Forex Trading Scenario

Forex Trading Scenario

Basic Forex Trading Scenario

forex trading scenario pictures
The amount of daily trading which takes place in this market is phenomenal, something in the region of $2 trillion!! How many zero’s is that? There are some basics of 24 hour a day trading scenario for forex to assist traders to take advantage of this 24/7 marketplace.

Forex Trading Rising Prices

If you believe that the euro will strengthen against the dollar you’ll want to buy euro now and sell it back later at a higher price.

• You buy euro >> We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 euro for 0.9875 USD or buy 1 euro for 0.9878 USD. In this example you buy euro 100,000, at the quote price of 0.9878 (ask price) per euro.

• The market moves in your favor >> Later the market turns in favour of the euro and the EURUSD is now quoted at Bid 0.9894 and Ask 0.9896.

• Now you sell your euro and get the profit >> You sell euro at a Bid price of 0.9894.

• The profit is calculated as follows >> Sell price-buy price x size of trade (0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit (Note that the profit or loss is always expressed in the secondary currency)

Forex Trading Falling Prices

If, on the other hand, you believe that the euro will weaken against the dollar, you’ll want to sell EURUSD.

• You sell euro >> We quote EURUSD at a Bid price of 0.9875 and Ask price of 0.9880 and you decide to sell euro 100,000 at a Bid price of 0.9875.

• The market moves in your favour >> The euro weakens against the dollar and the EURUSD is now quoted at bid 0.9744 and ask 0.9749.

• Now you buy back your euro >> You buy EUR at an ask price of 0.9749.

• Your profit/loss is then >> Sell price-buy price x size of trade (0.9875 minus 0.9749) multiplied by 100.000 = USD 1260 Profit. Remember that trading EUR 100,000 as we have done in our examples, does not mean that you have to put up euro 100,000 yourself. On a 2% margin means that you have to deposit 2.0% of euro 100,000, which is euro 2,000 on margin as a guarantee for the future performance of your position.