Forex Trading Examples
Forex Trading Examples
In order to be able to better understand the trading of foreign exchange and how real traders are able to obtain the profits offered in the foreign exchange trading market, some examples may be required. Thus, the example which is about to be provided below may be worth to read.
Assume that there is a foreign exchange trader with the possession of US$ 100,000 margin deposit in his bank account. Now the trader wants to raise his money against another currency, let’s say the Franc currency of Swiss. Because of this, he makes up his mind to purchase as much US$ 2,000,000 and he subtracts it with 2 percent off the maximum exposure applicable for him at the margin Forex gearing of 1 percent.
The dealer of the bank in which he deposits his money quotes 1.5515-20 to him. The trader then purchases his USD currency at 1.5520.
On the first day, he purchases as much US$ 2,000,000 versus as much CHF 1.5520. That equals selling as much CHF 3,104,000.
Then, four days after the first day, fortunately for the trader, the currency of US Dollar has increased up to CHF 1.5745. The trader then, of course, makes up his mind to take his available profit.
The trader then made another request to the bank and this time his bank dealer quotes him as much 1.5745-50. This means that the foreign exchange trader has made a sale at 1.5745.
On the next day, the lucky foreign exchange trader sells as much US$ 2,000,000 versus as much CHF 1.5745. This has the same meaning that the trader buys as much CHF 3,149,000.
Now, because there is a debit as well as the credit with the exactly same value of US$ 2,000,000 for the USD currency of the foreign exchange trader, his account that is deposited in USD will look just as how it looked before. Yet, his CHF account reveals to him a debit of as much CHF 3,104,000 as well as a credit of as much CHF 3,149,000. This gives some profit to the lucky trader.
The trader gets as much CHF 45,000 profit. This profit equals around as much US$ 28,600. The percentage of the profit he gets achieves the number 28,6% on his deposit which is as much US$ 100,000.
Bear in mind that this example has excluded the swap of interest rates in order to simplify it.
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