and its use for monetary exchange (gold standard) lasted as long as the 1930s. As a highly electrically conductive and malleable metal, gold is non-reactive to other elements, and it is used in several industries from jewellery, commercial chemistry and electronics to medicine. Gold as commodity money was only replaced by the fiat currency system after 1976, but it has continued to remain a solid investment asset until today. Along with gold, for over 4 thousand years silver has also been used for monetary exchange with the silver standard lasting until the 19th century. The industrial, commercial, and consumer demand make silver a strong asset to invest in, and derivatives like silver futures are traded on various exchange markets in the world. With the advent of online trading, silver exchange-traded products have been an easy way for investors to gain exposure to the price of silvers and invest in it long term. As compared to gold trading and silver trading, which have been present as investment assets since ancient civilizations, platinum and palladium have a shorter history in the financial sector. However, due to their scarcity and the amount of their annual mine production, along with their various uses in several industrial areas, at times they tend to sell at a price even higher than gold. 10 times rarer then gold, platinum is associated with wealth, and white gold-platinum alloys were used as early as in the pre-Columbian civilization. The first reference to platinum in Europe was made in the 16th century, and since the 18th century it has been used in jewellery, the motor and chemical industry, dentistry and even medicine. Similar to platinum, palladium also plays an essential role in technology. Since its discovery in 19th century Europe, global demand for palladium has largely increased, mostly in the automobile industry, but it is also widely used in medicine, the electrical industry, jewellery, and of course as an investment asset. Due to the supply and demand (i.e. the price determination in the market), in times of sustained economic stability the price of platinum and palladium can be as much as that of gold, or even higher, while their prices can fall behind the price of gold in periods of economic instability, making gold a more stable metal to invest in.

Gold and Precious Metals Trading Today

Precious metals have been some of the most popular hard commodities to trade since the 1970s. Besides currency exchange (forex) trading, investing in gold and other precious metals long-term is a worldwide popular way of portfolio risk management during times of inflation or economic/political uncertainty. Futures contracts are so-called derivative contracts, meaning that their value derives from the performance of the underlying asset. One of the main purposes of investing in precious metals futures is risk mitigation: given the ability to the contract buyer and seller to fix prices or rates in advance for future transactions, they can both ensure against drastic or sudden price movements that may cause increased losses. Precious metals can be traded in both directions: if the market is expected to move upwards (bullish trend) trades can be entered by purchasing a futures contract (going long) and exit the trade by selling it; while if there is anticipation of a downward movement (bearish trend), trades can be entered by selling a futures contract (going short) and exit the trade by buying a contract. The possibility is also given to trade multiple futures contracts, which involves making several separate entries and exits, that is, entering contracts at different prices and exiting at one price, or the other way round. The ability to trade in both directions allows investors to gain profits regardless of upward or downward market movements.

Commodity Trading

Along with the global currency exchange markets, commodity markets offer various investment opportunities for retail traders worldwide. Soft commodities such as sugar, wheat or corn have been traded for centuries, and investors’ preference for these financial derivatives is attributed to the major role they play in portfolio diversification and risk management. Investing in contract-based tradable goods is a reliable means of risk mitigation even during times of inflation or economic uncertainty, ensuring both the contract buyer and seller against drastic price movements that may cause increased losses.

About Energies

The most typical feature of energy prices is high volatility, which is the result of numerous political and environmental factors that influence it. Many supply and demand factors also affect energy prices, the strongest of which is global economic growth. In times of economic prosperity the demand for energies increases, while a decrease in consumption occurs when economy stagnates.

Beside economic changes, extreme weather conditions can also have a great impact on energies, leading to supply disruptions of crude oil, natural gas, or heating oil. As a result, such conditions can decrease or increase demand for many consumer services related to these energies. Moreover, global energy prices are highly affected by the political instability in some of the world’s biggest natural gas fields.

Oil trading is a globalized, 24-hour market, with its prices in constant motion. This makes it an ideal instrument for day traders who look for fast movements and choose CFDs as the easiest way to trade on oil prices.