My "Real Quick" Guide to Forex Trading
The Forex trading market has the largest growing number of traders. They come and trade in all shapes and sizes, in all manner of ways. The number of traders joining the fray each day multiplies and as they do, it increases the currency in circulation which currently rates at between 3 and 4 trillion dollars DAILY!
Now, 95-98% of traders lose money. Think about it. 95-98% of traders lose money. So prepare yourself. Forex trading is lucrative for the 2-5% of winners and that is where you want to be but you will be nowhere near the mark unless you know what you are doing.
You can do it so bear with me. Let's see what Forex trading means in real money terms. Here's a typical trade scenario:
Let's say the current bid/ask quote for the EUR/USD is 1.3802/05 and you want to take a long (or Buy) position because you believe the Euro will gain on the Dollar.
We'll also assume that you are only buying 1 Standard Lot.
When you buy this pair, you are actually buying 100,000 Euros for $138,050 US Dollars. Using leverage, at 100:1, you would need to have an initial margin deposit of $1,381 for this trade to take place.
Let us then assume that the Euro indeed gains on the Dollar and trades now at 1.3865/68 and you decide to sell and take your profits. You would sell you 1 Standard Lot at a profit of 60 pips (1.3865-1.3805).
When you sell this pair, you are selling 100,000 Euros for $138,650 US Dollars. Since you bought the 100,000 Euros for $138,050 and sold them for $138,650, you made a cash profit of $600.
If on the other hand the Euro went down to 1.3775/78 and you sold at 1.3775, you would have a loss of 30 pips, or $300. ($138,050-$137,750).
When using margin and leverage, it is imperative that you employ sound risk management rules to ensure that your account equity never falls below margin requirements. Of course, if it does, your position will be automatically liquidated and you will sustain a significant loss.
Otherwise, that is all there is to it! So, off you go, go get an education and make some serious money.
Now, 95-98% of traders lose money. Think about it. 95-98% of traders lose money. So prepare yourself. Forex trading is lucrative for the 2-5% of winners and that is where you want to be but you will be nowhere near the mark unless you know what you are doing.
You can do it so bear with me. Let's see what Forex trading means in real money terms. Here's a typical trade scenario:
Let's say the current bid/ask quote for the EUR/USD is 1.3802/05 and you want to take a long (or Buy) position because you believe the Euro will gain on the Dollar.
We'll also assume that you are only buying 1 Standard Lot.
When you buy this pair, you are actually buying 100,000 Euros for $138,050 US Dollars. Using leverage, at 100:1, you would need to have an initial margin deposit of $1,381 for this trade to take place.
Let us then assume that the Euro indeed gains on the Dollar and trades now at 1.3865/68 and you decide to sell and take your profits. You would sell you 1 Standard Lot at a profit of 60 pips (1.3865-1.3805).
When you sell this pair, you are selling 100,000 Euros for $138,650 US Dollars. Since you bought the 100,000 Euros for $138,050 and sold them for $138,650, you made a cash profit of $600.
If on the other hand the Euro went down to 1.3775/78 and you sold at 1.3775, you would have a loss of 30 pips, or $300. ($138,050-$137,750).
When using margin and leverage, it is imperative that you employ sound risk management rules to ensure that your account equity never falls below margin requirements. Of course, if it does, your position will be automatically liquidated and you will sustain a significant loss.
Otherwise, that is all there is to it! So, off you go, go get an education and make some serious money.
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