HOW TO TRADE FOREX-Part-2 ?

After the currency is bought, if the change in the rate is favourable, the trader sells and gains profit from the difference in the rates. That is, he concludes the transaction. At the moment the transaction is done, the credit is automatically closed, the collateral remains at the trading account of the trader as well as the gained profit – in full. That is the mechanism that makes it possible to gain good profit that sometimes exceeds the collateral used in the transaction even if the change in the currency rate is not big. The risk of the trader is limited only by the collateral.

Let us examine one transaction with the rate of euro to dollar. This rate (cross-rate) is designated as EUR/USD and shows the cost of EUR, which is expressed in USD. Traditionally, the exchange rate (quote) is represented at any moment with a five-digit number. The last digit in this number is called point (pip). Now let’s see how one can do a transaction.

Assessing the situation on the market, the trader makes a decision about buying EUR/USD (see the figure) from the 1.2500 level. At the level of 1.2530 he closes the transaction.

By doing that, the trader got a profit of 30 points.

Suppose that the trader used USD 1,250 for the transaction. At the moment of buying, the dealing centre automatically provided him with 1:200 leverage.

The volume of the transaction being 2 lots (1 lot = 100,000 units of the base currency) of EUR 200,000.00 of base currency or USD 250,000.00, the cost of a point for the EUR/USD currency pair is USD 20, i.e. the profit from the transaction was USD20*30 points = USD600.

As we can see, even a change of the prices by 30 points can bring good profit, and daily fluctuations of currency rates on the Forex market achieve sometimes several hundred points!

To try trading on FOREX, to learn doing transactions, one needs to just fill in the registration form and download FXD Trading Terminal, install it on his computer and open a free demo-account to train. The demo-account is provided by our company. The time of operation of the account is unlimited. Any initial amount (of virtual money) can be set up at the account as collateral. All terms of trade at the demonstration account conform fully to the real terms: current market quotes, rate charts, procession of transactions, spreads and other parameters.