Ways to Make Profit in the Forex Market

Beginner Questions
7

Adam, are you going to explain a system, or are you going to explain the mechanics of trading?

I only ask because if the former, you should probably start by going down that road first. If the latter then I would make it clear upfront that is what you intend to do.

Also I wouldn’t cover what the pipschool has covered unless you are going to expand upon it. In the interest of encouraging learning which is what you appear to want to do, I would also suggest you leave “homework” or “class debate” type questions open and after a set amount of time address them, and all concerns that were brought up during the discussion. This would allow for more people to learn, now and later, with a clear defined starting position.

Whichever direction, your off to a good start. Its clear your going to take your time and present good material, I just think a better idea of what material you plan to cover up front would be a good idea. Maybe even give an outline of some kind.

8

I’d use a broker which allows hedging to prevent losing my pips, so if it drops I’d open an opposite trade sell/buy to buy/sell .

9

If I’m a pro, and I’m sure of the signal movement as I’m expecting, then why not ??

10

It is necessary, to calculate how much profit you made !

11

Would you elaborate please ?? I’m using a US Broker.

12

Hi Simy,
Nice idea leaving a home work, I’ll put that on my mind.
Thanks for your suggestions and subscribing to the thread.
Cheers.

13

[B]Example:[/B]

The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:

He asks for a quote on USD1,000,000 against the Canadian dollar and Global Trade Station quotes 1.5390-95 and the investors sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.

Day 1: Sell USD 1,000,000 vs CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD1.5357 = Buy CAD1,535,700 for Day 61 due to the interest rate differential.

After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.

Day 31: Buy USD1,000,000 vs CAD 1.4865 = Sell CAD1,486,500 for Day 61.

Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.

The USD account receives a credit and debit of USD1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD49,200 = approx. USD33,100 = profit of 33.1% on the original deposit of USD100,000.

14

Why not just close the trade and then short it?

No it’s not. You didn’t even use the 1:500 leverage in your own calculation.

15

As I said, risk vs reward… its different for everyone.

I’d use a broker which allows hedging to prevent losing my pips, so if it drops I’d open an opposite trade sell/buy to buy/sell .

Well as i also said, there are many ways to trade, however hedging is not a good idea or practice to get into. But what ever works for you…

16

Yeah, you already established its was .1 lot trade, so the leverage is irrelevant and doesn’t factor into the profit calculation.

Cheers

17

does a pro can really do that or sometimes they will fail because of their expectation?

18

Failing or losing is part of trading… a PRO will accept the loss and move on without a worry.

Rob, just remember there are few real Pro traders here, so take most advice with a grain of salt

19

i see, thanks for your advice.

in cooking, a small amount of salt will make your recipe tastes good, too much will make it salty, :smiley:

20

Everyone has his own strategy in trading, and he uses the way which will make profits for him, and by the way I don’t hedge unless the indicator goes opposite to what I expected, just to prevent losing my money !!

21

Yes, trader needs to LEARN accepting loses, because you’ll NEVER always win, so losing is a MUST in Forex.

Beside that Yes there are a few PRO’s here, so use your mind before taking an advice from someone who think he’s a pro and ask once, twice and hundred times, don’t invest your money in VAIN rob.

22

Example:

The investor follows the cross rate between the Euro and the Japanese yen. He believes that this market is headed for a fall. As he is less confident of this trade, he does not fully use the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR1,000,000. This requires a margin of EUR1,000,000 x 5% = EUR50,000 = approx. USD52,500 (EUR/USD1.05).

The dealer quotes 112.05-10. The investor sells EUR at 112.05.

Day 1: Sell EUR1,000,000 vs JPY 112.05 = Buy JPY112,050,000.

He protects his position with a stop-loss order to buy back the euro at 112.60. Two days later, this stop is triggered as the euro strengthens short term in spite of the investor’s expectations.

Day 3: Buy EUR1,000,000 vs JPY 112.60 = Sell JPY112,600,000.

The EUR side involves a credit and a debit of EUR1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY112.05m and debited JPY112.6m for a loss of JPY0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.

This results in a loss of JPY0.55m = approx.USD5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD100,000.

23

Example:

An investor has a margin deposit with Global Trading of USD100,000.

The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD2,000,000 - his maximum possible exposure.

Global Trade Station quotes 1.5515-20. The investor buys USD at 1.5520.

Day 1: Buy USD2,000,000 vs CHF 1.5520 = Sell CHF3,104,000.

Four days later, the dollar has actually risen to CHF1.5745 and the investor decides to take his profit.

Upon his request, Global Trade Station quotes 1.5745-50. The investor sells at 1.5745.

Day 5: Sell USD2,000,000 vs CHF 1.5745 = Buy CHF3,149,000.

As the dollar side of the transaction involves a credit and a debit of USD2,000,000, the investor’s USD account will show no change. The CHF account will show a debit of CHF3,104,000 and a credit of CHF3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.

This results in a profit of CHF45,000 = approx. USD28,600 = 28.6% profit on the deposit of USD100,000.

24

We all don’t want to lose money especially if we loose it for nothing.

good example by the way, I also calculate and its exactly correct.
is it more advisable to buy in USD?

25

USD is the most liquidity currency in the Forex Market, myself I like to trade GBP/USD mostly.

26

For example if the USDJPY rate is 82.35, What is the Pip value of the USDJPY cross rate today?
Pip value (in USD terms) = 1 pip / Cross Rate x LOT Size or in this case .01 / 82.35 x 100000 = $12.14 So a one pip favorable movement in the cross rate results in approximately $12 profit per lot held. If trading a mini LOT (10,000 units) the Pip value is 1/10 the value of the Standard LOT Pip value of $12.14, ie. $1.21. If I was holding 20 LOTs of USDJPY and gained 5 Pips my profit would be approximately 5 x 20 x $12.14 = $1214.