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Forex Trading Examples

Total Customer Margin Balance USD/TRY Current Price Leverage Ratio
10.000$ 7,5000 10

Direction of position to be taken in USD/TRY parity by an investor waiting for a movement in favour of USD (in disfavour of TRY) will be LONG.

 

Hence, investor opens an upward position in USD/TRY parity by selling TRY 750,000 against a purchase of USD 100,000.

 

Given that 1:10 leverage ratio is used in this trade, a margin equal to 10% of the size of the position taken as above will be used from the investor’s account balance.

 

Used Margin = $100,000 / 10 = $10,000

 

If USD/TRY parity rises to 7.5200 (200 pip increase),the price of USD 100,000 will increase to TRY 752,000, and this upward movement will be reflected onto investor as a profit of TRY 2,000, and as a plus on the investor’s margin by being converted into his account’s margin currency.

 

If USD/TRY parity falls to 7.4800 (200 pip decrease),the price of USD 100,000 will decrease to TRY 748,000, and this downward movement will be reflected onto investor as a loss of TRY 2,000, and as a minus on the investor’s margin by being converted into his account’s margin currency.

 

In the case of loss, when the pre-determined margin completion rate is reached, a margin call is sent to investor for information purposes.

 

If the loss process continues and upon a margin call, investor fails to deposit an additional margin or to close his position or to reduce his position, then, loss process continues until the predetermined position closing (Stop Out) rate is reached. When this rate is reached, the system automatically closes at the then-current market price all open positions of customer, and cancels all standing orders of customer.

 

In the example given above, if the Stop Out (position closing) level is 40%, when the margin amount falls to USD 4,000, i.e. investor incurs a loss of USD 6,000, the system automatically closes all open positions of customer, and cancels all standing orders of customer. After position closing, the customer’s margin may have fallen even below USD 4,000.

Total Customer Margin Balance USD/TRY Current Price Leverage Ratio
20,000$ 1,1600 10

Direction of position to be taken in EUR/USD parity by an investor waiting for a movement in favour of EURO (in disfavour of USD) will be SHORT.

 

Hence, investor opens a downward position in EUR/USD parity by buying USD 116,000 against a sale of EUR 100,000. Given that 1:10 leverage ratio is used in this trade, a margin equal to 10% of the size of the position taken as above will be used from the investor’s account balance.

 

Used Margin = €100.000 / 10 = €10.000=€10.000*1,16= 11.600 USD

 

If EUR/USD parity falls to 1.1400 (200 pip decrease), the price of EUR 100,000 will decrease to USD 114,000, and the investor will make a profit of USD 2,000.

 

If EUR/USD parity rises to 1.1800 (200 pip increase), the price of EUR 100,000 will increase to USD 118,000, and the investor will incur a loss of USD 2,000.

 

In the case of loss, when the pre-determined margin completion rate is reached, a margin call is sent to investor for information purposes.

 

If the loss process continues and upon a margin call, investor fails to deposit an additional margin or to close his position or to reduce his position, then, loss process continues until the predetermined position closing (Stop Out) rate is reached.

 

When this rate is reached, the system automatically closes at the then-current market price all open positions of customer, and cancels all standing orders of customer.

 

In the example given above, if the Stop Out (position closing) level is 20%, when the margin amount falls to USD 2,320, i.e. investor incurs a loss of USD 17,680, the system automatically closes all open positions of customer, and cancels all standing orders of customer. After position closing, the customer’s margin may have fallen even below USD 2,320.

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