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Knowledge Base – Instruments

Forex

What is Forex Trading?The foreign exchange market (forex, FX, or currency market) is a worldwide, decentralised, over-the-counter financial market for trading currencies. It is the largest financial market in the world with a volume of over $1.5 trillion a day worldwide*. Total forex trading volume is well over three times the total of the stocks and futures markets combined.With 31FX, you will have direct access to the forex ‘spot’ market – a market that deals in the current price of a financial instrument.


History of ForexTraditionally, retail investors’ only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.There is no central marketplace for currency exchange; trade is conducted over the counter. The forex market is open 24 hours a day, five days a week and currencies are traded worldwide among the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.In the foreign exchange market there is little or no ‘inside information’. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.


Potential Advantages of the Forex Market

  • Leveraged trading allows you to trade with a specific asset on a leveraged amount, for example:Using a 100$ that are leveraged by a 100 allows you to open a position for 10,000$
  • Real time events trading – The Forex market is moving constantly according to events on the market, these events create the opportunities to gain profits.
  • Tax benefits (if any) are subject to change and depend on your personal circumstances

Potential Risks of Trading FX

  • Leveraged trading puts your capital at risk. You could lose all, or a large portion, of your trading capital if the market makes a significant move against your current open position/s
  • Your losses may exceed your deposits
  • Past performance does not guarantee future performance
  • Tax benefits (if any) are subject to change and depend on your personal circumstances

How does Forex Work?

  • Forex trading is the simultaneous buying of one currency and selling of another
  • These two currencies make up what is known as a “currency pair”
  • Currencies are always traded in pairs – each currency is represented by three letters
  • The first two letters represent the country and the third letter identifies the currency

When to Buy?

A trader would open a buy position if they believe that the value of that specific base currency would increase.

When to Sell?

A trader would open a sell position if they believe that the value of that specific base currency would decrease.

When can Currencies be traded?

The FX market is unique among the world financial markets in that it’s open 24 hours a day, 5 days a week.

Index CFDS

31FX introduces Ultra-low Latency CFDs with no dealing desk execution through our multi-award winning trading accounts. Clients can now Buy or Short Sell major stock indices, all with no commission.

What are Index CFDs?By definition, an index is a statistical evaluation of how the price in a selection of stocks has changed over time that allows to traders to assess overall performance of a certain market. Depending on the selection criteria, indices may be classified as national, global, industry or exchange based. Moreover, various calculation methods allow to subdivide them into price weighted stock indices, value (or market cap) weighted indices, and equally weighted stock indices.An index is basically a statistical value, which cannot be traded directly. However, it is possible to profit from index fluctuations through a derivative, a security which value is derived from an underlying asset. Derivatives can be either exchange based (e.g. futures and options) or over-the-counter (e.g. CFDs). The former are traded through an organized exchange while the latter are traded between two parties.CFD stands for contract for difference and is basically an agreement to exchange the difference between entry and exit price. Trading CFDs does not involve buying or selling the underlying asset (for example, a share or a commodity), however their price reflects the movements of the asset.What makes a CFD stand out from other derivatives is the ability to trade micro lots with relatively high leverage. For an individual trader it means that he or she can speculate on index prices and gain profit from price fluctuation with a small deposit and low risk involved.


How do I trade Index CFDs?

The major stock market indices such as FTSE 100, Dow Jones, S&P and Germany’s DAX index tend to respond well to technical analysis and are generally more preferred by short term traders. Other popular indices include France’s CAC-40 and Japan’s Nikkei 225.Fundamentals-wise, it would mainly depend on the country the index originates from as well as the economic sectors it represents. Below you will find a brief description of the major indices we offer for trading.


31FX CFD Technology

31FX’s CFD Technology has been developed for traders to execute large CFD orders with minimal slippage, allowing clients the best possible trading experience.31FX provides ultra-low latency execution from a deep pool of liquidity sources, with no dealing desk or execution manipulation. 31FX is globally renowned for developing and deploying cutting-edge IT Infrastructure supporting the most demanding trading applications.


