Forex Basics: The Complete Forex Trading Process

As the so-called combination of theory and practice, I will share with you the whole process of trading in this lesson. Here I would like to remind everyone that if you do not have a thorough understanding of the concepts we mentioned earlier, this article may seem very difficult. Please refer to the previous content according to the situation. Without further ado, let's get down to business.

Suppose we have $10,000 in our account, and the leverage provided by the trader is 100:1. At this time, the quotation of eurusd is: 1.1140/1.1142. Through analysis, you think that the euro will rise sharply, so you are going to establish a long position of 1 lot of euro , which is 100,000 euros. According to the quotation, 100,000 euros = 111,420 US dollars, so you spent 111,420 US dollars to buy 100,000 euros. After a while, you found that eurusd really rose by 30 points. Now the price of eurusd is 1.1170/1.1172, according to The quotation at this time is 100,000 euros = 111,700 US dollars, so you sell the 100,000 euros in your hand and exchange them for US dollars, then 111,700-111,420 = 280 US dollars, and your account balance will change from the original 10,000 US dollars to 10,280 US dollars. So here comes the question, why did we only make a profit of 28 points when it rose by 30 points? 30-28=2, the 2 points here are the "spread" between the BID and ASK prices we said yesterday, and this part of the money is earned by traders.

​Still the above example, because the leverage ratio is 100:1, so when we first started buying euros, we only need to pay a margin, that is, 100,000 euros/100=1000 euros=1114.2 US dollars, and we can trade 1 lot of euros deal. Later you earned another 280 US dollars, then 280/1114.2=25.1%, do you feel very happy at this time? But I would like to remind everyone here that leverage is a double-edged sword. Still the above example, if the exchange rate of eurusd did not rise, but fell by 30 points, it became 1.1110/1.1112. At this time, according to the quotation, 100,000 euros in our hands = 111,100 US dollars. After calculation: 111100-111420=-320, we will lose money Similarly, due to the existence of the point difference, although the euro fell by 30 points, we lost $320, and the balance of the account became $9680.

I have told you before that the general platform merchants will force liquidation when the margin is insufficient. For example, when the margin ratio is less than 100%, they will force liquidation. In this example, if we buy 1 lot of euros , the balance of the account becomes 10000-1114.2=8885.8 US dollars. Since the exchange rate is constantly changing, if our loss reaches 8885.8 US dollars, the platform will force the liquidation.

In the example we just bought, the point value of each point is 10 US dollars. In order to prevent investors who have no time to keep an eye on the market from being unable to close their positions, and also taking into account the degree of tolerance, a "stop loss" is set. in principle. Still in this example, we can set the stop loss at 1.1120. Once the price touches 1.1120, the platform will automatically close the trading order in your hand. If there is a stop loss, there is a take profit. They are corresponding. If we set the take profit price to 1.1160, then when it reaches 1.1160, the platform will automatically close the order.

Through the above introduction, I believe that everyone has already understood the whole process of foreign exchange trading. I will share this today. Thank you for your patience in reading. See you tomorrow! ​