You must be wondering how a small investor like you can trade such a large amount.
Imagine your broker is like a bank. He’ll lend you $100,000 to buy.
The e bank only asks you to pay $1000 as a deposit.
The broker will hold it for you for a while, but not necessarily forever.
Sounds incredible?
That’s how you trade with leverage.
How much leverage you use will depend on your broker and your personal habits.
Usually, the broker will first collect a transaction deposit, also known as “account margin” or “initial margin”.
Once you deposit the cash, you can start trading.
The broker will also indicate the amount required for each trading position.
For example, if the broker allows a leverage ratio of 100:1(or 1% of a position) and you want to trade a position worth $100,000, but your account only has $5,000.
That’s fine, because your broker will take the 1,000 as a deposit, or “margin,” and then “lend” the balance to you.
Of course, any loss or profit will be directly deducted or added to the remaining amount in your account.
Each broker has a different minimum guarantee (margin) for each transaction.
In the example above, the agent requires a 1% margin.
That means brokers need a $1,000 deposit for every $100, 000 of trading positions.
How should profits and losses be calculated?
Now that you know how to calculate point values and leverage, let’s look at how to calculate your profit or loss.
Suppose we buy dollars and sell francs. Your price is 1.45251.4530.
Since you are buying dollars, you should place an order at 1.4530 “(ask)” or another trader is ready to sell, so you buy 1 standard hand (100,000 units) at 1.4530.
A few hours later, the price rises to 1.4550 and you decide to close the deal.
The new quote for USD/is now 1.4550/1.4555. Now you have to close your trade. When you started trading, you bought currency.
So you have to sell at a “bid” of 1.4550.
This is where other traders are prepared to buy.
0.0020 or 20 points between 1.4530 and 1.4550.
Using our previous formula, we now have (0.0001/1.4550) x 100,000 = $6.87 per point x 20 points = $137.40.
Remember, when you open or close the deal, you must include the bid/ask quotes.
When you want to buy a currency, you use the ask price.
When you want to sell, you will use the buy price.
The first case of the new strain in the United States shocked markets, sending the dollar sharply higher and risk assets tumbling.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
