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Currency traders buy on margin so they can do which of the following?
Wiki User
∙ 14y ago
Make large currency trades using small amounts of money.
Wiki User
∙ 14y ago
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What does it mean to buy on margin?
Margin means you're borrowing money to buy stock. It's also one of the few ways you can lose more in the stock market than you invested in the first place.
How does currency depreciation affect companies?
currency depreciation is a double-edged sword for corporations, on the one hand it makes all your imports MORE expensive since your currency can buy LESS goods with the same amount of money, on the other, it makes your goods LESS expensive to consumers all around the world because their currency can buy MORE of your products with the same amount of their money, so if a company is a major exporter it will be positively affected, if it is a major importer, it will be affected negatively. if it is in the space between the two (which is usually the case) the results will vary depending on the elasticity of the product, the profit margin .... (between + and - )
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Explain the working of nostro and vostro accounts for fund transfer with example?
International accounting procedures between Local banks and overseas banks often involve the use of nostro and vostro accounts. A nostro (means "ours" in Latin) account is an account maintained by a Local bank with a foreign bank that allows the Local bank to buy foreign currency. A vostro (means "yours" in Latin) account is an account maintained by an overseas bank with a Local bank that allows the overseas bank to purchase Local currency. The system of nostro and vostro accounts facilitates foreign exchange dealings and settlements and allows the settlement of currency transactions between the Country's (Local)Bank and foreign banks. Example : When X (Buyer) a trader in Base Country wants to purchase $5000 worth of goods by paying cash. Mr.X deposits the cash in his local bank in the country's currency for the corresponding amount ($5000) then a swift message is sent to the corresponding bank in the foreign country where the local bank holds a NOSTRO account requesting the bank to make the payment to Y (Seller) in his local currency i.e. US Dollars. Thus facilitating the trade between X & Y. IF Y wanted to buy something from X then the foreign bank would complete the deal using their VOSTRO account in X's country.
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What happens when Currency traders buy on margin?
When currency traders buy on margin they borrow money from their broker. They do this in order to make a larger currency purchase.
Which of the following best explains how currency traders can buy large amounts of currency with little money up front?
They buy on margin to provide leverage for a large purchase. They borrow money from their broker in order to make a larger currency purchase.
How currency traders can buy large amounts of currency with little money?
Its called using leverage or buying on margin, but putting it simply they take out a loan.
Which of the following explains what happens when currency traders buy on?
They borrow money from their broker in order to make a larger currency purchase
Leverage enables currency traders to do what?
Currency traders use leverage (or borrowed funds) to trade financial assets (currency). Leverage allows an individual to control larger trade sizes in order to gain a greater profit on their investment.
Functions of foreign banks?
One function of foreign banks, which is especially important to those who trade in foreign currency,is margin trade. Forex margin accounts allow traders to control a large amount of currency with only a small deposit. What is margin? In forex trading margin accounts are expressed as a percentage. For example, a margin account of 1% would give you 100:1 leverage. So with $100 you could control $10,000 of currency. If the $10,000 of currency that you buy increases in value, you get all of the profits - but if that currency decreases in value, you are liable for all of the cost. Many people are wowed by the profit potential, and don't stop to think about what would happen if the trade went wrong. Trading on margin increases your profit potential, but also increases your risk of losses. Fortunately, most online FX brokers will end a trade if it falls below the amount deposited, minimising your losses - but you'll still have lost the money that you had deposited, you just won't end up owing a lot more. For more information on foreign banks and foreign exchange, see the websites below.
What is the role of currency traders?
A currency trader buys and sells currencies. For example, a trader may have dollars but believe the dollar will fall against the pound, so he might use his dollars to buy pounds.
What are the types of pairs and currencies in the Forex market?
What is a currency pair?It is a currency against another currency, forex currencies are available in pairs, you cannot sell or only buy one currency, you must buy or sell a currency in another currency and this is the reason behind trading in Forex in pairs.Example:The currency of the European euro against the currency of the US dollar, in the language of traders these two currencies are called "the euro-dollar pair" and the symbol for this pair is EUR / USDSecond: Forex Types and Pairs:Major CurrenciesMinor CurrenciesCross pairs (crosses)Exotic Pairs
Why did European traders want to buy china?
The Europena traders wanted to buy spices for China.
What happens in Currency trading?
In currency trading, at the basic level the price of a currency when compared to another is basically high or low. Example the EUR/USD currency pair. Based on the general health of the two countries and various economic indicators currencies tend to fluctuate. It is this fluctuation that allows forex traders to buy low and sell high.
What are businessmen who buy and sell?
traders
What is the difference between buying on margin and margin call?
Buying on margin, taking a "margin" loan from the broker to help buy part of a stock purchaseMargin call, this happens when the broker demands full payment of your "margin" loan
