- How to open XTB Forex account?
- Why you should choose XTB?
- What is CFD?
- Trading Commodity Markets with XTB
- Trading Equity (Stock) Market with XTB
- CFD Trading Examples
- Forex and CFD trading risk management
- Risk management – Key Factors of being profitable
- Market Analysis on FOREX and other OTC markets
How to open XTB Forex account?
XTB is an online Forex and CFD broker, which offers a large number of financial markets to trade on xStation and MT4 trading platforms.
To open an account with XTB and start trading Forex and CFDs, follow the steps below.
- Go to XTB Official Website.
- Click on “Create Account”.
- Insert your email address and choose the country residence.
- Proceed to complete the account opening procedures.
- Receive login credentials for your account.
- Log in to XTB Official Website to make a deposit and download XTB’s platforms.
- Log in to XTB’s trading platforms (xStation or MT4)
- Start trading Forex and CFDs
XTB has been growing as an international broker, and now supports hundreds of thousands of traders.
XTB also provides multilingual supports for 24 hours a day and 7 days a week.
Why you should choose XTB?
As a leading Forex and CFD trading service provider, XTB has a lot of advantages for traders.
Are you thinking of choosing XTB as your broker, and start trading online?
Here are some of the advantages that you can get by choosing XTB as your broker.
- 24 hour dealing hours
XTB’s experienced dealers provide 24-hour customer support. Should you have any question concerning XTB, XTB’s offer, the current market situation or technical support, do not hesitate to contact them.
- Regular and competitive spreads
For XTB clients, XTB offers regular and competitive spreads for all currencies, commodities, indices and shares CFD and financial options. Investors can expect the same terms of trade 24 hours per day. The only exception to this rule is at the moment of a major macroeconomic data release, as is usually announced in XTB’s economic calendar. This is an optimal solution for any market and any strategy.
- Account denominated in your favorite currency
As a customer of XTB, you have a choice as to which currency you would prefer to fund your account in. You can choose between USD, EUR and CHF. Trading results and account statements are generated for the selected currency account. This solution and efficiency of the settlements allow investors to supervise the current situation and take the right decisions.
- Reliability and safety of funds
XTB realizes that safety of funds is a major concern for investors. As a result, XTB has taken several important measures to ensure the utmost safety regarding customer deposits. XTB runs a business on its own behalf. XTB must adhere to strict rules and regulations to protect customer funds as well as pay a member’s fee to the National Depository for Securities as extra protection for investor’s deposits.
- Full transparency
“What you see is what you get”. This sentence describes the real account trading conditions XTB offers to all clients. You may check the value of your position at any time, as well as see a historical record of your transactions at the click of a button.
- More than 1000 currency markets, commodities, indices and shares options and CFD
Being XTB’s client you have the opportunity to trade a large number of different currencies. From Euro and Yen to the Polish Zloty and New Zealand Kiwi, XTB offers you the flexibility necessary to make the proper trading decisions, not to mention the tightest spreads on the majors. Moreover XTB’s offer includes not only numerous currency pairs but also a significant number of commodities, shares and indices CFD from around the world.
- Guaranteed Stop-Loss and Take-Profit
XTB guarantees stop-loss levels. It means that you never lose more than your Stop-loss amount at risk, as defined by you. This feature allows you to define your maximum loss with reference to your money management strategy and at the same time you still have an open path to earn money. Guaranteed take-profit is a function which closes your deal automatically on your pre-defined take-profit level. For you as a customer it means that if the price reaches your pre-defined level you have a guaranteed profit. With those functions you can manage your account without gazing at your computer screen all day long.
- Mobile trading
XTB is always thinking about the investors comfort. Accordingly, XTB offers all Customers the possibility of truly mobile trading. This means controlling the trading account via mobile devices such as Android, iPhone and iPad. Investors have full access to financial markets, and can make deals anywhere, anytime.
- Free training and online education
XTB understands the importance of having complete knowledge of the trading software you use to analyze, manage, and place your trades on FOREX and other OTC markets. XTB’s trading platform is easy-to-use, but in addition to that, XTB provides free training both for beginners and the more advanced traders, striving to improve their trading skills. A wide range of the training covers the basics of trading, as well as fundamental analysis and technical analysis of FOREX, commodities and other OTC markets.
XTB has also been recognized as one of the Best CFD Brokers.
XTB is one of the largest stock exchange-listed FX and CFD brokers in the world, and you can invest in over 4000 financial instruments.
