If your estimate is correct, the value of GBP / USD will move up. For example, up to the numbers written in the Scenario 1 box. Well, that's your chance to be able to realize the benefits of forex trading by doing CLOSE (Sell) GBP / USD at 1.2820.
Of the 1 forex trading transaction, the benefits obtained are: 1.2820 - 1.2804 = 16 Pip (Pip is the smallest price movement available in a currency).
Now, the question is, what if it turns out that the price of GBP / USD is moving in a different direction, or not according to your expectations?
For example, GBP / USD turns down to the numbers as stated in the Scenario 2 box. If you do CLOSE (Sell) in this position, it means: 1.2770 - 1.2804 = -34 Pip (You lose 34 Pip).
Thankfully, in forex trading, when you do CLOSE, this depends on the analysis and up to you. Is it estimated that GBP / USD will continue to fall? If so, then it's best to close now to minimize losses. Or are you sure GBP / USD will rise again? If so, don't close now, wait for the price to rise again to get a profit.
Simple, isn't it !?
The pip you get here is an advantage for you. However, to divert profits in the form of pip into money, more calculations are needed.
Calculating the Benefits of Forex Trading
Pip will be how much money (dollars), depending on the number of lots and the size of the contract you use.
The lot amount is the transaction volume that you fill in the order form when opening a forex trading position. While large contracts are usually attached to the type of account you choose when opening an account at a forex broker.
Generally, there are three types of contracts:
Standard contract: 100,000 units (one hundred thousand units; if we trade with US Dollar base currency, it can be called one hundred thousand USD).
Mini contract: 10,000 units (ten thousand units; if we trade with US Dollar base currency, it can be called ten thousand USD).
Micro contract: 1,000 units (one thousand units; if we trade with US Dollar base currency, it can be called a thousand USD).
An illustration of the calculation of profit in Scenario 1 earlier, assuming an order of 2 lots and using a standard contract, would be like this:
Profit ($) = Pip Profit X Contract Size ($) X Lot
Profit ($) = 16 pip X 100,000 USD X 2 Lot = 320 USD.
So, let's summarize in the following picture. Looking at the illustration example of the calculation above, it might be implied in your mind, "Then, forex trading capital is up to thousands of dollars? The smallest micro contract is a thousand dollars, if the standard is even one hundred thousand. Expensive. "
Not. Although the contractual order is like that, but the capital for forex trading can be as cheap as 10 USD. How come?
This is because there are forex brokers providing facilities called leverage.
Leverage is a loan scheme proportional to collateral, so it can increase the purchasing power of funds owned by traders. For example a broker offers 1: 100 leverage, meaning a trader with a capital of 10 USD can have a purchasing power of 1000 USD (from 10x100). In this case, 10 USD becomes a guarantee fund (Margin) that the trader needs to submit to the broker.
Small, isn't it !? Although later the profit will also be adjusted in proportion to the leverage used by traders, but at least it is clear that the capital needed by traders to start trying to get money from forex trading is very low.
More profitable for us now, all trading platforms / software from brokers have carried out the above calculation process automatically. So, we easily know the value of the dollar from our profits without having to bother counting again, just trying to make a profit transaction.
For those of you who like to count, can see a more complete explanation in a special article about how to calculate profit pips. However, if you are satisfied enough with this explanation and want to see firsthand how to do buy and sell orders, register to create a demo account. With a demo account at a forex broker, you can do forex trading simulations using virtual money (not real money) for free. You can also immediately apply the knowledge gained from various forex trading learning materials.advanced
Of the 1 forex trading transaction, the benefits obtained are: 1.2820 - 1.2804 = 16 Pip (Pip is the smallest price movement available in a currency).
Now, the question is, what if it turns out that the price of GBP / USD is moving in a different direction, or not according to your expectations?
For example, GBP / USD turns down to the numbers as stated in the Scenario 2 box. If you do CLOSE (Sell) in this position, it means: 1.2770 - 1.2804 = -34 Pip (You lose 34 Pip).
Thankfully, in forex trading, when you do CLOSE, this depends on the analysis and up to you. Is it estimated that GBP / USD will continue to fall? If so, then it's best to close now to minimize losses. Or are you sure GBP / USD will rise again? If so, don't close now, wait for the price to rise again to get a profit.
Simple, isn't it !?
The pip you get here is an advantage for you. However, to divert profits in the form of pip into money, more calculations are needed.
Calculating the Benefits of Forex Trading
Pip will be how much money (dollars), depending on the number of lots and the size of the contract you use.
The lot amount is the transaction volume that you fill in the order form when opening a forex trading position. While large contracts are usually attached to the type of account you choose when opening an account at a forex broker.
Generally, there are three types of contracts:
Standard contract: 100,000 units (one hundred thousand units; if we trade with US Dollar base currency, it can be called one hundred thousand USD).
Mini contract: 10,000 units (ten thousand units; if we trade with US Dollar base currency, it can be called ten thousand USD).
Micro contract: 1,000 units (one thousand units; if we trade with US Dollar base currency, it can be called a thousand USD).
An illustration of the calculation of profit in Scenario 1 earlier, assuming an order of 2 lots and using a standard contract, would be like this:
Profit ($) = Pip Profit X Contract Size ($) X Lot
Profit ($) = 16 pip X 100,000 USD X 2 Lot = 320 USD.
So, let's summarize in the following picture. Looking at the illustration example of the calculation above, it might be implied in your mind, "Then, forex trading capital is up to thousands of dollars? The smallest micro contract is a thousand dollars, if the standard is even one hundred thousand. Expensive. "
Not. Although the contractual order is like that, but the capital for forex trading can be as cheap as 10 USD. How come?
This is because there are forex brokers providing facilities called leverage.
Leverage is a loan scheme proportional to collateral, so it can increase the purchasing power of funds owned by traders. For example a broker offers 1: 100 leverage, meaning a trader with a capital of 10 USD can have a purchasing power of 1000 USD (from 10x100). In this case, 10 USD becomes a guarantee fund (Margin) that the trader needs to submit to the broker.
Small, isn't it !? Although later the profit will also be adjusted in proportion to the leverage used by traders, but at least it is clear that the capital needed by traders to start trying to get money from forex trading is very low.
More profitable for us now, all trading platforms / software from brokers have carried out the above calculation process automatically. So, we easily know the value of the dollar from our profits without having to bother counting again, just trying to make a profit transaction.
For those of you who like to count, can see a more complete explanation in a special article about how to calculate profit pips. However, if you are satisfied enough with this explanation and want to see firsthand how to do buy and sell orders, register to create a demo account. With a demo account at a forex broker, you can do forex trading simulations using virtual money (not real money) for free. You can also immediately apply the knowledge gained from various forex trading learning materials.advanced
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