Optimized for Institutional Traders

Our technology has been designed to support Institutional trade flows. As an immediate benefit, the highest-end of our clients that typically rely on trading large sizes in single tickets can trust in the scalability and robustness of our solutions.Firstly, we can handle multiple fills, meaning that we can sweep a large order through multiple levels into our Liquidity Aggregator.Secondly, our clients CFD orders are systematically executed using ‘Market execution’ basis (i.e. no requotes) with both Positive and Negative Slippage enabled (i.e. no broker intervention on price improvement).


Why trade Index CFDs?

Trading Indices offers access to a whole new range of markets, meaning you can diversify your trading strategies across uncorrelated instruments as well as take advantage of the different opportunities that global equities markets present.Stock Indices also offer a way to hedge your existing equities market exposure and dampen (or heighten) the impact of stock market volatility.With flexible leverage and real time pricing linked to actual stock market performance, indices with low spreads offer the potential to profit from small price movements on global markets.

Metals

Trading with 31FX gives you access to a range precious metal pairs including Gold, Silver, Platinum and Palladium traded against either the US Dollar or the Euro. Used in jewelry, industrial inputs and as safe haven assets in market turmoil – these symbols often move in line with market cycles and inflation.

Gold

XAU/USD is a spot commodity pair based on the physical price that gold can be bought or sold at, in a particular point in time. Influenced heavily by supply and demand, as well as US Dollar risk, spot gold is a volatile yet increasingly popular commodity available within the interbank market.


Silver

XAG/USD is a spot commodity pair based on the physical price that silver can be bought or sold at, in a particular point in time. Given silver’s common use in jewelry and consumer products, supply and demand heavily influence movements in this pair.Precious metals can be a great asset to diversify your trading strategy; as global markets, supply and demand are not driven by any one country in particular but the world as a whole. You can buy or sell to take advantage of both rising and falling markets without any additional commission charges applied.31FX offers all precious metals with the same leverage as you find on currency pairs, meaning up to 500:1 is available. All symbols are available in the cTrader platform, along with the Webtrader, Android, and Apple mobile devices – allowing you access to these markets wherever you are in the world.


Advantages of trading Precious Metals with 31FX:

  • Access to institutional grade spreads and trade execution
  • Minimum trade size of $0.10 per pip
  • A maximum leverage of 500:1
  • No commission fees on any commodity pairs
  • The ability to hedge positions on a single account

Risks of Trading Precious Metals:

  • Leveraged trading puts your capital at risk. You could lose all, or a large portion, of your trading capital if the market makes a significant move against your current open position/s
  • Your losses may exceed your deposits
  • Past performance does not guarantee future performance
  • Tax benefits (if any) are subject to change and depend on your personal circumstances

Energy

Available to all 31FX account holders, Oil and Gas products are tradable commodities on the cTrader.

Oil

XTI/USD is a spot commodity pair based on West Texas Intermediate crude oil, or WTI, which is a light ‘sweet’ oil traded in Cushing, Oklahoma – the sweetness referring to the oil’s low sulphur content. XTI/USD can be considered US Oil, and is heavily affected by developments in Northern America.XBR/USD is a spot commodity pair based on Brent Crude Oil, while Brent technically refers to oil produced in the North Sea it is often referred to as UK Oil. Brent Crude is used as the pricing benchmark for two thirds of the world’s oil production.

Gas

Natural Gas is an energy commodity that is affected by factors such as unexpected weather related demand, fossil fuel prices and gas supply issues. Not as readily portable as Oil, gas markets are fragmented and localized economic factors can cause diverging prices in different regions. XNG/USD is based on US Natural Gas, and is driven by global factors as well as those that affect only the US market.

Advantages of trading Oil and Gas though 31FX:

  • Access to institutional grade spreads and trade execution
  • Minimum trade size of $0.10 per pip
  • A maximum leverage of 500:1
  • No commission fees on commodity pairs
  • The ability to hedge positions on a single account

Risks of Trading Oil and Gas:

  • Leveraged trading puts your capital at risk. You could lose all, or a large portion, of your trading capital if the market makes a significant move against your current open position/s
  • Your losses may exceed your deposits
  • Past performance does not guarantee future performance
  • Tax benefits (if any) are subject to change and depend on your personal circumstances