FOREX TRADING EXAMPLES

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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 one lot opened of 100,000 the investor must maintain at least $500 in Margin (= 100,000 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 (1 lot of $100,000) 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)

  • Transaction Flows Report – Day 1
Account Name Credit/Debit Day 1 Comment
USD Account C USD +100,000 $100,000 Investment
CHF Account D CHF -101,500 # lots (1) x lot value ($100,000) x USDCHF Quote (1.0150)
  • Client Account Report – Day 1
Balance (USD) Equity (USD) Lots Open # Used Margin (USD) Usable Margin (USD)
$10,000 $10,000 20 $500 $9,500
(1) (2) (3) (4) (5)

(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 ($100,000) = 1 lot

(4) Used Margin = # Lots open (1) x Value of one lot ($100,000) 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 1 lot of USDCHF at 1.0300.

    By doing this, he commits in the simultaneous selling of USD 100,000 (1 lot at $100,000) and the buying of CHF 103,000 (= $100,000 x 1.0300).

  • Transaction Flows Report – Day 2
    Account Name Credit/Debit Day 1 Day 2 Comment
    USD Account D USD +100,000 USD -100,000 Sell # lots (1) x lot value ($100,000)
    CHF Account C CHF -101,500 CHF +103,000 Buy # lots (1) x lot value ($100,000) x USDCHF Quote (1.0300)
The dollar side of the transaction involves a credit and a debit of USD 100,000, the investor’s USD account will show no change.The CHF account will show a debit of CHF 101,500 and a credit of CHF 103,000. This results in a profit of CHF 1,500 = approx. USD 1,456 (= CHF 1,500 / 1.0303) which represents a 14.56% profit on the deposit of USD 10,000.

  • Client Account Report– Day 2 (AFTER TRADE EXECUTION
Balance (USD) Equity (USD) Lots Open # Used Margin (USD) Usable Margin (USD)
$11,456 $11,456 0 $0 $11,456
(1) (2) (3) (4) (5)

(1) Balance = Deposit ($10,000) + Sum of Realized Profit & Loss ($ 1,456)= $11,456

(2) Equity = Balance ($11,456) + Sum of Unrealized Profit & Loss ($0) = $11,456

(3) All positions are closed, therefore # Lots open = 0

(4) Used Margin = # Lots open (0) x Value of one lot ($5,000) x Margin (0.5%) = $0

(5) Usable Margin = Equity ($11,456) – Used Margin ($0) = $11,456

Note: For simplicity’s sake, we have disregarded the effect of difference in interest rate between USD and CHF over the 2-day period which would have marginally altered the profit calculation.

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