Forex Trading Guide to Capped Variable Spreads for New Traders

LONDON, March 19, 2012 /PRNewswire/ --

Forex trading involves buying one currency while selling another simultaneously for the purpose of speculation. As one of the world's most traded markets, forex has an average turnover in excess of US$4 trillion per day.

Compared to the New York Stock Exchange - whose turnover approximates to US$50 billion per day -you can see how popular this market proves with traders both new and experienced.

With this in mind, why do traders choose to trade forex?

Whether a new trader or an experienced one, you will be looking at the key features of trading forex from which you could potentially benefit and net a profit.

A significant attraction is that the forex market is one of the most liquid; resulting in tighter forex spreads throughout most of the day.

This over-the-counter (OCO) market - referred to as foreign exchange, forex, retail forex and simply FX - offers traders the ability to trade 24-hours a day; opening Monday morning in Wellington, New Zealand; progressing to Asia, then London; before it closes on Friday night in New York.

Forex trading offers traders the level of exposure they so often desire.

Through City Index, traders wanting an edge in the forex market can take advantage of capped variable spreads, which offer a competitive spread advantage over retail forex traders elsewhere.

Capped Variable Forex Spreads

Traders choosing the City Index forex trading account have the advantage of gaining exposure to tighter forex spreads during periods of high market liquidity, whilst also trading tight spreads during periods of low liquidity.

Capped Variable Spreads is a new concept in trading retail forex; offering a competitive spread advantage over traders elsewhere.

For example, take retail forex trader A. They are trading through a City Index forex trading account.

During periods of low liquidity, they are trading at spreads around 5 pips/points, the cap set by City Index, even though the underlying spread may be wider (as an example).

However, for retail forex trader B - who does not trade with City Index - they are trading at spreads of 8 pips/points or higher, giving retail forex trader A the advantage in the marketplace.

In addition, retail forex trader A can trade with peace of mind; they know that even in the most volatile market conditions, where spreads have the potential to widen excessively, the City Index forex spreads will remain between fixed capped levels.

Summary

Forex trading with City Index offers a range of benefits to its retail forex traders. From the tighter spreads mentioned here, to the downloadable Advantage Trader and browser-based Advantage Web trading platforms.

However, it is imperative to your trading success that you remember that forex trading on margin carries high levels of risk. The possibility exists that you could lose some or all of your investments, including your initial deposits, making retail forex unsuitable for some investors.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.

SOURCE City Index