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Forex Trading Examples

Forex Trading Examples

Compiled below are Forex trading examples. Please note that these are just examples; be aware that trading Forex is speculative and involves significant risk.

USD/CHF Trading Example

An investor deposits $10,000 in a Markets.com Trading Account.

The account is set to 0.5% margin or 200:1 Leverage. This means that for every 5,000 lot opened, the investor must maintain at least $25 in Margin (= $5,000 x 0.5%).

The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy $ 100,000 of the USD/CHF pair.

Day 1 – USD/CHF Quotes = 1.0147-1.0150

The market quotes USDCHF 1.0147-1.0150. The investor buys USD at 1.0150 against CHF.

By doing this, he commits in the simultaneous buying of USD 100,000 (20 lots at $5,000) and the selling of CHF 101,500 (= $100,000 x 1.0150) by using $500 as a Margin (= $100,000 x 0.5%) and borrowing USD 99,500 from Markets.com (= $100,000-$500)

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(1) Balance = Deposit ($10,000) + Sum of Realized Profit & Loss ($0) = $10,000

(2) Equity = Balance ($10,000) + Sum of Unrealized Profit & Loss ($0) = $10,000

(3) # Lots open = Investment ($100,000) / Value of one lot ($5,000) = 20 lots

(4) Used Margin = # Lots open (20) x Value of one lot ($5,000) x Margin (0.5%) = $500

(5) Usable Margin = Equity ($10,000) – Used Margin ($500) = $9,500

Day 2-USD/CHF Quotes = 1.0300-1.0303

The US dollar has risen and the USD/CHF quotes 1.0300-1.0303.

The investor decides to take his profit and enters a sell market order in the Market trading platform. The order is executed instantaneously and the investor sells 20 lots of USDCHF at 1.0300.

By doing this, he commits in the simultaneous selling of USD 100,000 (20 lots at $5,000) and the buying of CHF 103,000 (= $100,000 x 1.0300).

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