Forex Trading Example

Let’s assume that the EUR/USD current exchange rate is 1.3088 / 1.3090. Based on some technical analysis you have assumed that the euro is going to rise in value. That is why you make a decision to buy 10,000 EUR (0, 1 lot) at 1.3090 (the ask price). So, you bought 10,000EUR and paid 13,090 US Dollars for that.

No one has to have that 13,090 US Dollars in order to buy Euro. Your deposited money may be much less, but due to the leverage provided by the broker you will have the opportunity to trade with high volumes. You just need to deposit an amount, which is considered to be the margin for providing you with higher virtual credit amount. For example, you may have leverage of 1:100. In this case you need to have only 130.9$ deposited on your account so as to open such position.

If your predictions come true, and Euro has risen to 1.3199/1.4001, you then decide to sell it. In this case you have to sell your Euros at Bid price (1.3199). Thus, you are buying back the USD, but selling the Euro at higher price (1. 3199). So, we end up with 13,199 USD. As the company takes the 13,090 USD, our profit becomes 109$.

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)