Process of Trading Forex

 

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. Moreover, it is always vital that traders make decisions without forgetting their intuitions as a guiding tool on the trust they give to themselves which is ultimately the reason why most traders succeed.

 

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. On the event your analysis tells you that the Euro will eventually gain on the dollar; so, you buy 2 Standard Lot in the market. Buying 2 Standard Lot on the current ask quote will actually cost you 6,180 US dollars.

 

The initial margin deposit for this trade is $ 2962.The leverage we use is 100: 1 which is the accepted leverage in the market.

 

Fortunately, the market marks the Euro gaining over the Dollar and the new trade 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.It will actualize a price of 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. With this forex trading strategy, you will be losing $ 340 US dollars when you trade forex.