When hearing the word Forex, the first thing that is in our heads is the "big profits". However, one can not simply plunge into the Forex and generate a lot of profit. Actually how to Forex trading correct?
The Answer Is NO.
Yap. No one can determine the proper trading way, for each trader has the character and style of trading respectively. But in General, here are the basic ways of Forex trading.
Margin As Honey And Poison
The Margin could make large profits for traders, but also could lead traders to the brink of loss. Learn more about the most crucial aspect in this Forex trading.
The first step to understand how forex trading is to know the procedure beforehand. When registering on forex, we will later meet a selection of leverage or margin. We will often find the term margin and leverage this later, because her role is quite important for the sustainability of our trading account.
Understanding Margin
With the margin, we can trade some thousands of dollars without having to spend thousands of dollars anyway! The Margin can ease all at once can also be troublesome for our account. That is how the heck? What tuh margin trading? So that it is easier, just go to the example of the case:
Known today EUR/USD exchange rate is 1.5712 meaning 1 Euro equals US $ 1.5712. And the next day the currency pair has experienced a movement of points become 1.6712. For example we bought 100 Euro, then the profit we earn is calculated as follows (1.6712-1.5712) x 100 Euro = 0.01 x 100 = 1 Euro.
Why, the profit just 1 Euro so pulling it, then what is forex trading? Lah, its capital is small anyway, just 100 euros. Imagine if we deposited the larger capital 10,000 Euros for example. So if calculated again, with a deposit of it, the upside can be 100 euros! If exchanged for Rupiah 100 euro x USD $ 15,000 = Rp1,5 million! Whoa, okay well Yes!
The case of the example above, perhaps there are some of us who argued, "a Deposit of it but only 1% percent of the profit? We are desperately looking for a capital of 10,000 euros or 150 million dollars, just to be 1.5 million? Just a lie, "dong
Well, the above example is the conventional trading system with one single Exchange rate, meaning that the higher the capital higher thankfully. Type of trade as it surely wouldn't be interesting especially for traders who are mediocre marsupials. That policy ended up margin trading is presented.
With margin trading, we do not need to explicitly set up a capital of 10,000 euros for trading. Bottom line, you simply pay a guarantee to obtain the capital of 10,000 euros. Where to pay? Of course we have to the broker choose!
In the present era, guarantees for capital trading ranges only 1% or is usually mentioned with a ratio of 1: 100 leverage. As such, we just pay 100 euros to 10,000 euros capital gain and profits remain 1.5 million! Bottom line, we could be so lucky 2 x folding in one day!
Then if the broker is not loss set up that kind of money? Of course not! Remember loh, forex trading is the trading of non-physical, meaning that brokers do not need to give us as much money as 10,000 euro segepok real. They only need to provide a facility and benefit all its own. Where did the broker earns a profit, will be discussed further in the primary.
If so, it's a miracle, Yes, this margin trading?
Margin As Honey And Poison
Eits, don't get me wrong. Behind this wonder, margin trading, in fact, like honey and poison. He could be the honey by giving us the opportunity to gain a huge advantage at once become poison, because the margins are a trader could suffer huge losses. So how come?
In forex trading, a trader should be ready before the rain, umbrellas on hand before steamy fan. That is, there is a risk that contained in forex trading is to be anticipated. Risks in forex trading is certainly a loss.
Forex vs. Stock on chapter, we had discussed at a glance about the margin in forex trading. Er, how? Forget? Or are still confused? Hmm, all right! We will review again the example of the use of margin trading with the case that almost close to reality when trading.
So here's the thing, when looking into a chart and found pound sterling United Kingdom was dealing with the U.s. dollar, we predict that the Queen of the United Kingdom will beat Uncle Sam. Then we open one standard lot (100,000 units of GBP/USD), by buying the GBP with a margin of 2% and then wait for the exchange rate pair is soaring.
Remember, when we buy one lot (100,000 units) GBP/USD at price of 1.35000, that means we buy 100,000 Pounds equal in value to $ 135,000 kPa U.s. dollars (100,000 units in the calculation of GBP x 1.35000).
If the specified margin is 2%, it means that we will only use $ 3,000 of the $ 135,000 kPa our capital. Now we can control the 100,000 Pounds with just $ 2,700 US dollars.
When our predictions come true, the next thing we have to do is do a sell order, close-position number 1.35350, and profitable $ 350 US dollars from trading.
When we decided to close-position, our initial deposit will be refunded plus a profit (or loss) that we achieved. Profit or loss from trading we will put in our account. Well, so it's pretty obvious it's how margin works?
"What would happen if the predictions we miss the mark?"
Still remember it if the margin could be a honey and poison to our trading? Our prediction is that Melesetnya made the margin as toxins. A little giveaway ya ya, in forex trading despite trading as much as we can open 1 lot with guarantees of 1.5 million pounds or 100, the price would not be pure 100 pounds. Brokers will generally specifying a minimum deposit on top of the price of one lot. The minimum required Deposit could be just 250 Pounds or more. Its function is of course to hold the position when the predictions we miss the mark and prices move against our position.
More simply put, this example suppose we open a trading account with 1 lot GPB/USD at price and our initial deposit 1.9600 is USD250. If a 100 pound equals USD196, then compute the 250-196 = USD54. That's the Dollar funds 54 later kan sustain our position.
So what if the price continues to fall up to the point of 1.9546? Of course the USD54 funds strut rushes. Finally, our position will be closed automatically by the system because the collateral is up and this condition is known as a Margin Call aka MC. so total losses to us is our money and remaining USD54 is $ 196 of the initial deposit USD250.
Margin Call
A Margin Call is a demand from the broker for the deposit in order to add any number of positions that are not terlikuidasi because the guarantee had expired. For a trader, getting a margin call taste is not the same as getting a morning call from our beloved (ya iyalah!). Margin call means a sign towards the abyss of a loss. Given the GBPUSD is a pretty Frisky pair aka pair with high volatility, this pair are frequent moves up to 100 pips per day. So, it is likely we can lose USD54 MC and only within a day.
Until here appears to be not that we could have got a profit of up to 100 dollars a day, but the losses will we experience due to a margin call can also occur if our deposit is only $ 250. So, that's the disadvantage when we trade with very little capital. Imagine if our capital USD1000, certainly there are still remnants of sufficient funds to sustain the price movement several times. As a side note, the prices never move in one direction multiple times. With a large capital, means we still have the possibility of profit if the price of return move past 1.9600.
How? Already understand little or know a lot about how to forex trading? Now, let's move the discussion to the next class!
Next lesson: Harvesting in the fields of Money Forex
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