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
Exploring the World of Day Trading
Are you looking into a career in day trading? In the past, the tools for day trading were available only to professionals. But thanks to the power of the Internet, everything you need to get started is now conveniently online. If you have a nose for business, guts and a sharp instinct for how the market shifts, the maybe day trading is the job for you.
Welcome to the World of Currency Trading
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 1.5 million in 1997. As a result, start-up firms now compete directly with financial institutions to serve investors in the new technologically driven economy, and the clear winner is the customer. The competition between the brick and mortar institutions and the Internet-based companies has dramatically lowered the costs of investing, and empowered the individual investor to take control of their own investment strategy in Forex trading.
Forex Signal, Forex Signals Advice
There are lot's of Forex signals providers out there. New Forex traders might be thinking of looking for a reliable Forex signals provider. Is there any reliable Forex signals providers available?
Forex Trading - Advantages and Disadvantages
What is Forex Trading?
Crisis of Confidence in the EU
The European Union (EU) constitution was dealt a double blow, first by a French "no" vote on 29-May and then by a follow on "no" from the Netherlands on 01-Jun. To add insult to injury, one low level Italian diplomat quickly called for a referendum in Italy to decide if a return to the lira was warranted. Additionally, Prime Minister Tony Blair, who took over leadership of the EU on 01-Jul, indefinitely postponed the British referendum on the EU constitution.
Business and the Forex
The business world is a complex web of supply and demand. Money and goods, physical or otherwise, pass through the global market every single day. To meet this exchange between one country and another, foreign exchange, or forex, was born. The term forex is used to refer to transactions involving the conversion of money of one country into that of another or to the international transfer of money and credit instruments.
Your Mother Could Make Money In Forex Trading
The question would be not whether she could but rather would she enter the Forex trading market. The Forex day trading arena is a veritable snake pit ripe for scam artists to bilk money out of unwary investors. On the other hand, it is a forum for educated traders with the correct education, tools, and trading strategy to make a handsome income.
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?
Trade Exit - How To Cut Losses And Let Profits Run
Cut your losses short and let your profits run. This is the essence of your trade exit rules.
Hedging Foreign Exchange Risks
The exchange rate of the Macedonian Denar against the major hard currencies of the world has remained stable in the last few years. Because of the IMF restrictions, the local Narodna (Central) Bank does not print money and there are no physical Denars in the economy and in the local banks.
ISO 4217 in Forex Trading
ISO 4217 is an international standard describing three letter codes to define the names of currencies established by the International Organization for Standardization (ISO).
6 Critical Factors For Successful Trading
Success in any profession can be broken down into a number of critical factors. Trading is no different. Does your trading tick all 6 boxes or are there any areas you need to work on:
Forex Made Easy for Everyone
Forex made easy is as simple as you would want it to be. The foreign exchange market is a worldwide market and according to some estimates is almost as big as thirty times the turnover of the US Equity markets. That is some figure to chew on. Forex is the commonly used term for foreign exchange. As a person who wants to invest in the forex market, one should understand the basics of how this currency market operates. Forex can be made easier for beginners to understand it and here's how.
Money Management, Part 1
There are some common mistakes I've seen traders make in the area of money management. First, let's understand what money management is all about.
Risk and Stock Trading Fees: The Two Barriers To Overcome If You Want A Successful Trading Career.
You know the old joke:
The Major Players in the Foreign Currency Exchange Market - FOREX
Since the US dollar is the centerpiece of the market,it is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 123.50 means that one U.S. dollar is equal to 123.50 Japanese yen.
Commodity Trading - Advantages and Disadvantages
What Is Commodity Trading?
Choosing A Forex Broker
With currency trading becoming ever more popular, the number of brokers is growing at a rapid rate. What should one look at when deciding which broker to open an account with? These are the important points to consider.
Is The U.S. Dollar About To Reverse Course?
For the first time in several years the U.S. dollar has managed to gain value against the world's other major currencies. During the first three months of 2005, the U.S. dollar is up approximately five percent against both the yen and the euro. The gains for the dollar should be considered significant when considering the United States still faces a growing trade imbalance. So far this year, currency traders have shifted their focus from the United States' large trade and current account shortfalls toward the higher rates of returns being offered on U.S. debt. The recent strength shown in the dollar has somewhat shifted sentiment within the financial markets about the future direction of the currency. A Bloomberg survey released earlier this week shows that the major currency traders expect to see dollar weakness resume later in the year, but the sentiment among dollar bears is much weaker than it was at the start of the year.
Foreign exchange market, or better known as FOREX, is the world's largest and most prolific financial exchange market originated on 1973. Bearing the status of largest and most prolific currency exchange market, FOREX is the center stage where a vast majority of the currency trading or FOREX trading takes place, with a total daily turnover of currency worth more than $1.2 trillion.
|© Athifea Distribution LLC - 2013|