Forex Trading Examples
Here are two detailed examples of intraday trading: this means that you open and close the position within one Forex day.
Remember that the Forex day starts at 5:00 PM EST (10:00 PM GMT / 22:00), and ends a day after at the same time.
Long position example (buying position)
Detailed description You have a EUR 1,000 account and would like to buy a full lot (100,000) of the pair USD/JPY.
To buy 100,000 USD with JPY, the broker provides you 100,000 USD x 110.03 (The ask price), which equals 11,003,000 JPY. With 11,003,000 JPY, you buy 100,000 USD.
Having used 1:100 leverage, you are able to open this position with a 1,000 USD investment (110,030 JPY). EUR 687.69 (110,030 JPY / 160.00) is used as margin to cover your position. You are left with a EUR 312.31 balance in your account. Now you have an open long position.
You sell USD at 110.70 for a total of 11,070,000 JPY. Your profit is 67,000 JPY ( 11,070,000 - 11,003,000), i.e. 67,000 JPY / 160.04 (ask price) = 418.65 EUR. This means that your account now contains 1,418.65 EUR (1,000.00 initial account's amount + 418.65 profit).
Using leverage to your advantage, you made a 61% (100 x 418.65 / 687.69) profit in one day. Only in the Forex market can you make such huge profits, so quickly.
You buy 100,000 USD against JPY at 110.03.
The difference between the selling and buying price is 110,70 – 110,03 = 0.67 JPY: this is your profit for each USD invested, for a total of 100,000 USD x 0.67 JPY = 67,000 JPY, or 418.65 EUR, as seen above.
Short position example (selling position)
Detailed description Your basic account currency is EUR, with an amount of 1,000 EUR, and you would like to sell 100,000 (a full lot) of the pair USD/JPY (selling USD against JPY).
Using a leverage of 100:1, you are able to sell USD 100,000 USD/JPY, selling USD 100,000 and buying JPY 11,000,000 (100,000 x 110.00). The 1,000 USD translates into EUR 714.29 (1,000 USD / 1.4000), which is margin to cover your position. You are left with a EUR 285.71 balance in your account. Now you have an open short position.
You buy USD at 109.23 (ask price), for a total of 100,704.93 USD (11,000,000 JPY / 109.23). Your profit is 704.93 USD (= 100,704.93 - 100,000), i.e. 503.20 EUR (704.93 USD / 1.4009). Your account now contains 1,503.20 EUR (1,000.00 initial account’s amount + 503.20 profit).
You made a 70% (100 x 503.20 / 714.29) profit in a day.
You sell 100,000 USD against JPY at 110.00.
You buy USD at 109.23. The difference between the selling and buying price is 110.00 – 109.23 = 0.77 JPY: this is your profit for each USD invested, for a total of 100,000 USD x 0.77 JPY = 77,000 JPY, or 503.20 EUR, as explained above.