Forex and losses incurred in trading currency pairs
The Forex market is one of the most frequently needed markets for market news and technical knowledge.
In each transaction there are numerical determinants through which the proportions of losses and profits are determined.
This is determined according to a number of factors, such as the point value, the size of the trading position, the spread and the leverage.
In this article we will explain several examples, through these examples we will explain the management of sales transactions.
And how to manage long positions in order to achieve the results you wish in the trading market.
The importance of pip value in the Forex market
For example, if you buy a mini contract on the EUR / CHF currency pair.
This means that a long position on this pair can cause an increase in the value of the euro against the Swiss currency, and if the value of this deal equals 10,000 euros.
Through one of the simple equations we can determine the value of one point of profit or loss in euros.
If the price of buying the euro currency pair against the Swiss franc is 1.0923.
One point would be 0.0001, and for that point to be determined in a contract of 10,000 euros.
In this case, the importance of the point value must be emphasized, because the point value may be tricky at times.
You have to be careful, because this may cause you to make unintended mistakes.
You should also note the point value, which can vary.
According to the size of the deal, with the different currency pairs traded in Forex, this affects the rate of profit and loss.
If we assume that you closed the market order at 1.0941, in this case how would you withdraw your profit?
How to calculate Forex profits
You have to bear in mind that you will pay 1 pip as a spread when opening a trade order.
When this happens, you will find that the exchange rate is supposed to move 19 points, in order to be able to earn 18 points.
This means that we will close long positions by using the bid price.
Second, you will focus on the effectiveness of flash trading strategies, which are low in the spread price market.
Each brokerage firm differs from the other in the number of points of the spread, and the size of the spread is also affected by the market conditions that occur.
EUR / CHF is usually the pair with the lowest spreads.
If we look at the people who trade in scalping they aim to make profits by using a few points.
In order to obtain reasonable profits through this strategy, you will have to use a high leverage.
High leverage use
If your account balance is at least $ 1,1045, and the leverage you use is 1: 100.
It is better for your account balance to be greater than this amount. You can trade contracts amounting to 100,000 Euros.
In this case, it equals 1 standard lot on EUR / USD, and this indicates a profit of $ 30, for every 3 points the deal is closed.