While Forex is the most popular market among investors, most of financial products offered by XTB are in a form of “CFD”.
How much do you know about CFD market and how it works?
In this article, we will explain the mechanism of CFD market, features and characteristics for online investors.
What is CFD?
CFD, short for Contract for Difference, non delivery spot transaction gives an opportunity to make profit on changes in currency rates, commodity, stock market indices or share prices.
The transaction gives an opportunity to buy or sell a specified amount of asset involving only limited amount of money for initial margin, the percentage of the nominal price of the CFD contract.
The initial margin is determined according to a formula set by the broker.
For a single CFD contract, it will be a small fraction of the nominal market value of the instrument.
Typically, initial margin is intended to represent the maximum one-day net loss you could reasonably be expected to incur on the position.
Standards and Base of CFD transactions
CFD transactions are standardized.
The transaction unit is 1 lot, buying or selling 1 lot typically means buying or selling 100,000 of one currency for another or specified amount of the underlying commodity or number of shares.
It is possible to deal with a larger or smaller nominal by trading multiple or fractional lots.
For example, in order to buy 250,000 EUR for USD, one has to make a buy transaction of 2.5 EUR/USD lots.
CFD transactions give traders an opportunity to use financial leverage, thus it is possible to trade contracts with 500 times larger than resources available on the account of the investor.
In case of FOREX trading with XTB, the margin requirement is 0.2%, so the leverage is 1:500.
In order to buy 250,000 EUR trader should provide margin equivalent to 0.2% * 250,000 EUR = 500 EUR in USD.
CFD trading is about the price movement
It is worth noting that in a transaction where, for example, one buys 2.5 lots representing 250,000 EUR, one does not incur any rights to withdraw 250,000 EUR on the bank account of the investor.
CFD settlement, performance on a contractual obligation, results from the comparison of the opening and closing price of the relevant transaction.
Buying 2.5 lots of EUR/USD means that any eventual profits from price change shall be based upon value of 250,000 EUR.
Financial leverage (in this case 1:500) means that when the price of EUR increases by 1%, investor would get profit of 1% * 500 = 500% of his/her initial deposit.
Please take note that excessive usage of financial leverage significantly increases the risk to the investments, and may lead to substantial losses.
As usual in the world of finances, higher potential profits are possible at the cost of increased risks.
Trading Commodity Markets with XTB
The dynamic growth of commodities prices in recent years have put them in the center of the scope of many investor’s interest.
This is especially the case with oil, gold, silver and industrial metals like copper, aluminum, zinc or nickel.
The relatively high price of raw materials has a significant impact on the condition of the global economy.
Commodities are amongst the oldest market of the world.
Their beginnings date back to ancient times, and the first organized commodities exchanges were organized in Western Europe in XII century.
The history of financial markets has been marked by the first infamous crash of the so called “tulip mania”.
Development and burst of the speculative bubble in XVII century markets in Amsterdam and London was the first, but not the last example of the interplay between greed and fear dominating the process of speculative trading.
The development of new technologies that occurred at the end of XX-century has resulted in the dynamic growth of volumes traded on commodities markets.
Commodities and their derivatives are quoted both on Over the Counter and regulated stock exchange markets.
XTB offers the possibility to trade contracts for difference on a broad range of commodity markets.
Oil, gold, silver, platinum, copper and many more are available for real trading.
Real time quotes, charts and analysis come as standard along with the real trading platform that XTB provides for all clients.
Trading Equity (Stock) Market with XTB
Stock exchanges are organizations, that provide facilities for brokers, corporate and individual investors to trade stocks, futures, options, bonds and other financial instruments.
All the instruments quoted on the regulated markets are standardized, that means typical nominal value, time to expiration, margin requirements and other typical characteristics.
The main stock exchanges in the world include the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) and the London Stock Exchange.
The markets in Frankfurt, Paris, Tokyo, Milan and Hong Kong also have a significant influence on world financial systems.
Access to stock exchanges for individual and corporate entities is possible through specialized brokers, that directly trade on the market on behalf of their clients.
Stock exchanges and all the market participants are strictly regulated by government organizations, which ensure a proper standard of quality in dealing and settlement of the transactions and relations between brokers, their clients and corporations offering its shares and bonds to the public.
Initial public offer (IPO) is one of the ways that companies can raise money from market funds that can be invested in further business development.
Contracts for shares and stock exchange indices, instruments that reflect the overall market conditions are also being offered on the Over The Counter Market (OTC).
