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 Mon. August / 10 / 2020
A guide to forex trading instruments The Boca Raton Tribune
Trading Forex: 5 Things You Have To Know Before You Start Wealth Morning
How the Coronavirus has impacted Forex trading Nairametrics
Forex: best currency pairs to trade at night Capital.com
Three essential facts about trading forex in Australia Inside Retail
Timing Entry And Exit When Forex Trading NuWire Investor
Tiny ETF With Massive Discount ETF.com
Top 3 South African Forex Brokers - 2020 Securities.io
Trading Support and Resistance DailyForex.com
Dominant Currencies and the Limits of Exchange Rate Flexibility International Monetary Fund
EUR/NZD 4H Chart: Breakout Could Occur Action Forex
The Analytical Overview Of The Main Currency Pairs Action Forex
AUD/USD Decline Likely To Continue Action Forex
Euro Trading A Tad Higher In The Morning Session Action Forex
Using Forex Fundamental Analysis DailyForex.com
Forex Forecast: Pairs in Focus DailyForex.com
How to trade online with your smartphone KnowTechie
CCL Industries Signs Agreement to Acquire Graphic West GlobeNewswire
Weekly Forex Forecast DailyForex.com
GBP/INR Extends Correction, Trades Below 98.00 Currency Live
Currency News: US Dollar (USD) Exchange Rate Fluctuates on US Stimulus Uncertainty - TorFX News - TorFX News
Currency News: US Dollar (USD) Exchange Rate Fluctuates on US Stimulus Uncertainty - TorFX News TorFX News
Revolut launches in Australia: How does it compare to rival neobanks and fintechs? - finder.com.au - finder.com.au
Revolut launches in Australia: How does it compare to rival neobanks and fintechs? - finder.com.au finder.com.au
What is the exchange rate of EUR (Euro) / GBP (British Pound Sterling) on Friday August 7, 2020 - Born2Invest
What is the exchange rate of EUR (Euro) / GBP (British Pound Sterling) on Friday August 7, 2020 Born2Invest
Aussie Reverses Its Losses In The Asian Session Action Forex
EURUSD 1.1800 Struggle Action Forex
GBP/USD Technical Analysis: Awaited Threat to Recent Gains DailyForex.com
USDJPY 106.40 Possible Action Forex
What is Forex Trading? How to Trade Online Securities.io
EURUSD 1.1750 Key Action Forex
What is the Forex Market? Securities.io
GBPUSD Bearish Under 1.3070 Action Forex
USD/PKR: Pakistan Rupee Declines As Oil Jumps 1.7% Currency Live
Everything To Know About Getting Into Forex Trading GQ Australia
Forex Brokers: Are They a Scam? | Investing | US News U.S News & World Report Money
Avoid risk related to BITCOIN – for the rapid growth | Invision Game Community - Invision Game Community
Avoid risk related to BITCOIN – for the rapid growth | Invision Game Community Invision Game Community
What is Margin in Forex? Securities.io
What Is Forex Trading and How Does it Work? Money and Markets
EUR/USD Technical Analysis: Volatility May Increase DailyForex.com