Forex: Ways To Trade

Posted on February 8, 2010
Filed Under Investments | Leave a Comment

 

Forex trading is a simple area; one must erase the idea that it is the most complex type of business and try to learn forex trading strategies. It is essential to compare information and make decisions from them but always remembering that judgment must be supported with specific valid reasons to ensure the reliability of the conclusion. Furthermore, traders need the essential ability of trusting intuition which can be said is relied mostly to luck.

 

In its simple idea, Forex has simple calculations. The system of Forex is shown:

 

For instance, the market bid for the EUR/USD is 1. 4806/09. If the euro will gain on the dollar, you will be buying 2 standard Lot in the Forex market. It will cost you 6,180 US dollars when you buy the 2 Standard Lot.

 

You need to make an initial margin deposit of $ 2962.The leverage we use is 100: 1 which is the accepted leverage in the market.

 

At an opportune time, let us assume that the euro gains over the dollar and the bid is now at $ 1.4903/06.With the current market bid, you decide to sell your 2 Standard Lot to gain profit of 100 pips.Selling your pair will actually sell 200, 000 Euros for $ 298, 060 US dollars. To compute the amount you will get out of this trade, you need to subtract $ 298, 060 US dollars and $ 296, 180 US. The amount you will be earning in this trade is $ 1880 US dollars.

 

But, if the ask quote or market bid fro Euro will fluctuate, lets assume the new bid is $ 1.4783/06.By this ask quote, when you sell your 2 Standard Lot it will only amount to $ 295 720 US dollars. In this forex trading strategy, you will lose $ 340 US dollars as the difference between the selling price and the buying price which is higher than the selling price.

 

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