Forex Explained

Forex Trading Example

Going Long:

1. The US dollar is trading against the Japanese Yen at 117.00/02

2. You believe that the US dollar will strengthen against the Yen so you decide to buy 500,000 USD at 117.02

3. The margin requirement for currency trades is 1% therefore you are required to allocate £5,000 against this trade as initial margin.

4. Your decision proves to be correct and the dollar rises to 117.65/117.67

5. You decide to realise your profit and sell dollars at 117.65

6. How you calculate your revenue is:
   $500,000 (size of position) x (117.65 [sell price] – 117.02 [buy price])
   = ¥315,000

7. To convert this back into dollars
   ¥315,000 ÷ 117.65 = $2,677

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