Forex Trading Examples

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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.

Step 1
You decide to buy the pair at the following rates:
USD/JPY 110.00/110.03
EUR/JPY 160.00/160.03
NOTE: We will use the EUR/JPY rate to transform the trade currency into your euro account base currency.

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.

Step 2
When you sell the pair, the rates are:
USD/JPY 110.70/110.73
EUR/JPY 160.01/160.04

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.

Long summary
Step 1
When you buy the pair the rate is:
USD/JPY 110.00/110.03

You buy 100,000 USD against JPY at 110.03.

Step 2
When you sell the pair the rates is:
USD/JPY 110.70/110.73

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.

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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).

Step 1
You decide to sell the pair at the following rates:
USD/JPY 110.00/110.03
EUR/USD 1.4000/1.4003
NOTE: We will use the EUR/USD rate to transform the trade currency into your euro account base currency.

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.

Step 2
When you buy the pair, the rates are:
USD/JPY 109.20/109.23
EUR/USD 1.4006/1.4009

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.

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Short summary
Step 1
When you sell the pair the rate is:
USD/JPY 110.00/110.03

You sell 100,000 USD against JPY at 110.00.

Step 2
When you buy the pair, the rate is:
USD/JPY 109.20/109.23

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.