In XTB’s offer, you may find Contracts For Difference on all the major equity markets of the world, as well as CFD for shares of American companies.
All are traded on-line, with real time charts, quotes and figures.
CFD Trading Examples
In order to help you understand more about CFD trading, we have 2 examples of CFD trading.
For more about CFD trading, you are recommended to open XTB’s demo trading account and practice trading with virtual money.
1. CFD Trading Example 1
Assume that the investor predicts a strengthening of the Euro currency against the US dollar because of a possible ECB interest rate rise in the market.
With 20,000 USD on XTB deposit account, he is certain of his view on the market and buys 2 EUR/USD CFD contracts at 1,2600.
Upon completion of this transaction the investor possesses an open position aimed at an increase in rate of EUR/USD worth 200 000 EUR.
The initial deposit for securing the transaction is equal to 1%*200 000 EUR * 1,2600 (current EUR/USD rate) = i.e. 2.520 USD.
The investor would gain profits if EUR/USD rate increases over 1,2600, whereas a price reduction below 1,2600 results in a negative balance on the transaction.
Rate of EUR/USD is 1,2500
The investor’s loss for 2 lots of EUR/USD CFD is:
200 000 EUR*(1,2500 – 1,2600) = – 2000 USD
He decides to hold the position and rolls it to next day.
Rolling operation is automatic. His account will be billed with swap point value for one day.
According to XTB’s table, swap points for 1 lot total is -10USD.
Investor’s account will be charged 2*10 USD= 20 USD
Rate of EUR/USD is 1,2620
The investor gains profit equal to:
200 000 EUR*(1,2620 – 1,2600)= 200 USD
The investor decides the profit is not rewarding and decides to hold the position for the next day.
Again his account is charged with 20 USD swap points value.
At 14:00 there is news concerning a possible decision about an ECB interest rate rise.The market is uneasy.
At 15:15 the EUR/USD rate is 1,2720, the ivestor decides that the current rate level is satisfactory and closes his position at 1,2720.
His profit is:
200 000*(1,2720 – 1,2600) = 3200 USD
However he incurred the cost of swap points for 2 days, so his net profit from the CFD transaction would be:
3200 USD -2*20 USD = 3160 USD
2. CFD Trading Example 2
The investor foresees the strengthening of the American currency against the Euro.
The investor holds 40.000 USD on his XTB investment account.
He decides that the current rate of GBP/USD is excessively high and sells 1.5 CFD contracts of GBP/USD at 1,8900.
As a result he has an open position aimed at a decreasing rate of GBP/USD worth 150.000 GBP.
Initial deposit for this position is equal to 1,5*1%*100.000 GBP i.e. equivalent of 1500 GBP in USD (2835 USD = 1500 GBP * 1,8900 GBP/USD).
The investor would earn a profit if GBP/USD rate falls below 1,8900, the result of the transaction would be negative once the GBP/USD rises over 1,8900.
Closing rate of GBP/USD is 1,9000
The investor’s loss amounts to:
150.000*(1,8900 – 1,9000)= – 1500 USD
Investor decides to hold the position and rolls it to next day.Because he sold GBP/USD, according to XTB’s table, his account will be credited with 1,5*5 USD = 7,5 USD, since swap points for GBP/USD on short position for one day are 5 USD
Closing rate of GBP/USD is 1,8920.
The investor decides that he misjudged the current situation on the market and closes the position.
The loss amounts to:
150’000*(1,8900-1,8920) = 300 USD
However, the investor earned on swap points so his net result from the CFD transaction would be:
-292,50 USD = – 300 USD + 7,5 USD
Forex and CFD trading risk management
Fluctuations in currency prices are one of the sources of risk that may influence the financial results of corporations or individuals having credits/liabilities in foreign currencies.
Assuming that the company:
- has assets or business operations across national borders;
- invests abroad;
- has credit or loanes in a foreign currency.
It follows that it is exposed to currency risk, as long as the management does not decides to hedge the positions.
Volatile exchange rate fluctuations that occurred during recent years had a significant influence on the financial results of many corporations, often weakening their position among competitors.
Moreover, higher volatility of exchange rates may lead to a decrease in incomes for exporters and more expensive goods for importers.
For the reasons described above, an increasing number of corporate clients are investigating the possibilities of currency risk management, looking for optimal solutions.
The derivative instruments offered by XTB Brokers enables one to manage the currency risk simply and cheaply.
High liquidity, with no hidden costs and easy access 24 hours a day – make CFD and financial options attractive and convenient tools to manage currency risk.
