If the euro / dollar trading price of 1.2400/03, you are buying 1.2403 euros, then you are a “Long” euros, or “Short” U.S. dollars. In another deal, you decide to sell yen, if the dollar / trading price of 107.20/23 yen, you will be a long U.S. dollar, short the yen. We assume that the euro rose to 1.2537 but the yen fell to 106.76. then you do what?
Your profit and loss are as follows: In the euro transactions, you buy 100,000 units of 1.2403 euros. In 1.2537 euros you sell. Your profit is .0134, or .340 (.0134 x Euro100, 000 =, 340). In the U.S. dollar / yen trading, you bought 0,000 at 107.23 price and selling price of 106.76, your loss is 0.47 or 0.24 (0,000 x 0.47 = JPY47, 000 / 106.76 = 0.24). Your net profit value is 9.76 (40 — 0.24 = 9.76). In fact, in the foreign exchange margin trading, buy / sell 100,000 units of the euro does not mean that you really need to invest so much, you only need to put 100,000 units of the euro can be 1% of the deposit , which is 1,000 euros or the equivalent in dollars and other foreign currency assets.
Foreign exchange rate quotation method
In the foreign exchange market, one country and another currency exchange rates occur in pairs. The base currency in the former, target currency in the post, in the middle with “/” separated, indicating a unit of the base currency can be exchanged for the number of target currency. For example: USD / JPY, said U.S. dollar is the base currency, the yen is the target currency; EUR / USD, said the euro is the base currency, the dollar is the target currency; EUR / JPY, said the euro is the base currency, the yen is the target currency. We have to offer U.S. dollar as the basic currency is called the direct quotation, the U.S. dollar as the target currency of the bid is called an indirect quotation, but neither the U.S. dollar as the basic currency, nor as a target is called cross-currency quotes quotes . Most of the currency used in direct quotation, rather euro, sterling and Australian dollar used in an indirect quotation method.
The exchange rate quotes are divided into bid and offer prices (in English, said yes: BID / ASK), are made from the perspective of transaction banking, and in the base currency for quotes purposes. Bid price refers to the trading banks to buy one from you and pay you the basic monetary unit price of the selling price refers to the trading banks to sell you a basic unit of currency prices. For example:
Currency Name Bid Ask
EUR / USD 1.2807 1.2810
Here, the euro is the base currency, the dollar is the target currency. When you want to buy one euro unit, you are a trading bank in accordance with the selling price, to pay 1.2810 U.S. dollars. And when you want to sell € 1 flat, you are a trading bank in accordance with the purchase price to recover the 1.2807 U.S. dollars.
How to profit in the foreign exchange transactions?
Forex trading is the exchange rate against the currencies of different countries carried out a financial transaction, so when you trade currencies correctly grasp the future direction of the time, you may be given the potential profits. On the contrary, when you determine the error, you may be exposed to potential losses. For example: According to your market, the euro and the dollar exchange rate of the observation, do you think the current U.S. dollar is undervalued relative to the euro, you estimated that U.S. dollar strengthened in the coming time. So, are you in advance a certain amount of U.S. dollars to buy euros. If the market direction in line with your judge, the U.S. dollar relative to the euro appreciation, then you will sell U.S. dollars in exchange for the euro, reaching a profit. On the contrary, if the dollar continues to depreciate relative to the euro, then you lost. We call this the future direction for the currency transactions for holders of long-term position. By contrast, the foreign exchange market for the short-term fluctuations, of the Kuaijinkuaichu transaction is known as holding short positions. In the foreign exchange market, in order to achieve maximum profits, are often two kinds of transactions staggered.
