Hi folks!
I’ve been doing some research and am attracted to spread trading, but I’d like it if someone would help me understand how to calculate my risk.
In a mini account, using 1 lot = 10,000
If I deposit $500 with 2:1 leverage and:
buy 1 lot of GBP/USD @ 2.03
sell 1 lot of EUR/USD @ 1.56
how much margin would I have in my account, how many downside pips on the net position could I weather before a margin call/liquidation?
Your help in understanding this would be appreciated - thanks
plus do the whole school looks like you need it.
The trade you have outlined here is basically short EUR/GBP. You are better off trading that pair directly and not by doing the seperate trades as you will have two spreads going against you and the seperate carries will also be negatively skewed against you too.
Keep in mind that forex trading is effectively spread trading already. When you trade GBP/USD your making a spread trade on the relative values of those two currencies. You don’t spread trade pairs against each other because if you think GBP/USD is going to rise faster than EUR/USD (or fall less quickly) then that means you think GBP will be stronger than EUR. That’s a falling EUR/GBP rate.
Thanks guys; the tutorial helped as well as the idea to see the spread as a short of Eur/GBP.