I’m up and running with fxcm with their trading station II platform.
Here is the question:
My account is in GBP. I decide to buy some USD in the hope that it will strengthen against the pound and it does. So i’m making profit right?
Then I glance over at the exchange board and I notice the EUR is strengthening against the dollar. I have just bought dollars right by selling my pounds???
If i decide to buy Euros will it be with the newly bought dollars or will money already in my account GBP. I’m confused. Could someone please using laymens terms help explain the process of opening multiple positions and exactly how do i calculate the profit and loss???
Say i decide in any given day i want to buy or sell several currencies. Break it down please. I’m going insane here.
When you do a forex trade you are not actually buying or selling any currency, but rather making an agreement to do so two days in the future. Of course that agreement is rolled forward each day if you keep the position open, so you never actually do that exchange.
That being the case, if you have a GBP based account and go short GBP/USD (meaning long USD, short GBP) it’s not a situation where you have converted your GBP account funds into USD. You simply put up a portion of your account as margin on the position.
As for putting on multiple positions, just take what I’ve explained and extend it. Each new position you put on means more of your GBP funds applied toward margin.
If you are new to all this, though, I strongly recommend you stick to only one position at a time, though. Running multiple trades in different pairs can completely alter the exposure you think you have and/or the risk you’re taking.
I sort of understood. Could you explain to me what happens in this situation.
My account is in GBP. I’m looking at my exchange rate board. I notice that the AUD/USD strengthening. I click on the buy button. Break it down what i just did, how the profit and loss is calculated etc. I’m lost yet again…
In your account a portion of your GBP will be set aside as margin for the position. How much will depend on the size of the trade and your margin setting (i.e. 1%).
For your P/L you entered into arrangement whereby you will benefit from a rise in the value of the AUD vs. the USD - meaning you’re long the former and short the latter. Based on the movement of that pair you will make or lose some amount of AUD (or USD, it doesn’t really matter). That then gets translated into GBP for your account by converting it to GBP at the prevailing GBP/AUD rate (or GBP/USD).
I do the same sort of trades. My account is in AUD and I buy EUR/USD (or sell).
But I run the GFT platform and all my calculations are done for me by the computer. I see my margin, equity and floating profit/loss at any time during a trade or trades - all in AUD !!