For further information please do not hesitate to contact us. Our Corporate Sales Department can be reached at +48 22 520 22 86/87.
Risk management – Key Factors of being profitable
Risk management represents a crucial element of the process of investment.
It focuses on dynamic stability and profit growth over time.
Management in this area means defining and following a set of rules regarding the amount of money to be invested, acceptable risk level, goals to be set and choosing the market for activity.
Proper risk management is critical for investment success.
The key factors of risk management are:
- Market exposure limits
- While setting the limits traders should take into consideration the market volatility, interest rates correlations and market potential.
- Cutting losses
- A trader should define and follow the closing losing positions rule which should be set before you enter the market (for instance 5% loss is the most you can accept).
- Using stop loss orders
- To prevent greater losses.
- Closing positions on weekend problem
- This should define the attitude of the trader towards the weekend price gaps problem.
Market Analysis on FOREX and other OTC markets
To earn money on FOREX, commodity or the equity market, a trader should either buy an asset and sell it higher or sell it and then buy back lower.
This however, is not that simple.
The key to a successful transaction is to know when the price is relatively low or high, and then is it going to fall or to rise?
In order to achieve that, traders basically use two types of investment analysis:
- Fundamental analysis
- Method of predicting exchange rate movement on the basis of economic and political data and factors, that influence supply and demand of currencies, commodities or equities and other markets.
- Technical analysis
- Method of predicting exchange rate movement and future market trends on the basis of charts, oscillators and other indicators constructed from historic exchange rates and turnover data.
In practice investors usually apply both investing techniques, combining methods and relying on their own investment experience.
1. Fundamental analysis
Fundamental analysis of the FOREX market can be based upon analysis of political and macroeconomic environment of the relevant countries, trend identification and its impact on the supply and demand for the given currency.
In order to achieve this aim it is advisable to follow the main political, economical and social processes and macroeconomic indicators related to the state of the economy of relevant countries.
Macroeconomic data publication of is one of the most important events “fundamentalists” closely watch.
Publicized by news agencies accordingly to specified calendar agenda, along with forecast for a given indicator.
If the actual value is equal to the prior prognosis, there should be no reaction on the market.
However, if there is a significant difference, the market is likely to respond nervously, according to the impact the publication has on the underlying economy, rewarding traders that correctly predicted the value of the indicator.
One of the characteristics of the FOREX market is its sharp reaction to macroeconomic data publications and thus discounting of future information.
An investor has to decide – is the data predicted by him already discounted by the market or not.
Publishing of commonly expected data will not have any major impact on the market, as it is almost certainly already discounted by the currency exchange rate.
Information is interesting only when it is not known to the public.
One of the most important factors in fundamental analysis is the monetary policy carried out by central banks.
Interest rates, open market operations and central banks interventions influence the situation on the market and are closely watched by financial analysts.
Natural and man made disasters like terrorist attacks, wars and catastrophes may have a significant impact on the currency market.
During a crisis investors come back to safe currencies like: American Dollar, Swiss Frank or Euro.
Statements by government officials, central bank presidents, or other officials related to international or monetary policy should also be followed closely.
Stability of the political environment improves the economy, attracting foreign direct investments and demand for local currency, whereas an unstable political situation may result in a massive withdrawal of invested assets and an increase in foreign currencies prices.
2. Technical analysis
Technical analysis is the forecasting of future market prices, based upon charts representing historical price movements.
Trades using technical analysis examine the history of market prices and the turnover of relevant financial instruments in order to identify the market trend and its possible changes.
Charts representing historical prices reveal various shapes and formations, traders using technical analysis methods claim that the formations occur on a regular basis and lead to similar market behaviors, continuation or change of the market trend. Unlike fundamental analysis, which evaluates overall market situation, technical analysis may be used to define the moment of entering and closing the market position.
Technical analysis is based on the following assumptions:
- Market discounts everything
- All the factors that have influence on the price are already discounted. It comes from the supposition that prices reflect changes in relation to supply and demand.
- Prices are subject to trends
- A technical analyst tries to discover a trend (actual direction in which prices follow) by analyzing the historical prices charts. Identification of the trend in its early stage of development may lead to profitable transactions.
- History repeats itself
- By studying the charts one can recognize repeatable formations drawn by the prices. It is a consequence of recurring human behaviors in specific situations. Analysts attempt to identify the price formations in the current market behavior and upon this basis forecast the future price movements.