Example of a Profitable Transaction in FOREX
To make a profit, in the FOREX, a trader can enter the market
as a *buy position* (known as going "long") or a *sell
position*(known as going "short").
For discussion, let's assume you've been studying the
Your trading methods, rules, strategies, etc., tell you that
prices will rise during a particular timeframe. So you buy the
EUR/USD pair (or, technically, you will simultaneously buy euros,
the base currency, and sell dollars).
You open up your handy trading station software (provided to
you for free by the online broker), which resides on your
desktop, and you see that the EUR/USD pair is trading at:
REMEMBER: the quote to the left of the / (1.3242) refers to
the bid or "sell" price (what you obtain in USD when you sell
EUR). The quote to the right of the / (1.3245) is used to obtain
the ask or "buy" price (what you have to pay in USD if you buy
So, since you believe that the market price for the EUR/USD
pair will go higher, you will enter a *buy position* in the
market. For simplicities sake, let's say you bought one lot at
1.3245. As long as you sell back the pair at a higher price, then
you make money.
But, no worries. This seemingly elaborate process is handled,
and even calculated for you, via the broker's software mentioned
above. The chart software and the quote board are in agreement
with all sides of the currencies.
To illustrate a typical FX SELL trade, consider this scenario
involving the USD/JPY currency pair:
REMEMBER ~ Selling ("going short") the currency pair implies
selling the first, base currency, and buying the second, quote
currency. You sell the currency pair if you believe the base
currency (USD) will go down relative to the quote currency (JPY),
or equivalently, that the quote currency (JPY) will go up
relative to the base currency (USD).
NOTE: while the Profit Calculations, on the Short-sell trade
scenario below, may seem somewhat complicated if you've never
been in the FOREX market before, trust us when we say, "this
process is nearly seamless through your broker trade station
(software). We're just showing you this thought-process below so
you can SEE how a PROFIT occurs even when
SELLING a currency pair.
The current bid/ask price for USD/JPY is 105.26/105.30,
meaning you can buy $1 US for 105.30 Japanese YEN or sell $1 US
for 105.26 YEN.
Suppose you decide that the US Dollar (USD) is overvalued
against the YEN (JPY). To execute this strategy, you would sell
Dollars (simultaneously buying YEN), and then wait for the
exchange rate to rise.
So you make the trade: selling US $100,000 and purchasing
10,526,000 YEN. (Remember, at 1% margin, your initial margin
deposit would be $1,000.)
As you expected, USD/JPY falls to 104.26/104.30, meaning you
can now buy $1 US for $104.30 Japanese YEN or sell $1 US for
Since you're short dollars (and are long YEN), you must now
buy dollars and sell back the YEN to realize any profit.
You buy US $100,000 at the current USD/JPY rate of 104.30, and
receive 10,430,000 YEN. Since you originally bought(paid for)
10,526,000 YEN, your profit is 96,000 YEN.
To calculate your P&L in terms of US dollars, simply
divide 96,000 by the current USD/JPY rate of 104.30.
Total profit = US $920.42
Omar Vargas is a freelance writer with articles published in a
number of places. You can learn more about Forex trading and its
great advantages over other kind of business at this useful
MORE RESOURCES updated Fri. August / 07 / 2020
Online Stock Trading:
Freedom of Trade
I remember the first time I started to trade online. It was
just before the tech bubble of the late 1990's and the
internet was still something new for most people.
FOREX 101: Make Money
with Currency Trading
For those unfamiliar with the term, FOREX (FOReign EXchange
market), refers to an international exchange market where
currencies are bought and sold. The Foreign Exchange Market
that we see today began in the 1970's, when free exchange
rates and floating currencies were introduced.
Chinas New Currency
The base unit for the renminbi is the yuan, which is how
the Chinese currency is most commonly referred to. The
official ISO abbreviation for the yuan is CNY, but it is
also commonly abbreviated in the forex industry as RMB.
The Nature of the
Consider the following: As a trader you are in a business.
Your strongest opponent has plenty of capital.
It is possible to buy and sell money from different
countries on the foreign exchange market called Forex.
Forex currency traders can profit by taking advantage of
the dips and swells in the foreign currency market.
Why Demo Account
Performance Is Often Better Than Real Account
Over the past several years, the popularity of online
currency trading has grown substantially. Each day, online
FX brokerage firms attract new investors - each of them
lining up with a glint in their eye, lured in by promises
of easy money.
There are many types of investment methodology out there.
All of them has their own merits.
Day Trading - Moving
Averages vs Support and Resistance
When day trading the SP and Nasdaq futures, do you rely on
your moving averages more than your support & resistant
areas?During the first hour of trading, the support and
resistance zones on the SP and Nasdaq futures are the most
important things to watch. The moving averages have not yet
had a chance to come into play.
Forex Scams: How to Spot
Them A Mile Away
In recent years, investors have witnessed increased number
of investment opportunities and offerings. While the
complexity and success of these investment products vary,
technological innovation has made the Forex market one of
the fastest growth areas.
How Do Other Countries
Devalue Their Currencies?
Countries devalue their currencies only when they have no
other way to correct past economic mistakes - whether their
own or mistakes committed by their predecessors. The ills of
a devaluation are still at least equal to its advantages.
Forex Trading Can Be
Forex trading, or foreign currency trading, has become a
bit of a craze of late, especially since it is something
available to anyone who owns a computer. And anyone who is
willing to put in some training time can profit from forex
The Seven Most Traded
Currencies in FOREX.
Currencies are traded in dollar amounts called "lots". One
lot is equal to $1,000, which controls $100,000 in
Getting a Forex Trading
Many Americans are interested in getting involved in forex
trading. Before doing this, you should get a forex trading
The Margin Advantages of
There is one aspect that is considered as one of the best
advantages of FOREX Trading. This is related to the amount
of money you need to place a trade, this is known as
"margin", and in short, this is all that can be lost in a
the case you had a bad trade.
Risk and Stock Trading
Fees: The Two Barriers To Overcome If You Want A Successful
You know the old joke:" How do you make a million in the
stock market? Start with two million?" There is no way
around it, risk and stock market fees are a part of trading
that you can't avoid. But, you can manage your risk.
5 Questions You Need To
Have Answered Before You Back-Test Your Forex
As 90-95% of new forex traders lose money within the first
3-6 months this article helps to guide new forex traders by
asking 5 questions that the forex trader needs to know
prior to back-testing their forex system.Let us jump right
Trading Tips No 1: Learn
How to Trade The Moment of Truth
So you have learned how to trade the markets by mastering a
few trading tools like Moving Averages, Channels,
Stochastics, MACD, or RSI - that is a great accomplishment
achieved by only a few. However, having the tools and rules
to trade markets successfully, year in and year out, is
only half of the challenge.
Forex Trading Online - 7
Reasons Why You Should!
Forex trading online is a fast way to use your investment
capital to it's fullest. The Forex markets offer distinct
advantages to the small and large traders alike, making
Forex currency trading in many ways preferable to other
markets such as stocks, options or traditional futures.
Forex Options Market
The forex options market started as an over-the-counter
(OTC) financial vehicle for large banks, financial
institutions and large international corporations to hedge
against foreign currency exposure. Like the forex spot
market, the forex options market is considered an
Welcome to the World of
Indeed large multinational and individual banks and other
major financial institutions have dominated FX trading
(also known as Forex trading), but there is a paradigm
change in the nature and type of investing. According to
one estimate, in the new millennium, there are over 6
million online investment accounts, up from 1.
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