Currency Trading Information Channel
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 EURO.
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 EUR).
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 104.26
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 website: http://www.1-forex.com
MORE RESOURCES updated Fri. November / 22 / 2019
Global Currency Exchange Software Market Delivers Key Players Analysis, Regions and Applications 2019-2024 - Eastlake Times
Global Currency Exchange Software Market Delivers Key Players Analysis, Regions and Applications 2019-2024 Eastlake Times
Five Chinese awaiting deportation after being arrested in Phuket over illegal FOREX trading - The Thaiger
Five Chinese awaiting deportation after being arrested in Phuket over illegal FOREX trading The Thaiger
The Best 5 Tips for Forex Trading Beginners - VENTS Magazine
How To Start Out In Forex Trading Latin Post
Why are forex trading signals important? ForexLive
Indian-origin trader convicted for price fixing, bid rigging in foreign currency exchange market - Times of India
Indian-origin trader convicted for price fixing, bid rigging in foreign currency exchange market Times of India
Currency trading floors seem to have glass ceilings for women looking to move into management - The National
Currency trading floors seem to have glass ceilings for women looking to move into management The National
GBPUSD trades to new session lows ForexLive
Top 5 Reasons Why You Should Start Forex Trading Business Review
When robots meet humans in forex trading Born2Invest
Chinese 'tourists' arrested in Phuket for illegally operating foreign exchange online - The Phuket News
Chinese 'tourists' arrested in Phuket for illegally operating foreign exchange online The Phuket News
Currency, trading and plot: The Tipline for 5 November 2019 Global Competition Review
Bitcoin plunges below $8,000 after 7 straight days of declines | Currency News | Financial and Business News - Business Insider
Bitcoin plunges below $8,000 after 7 straight days of declines | Currency News | Financial and Business News Business Insider
Govt urged to embrace online forex trading The Zimbabwe Standard
Ebury nabs £350M for foreign exchange and currency services for SMEs, Santander takes 50.1% stake - TechCrunch
Ebury nabs £350M for foreign exchange and currency services for SMEs, Santander takes 50.1% stake TechCrunch
Dollar Extend Slide on Trump-Powell Meeting, Risk Unperturbed by Currency, Trade War Risks - DailyFX
Dollar Trade Wavers in Tokyo DailyForex.com
Eight key terms you need to know before getting into forex trading Standard Digital
The Analytical Overview Of The Main Currency Pairs Action Forex
Ion Group buys currency software supplier MarketFactory Financial Times
EUR/JPY Remains Below 120.60 Action Forex
Loonie Trading A Tad Higher In The Asian Session Action Forex
Forex Trading for Beginners Yahoo Finance
USDJPY Sell Rallies Action Forex
EURUSD 1.1045 Key Action Forex
Currency Trading for Beginners Benzinga
What Is Forex Trading and How Does it Work? - RushPRnews.com
How to Invest in Forex | The Smarter Investor U.S. News & World Report
Is forex trading profitable? Capital.com
Your first 5 minutes as a forex trader ForexLive
Retail forex trading set to go live today Economic Times
A Guide to Trading Forex in Canada Benzinga
How Does Forex Trading Work? FinSMEs
Forex tips for trading the GBP/USD ForexLive
Never lose hope in currency trading business Rocky Mountain Collegian
Top 8 Mobile Apps for Forex Trading Techzone360
What is forex trading and why it is going strong in 2019? Business MattersBusiness Matters
Learn the Basics of Trading Currencies FX Empire
How to be a forex expert ForexLive
The currency-trading scandal continues to dog the banks The Economist
Listless currency markets frustrate forex traders, Companies & Markets News & Top Stories - The Straits Times
Listless currency markets frustrate forex traders, Companies & Markets News & Top Stories The Straits Times
Best platform for Forex trading Augusta Free Press