Online Forex Trading Practice
Let’s do the simulation online forex trading with the currency pair GBP/USD (pounds sterling and u.s. dollars).
One time, one of major pair on the online forex trading GBP/USD showing the bid price and the ask price of 1.2800 1.2804. If the time you estimate the value of GBP will strengthen/up, then you take a position BUY EUR/USD at 1.2804. After some time, the price will change. Could move up, could also move down.
An Example Of The Practice Of Getting Money From Online Forex Trading
Let’s do the simulation with the currency major pair Online Forex Trading GBP/USD (pounds sterling and u.s. dollars).
If Your estimate is true, the value of the GBP/USD will move up. For instance, up to the number written on the box scenario 1. Well, that’s your chance to be able to realize a profit by doing CLOSE (Sell) GBP/USD at 1.2820.
From 1 Online Forex Trading transactions, profit is: 1.2820-1.2804 = 16 Pip (Pip is the smallest price movement is possible in currencies).
Well, now the question is, what if it turns out that the price of GBP/USD moving toward a different, or not in accordance with Your estimate?
For example ajor Online Forex Trading pairs GBP/USD turned out even down to the number as listed on the box scenario 2. If you do CLOSE (Sell) in this position, means: 1.2770-1.2804 =-34 Pips (you lose 34 Pips).
Thank God, in Online Forex Trading, when You do this CLOSE, depending on the analysis and it is up to you. What is the estimated GBP/USD will continue to fall? If so, then it should Close now to minimize the losses. Or are you sure GBP/USD will be back up? If so, please Close it now, wait for the price climb back to profit.
Simple, isn’t it!?
PIP you get here is an advantage for you. It’s just that, to turn its advantage in the form of pip became money, necessary calculations again.
Calculate Forex Trading Profits
PIP will be how much money/dollar, depending on the number of lots and the large contracts that you use.
Number of lots is the Volume of transactions that you enter on the form order when the open position Online Forex Trading. While the big contracts are usually attached within the account type that you selected when opening accounts at online forex broker.
Generally, there are three types of contract:
- Contract standard in Online Forex Trading: 100.000 units (one hundred thousand units; if we trade with the base currency us dollars, then it could be called a hundred thousand USD).
- Mini contract in Online Forex Trading: 10.000 units (ten thousand units; if we trade with the base currency us dollars, then it could be called the ten thousand USD).
- Micro contract in Online Forex Trading: 1.000 units (thousand unit; if we trade with the base currency us dollars, then it could be called a thousand USD).
Illustration of calculation of profit in scenario 1, assuming the order as much as 2 lots and use standard contracts, would be something like this:
Profit ($) = Pip Profit X Contract Size X Lot ($)
Profit ($) = 16 pips X 100,000 USD X 2 lots = 320 USD.
So, try our auto summary in the following image.
See example illustration of the calculation above, may be implied in your mind, “if so, Online Forex Trading was need alot of money about to thousands of dollars? The smallest micro contract just a thousand dollars, if the standard of even a hundred thousand. Expensive dong. ”
It is not. Although his contract order so, but capital for Online Forex Trading can be as cheap as 10 USD only. How can so?
This is because there are forex brokers providing facilities called leverage.
Leverage in Online Forex Trading is proportional with the loan guarantee scheme, so that it can enlarge the purchasing power of the Fund owned trader. For example a broker offers a leverage 1:100, meaning traders with a capital of 10 USD could have the buying power of 1000 USD (from 10×100). In this case, 10 USD into the guarantee fund (Margin) that need to be turned over to the trader’s broker.
Small, isn’t it!? Although later profit also will be adjusted proportionately to the leverage used the trader, but at least it is clear that the required capital trader to start working to get money from Online Forex Trading it is very low.
More favorable for us right now, all platforms/brokerages from Online Forex Trading software has done the above calculation process automatically. So, we easily know the dollar value of our advantages without the need to hard-hard to compute it again, just attempting to conduct the transaction profit only.
For those of you who like counting, can see the more complete explanation in the article specifically about how to calculate the profit pips. However, when it was quite satisfied with this explanation and would like to see immediately how do orders buy and sell, sign up for a demo account. With a demo account on forex brokers, you can perform a simulation using the online forex trading virtual money (not real money) for free. You can also directly apply the knowledge gained from a wide range of online forex trading learning material. – online forex trading