How to Trade Currency

Illustrated below for the beginner is an example of how to calculate a profit in forex currency trading.

Say for example you believe that the Euro might appreciate in value against the US Dollar in the near future and the current exchange rate is EUR/USD = 1.4210. You then decide to buy 100,000 Euros (1 standard lot).

EUR 1.00 = USD 1.4210

100,000 x 1.4210

Your purchase of 100,000 Euros is US $142,100

At 100:1 leverage your required margin deposit is $1,421

Profit

Later on, as expected, the Euro appreciates by 75 pips to EUR/USD = 1.4285. You then decide to sell your Euros and exchange them back into US Dollars.

EUR 1.00 = USD 1.4285

100,000 x 1.4285

You will get: US $142,850

Your profit = ($142,850 - $142,100) = $750

When starting out with forex currency trading it's a good idea to begin with some lower amounts until you have figured out exactly what you're doing as it can be difficult for most beginners. You can always increase the amounts once you gain the experience and skills necessary to make larger trades successfully.

It is also beneficial to take some time to decide what currency pair or pairs you want to trade with. Generally no more than 2 to begin with to allow you ample opportunity to learn how the pairs actually relate to each other and ensure you are able to clearly identify the patterns that they follow. Beginners can increase to more pairs once they have a firm grasp of the basics of forex currency trading.