Forex Trading Training: How a Forex Trade Works

Many of our visitors come to ForexInfoPlace.com for free forex trading training, and we are happy to provide it. In this article, we'll look at how a margin trade actually unfolds.

Let's say you have a margin deposit of $10,000. (If you're not sure what that means, read this article). You've been watching the U.S. dollar and the Swiss franc, and you believe the dollar is about to rise. So you decide to buy some U.S. dollars and pay with Swiss francs.

Your broker is offering you a margin of 1%, that means you COULD buy into a position worth $1,000,000 ($10,000 x 100). However, you are a cautious trader --- a very wise thing, especially since you are early in your forex career --- so you decide to go for $200,000, using $2,000 of your money.

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Your broker quotes you 1.5515-20, and you buy at 1.5520. What this means is, you will buy USD 200,000 and sell CHF 310,400. Your CFH account will show a debit of 310,400.

Let's say in a few days your prediction has proved correct and the USD has risen to CHF 1.5745. If you have decided on a "take-profit" strategy (go to this article for a refresher on what this means), you can now sell your U.S. dollars for a profit.

So you sell your USD 200,000 at 1.5745, giving you CHF 314,900. Your USD account balance will remain the same, but your CHF account now has a credit of 314,900. So your profit on the trade is CHF 4,500, or approximately U.S.$2,858.

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