Forex Trading Examples

April 22, 2014

Forex Examples | Vantage FX Education

How do Forex trades work on a basic level?

Please be advised:

  • 1 lot equals 100,000 of the first named currency on the MetaTrader 4 platform
    • Pip values are calculated in the second named currency
      • Profit is calculated by (sell price – buy price) x contract size
        • Profit is converted to the account currency by the price quoted in the currency/exchange rate
          •  

            Example 1

            A client buys 1 lot of AUD / USD @ 0.9169
            The position is closed @ 0.9179 Profit / Loss is calculated as 0.9179 – 0.9169 x 100,000 = US$100
            The profit / loss is converted to the account currency by the following calculation: 100 / 0.9179 = $108.94

            Example 2

            A client sells 0.5 lots of EUR / GBP @ 0.8333
            The position is closed @ 0.8403. Profit / Loss is calculated as 0.8333 – 0.8403 x 50,000 = -GBP£350
            The profit / loss is converted to the account currency by the following calculation: 350 / 0.5923 = -$590.52

            Example 3

            A client buys 0.5 lots of AUD / JPY @ 77.35
            The position is closed @ 78.20 Profit / Loss is calculated as 78.20 – 77.35 x 50,000 = JPY¥42,500
            The profit / loss is converted to the account currency by the following calculation: 42,500 / 78.20 = $543.48

            Now that you have seen how trades work on a basic level, it’s now time to add a more technical aspect to your trading – charts. Forex charting will help you analyse and determine which way the currencies will move or have moved.

            Lesson Four: Charting »

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