Typical Forex Trade Scenario
By: Stephanie
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Can you take me through a typical trade scenario?
Here is an example of a typical trade scenario.
Let’s say the current bid/ask quote for EUR/USD is 1.3802/05 and you want to buy the pair because you think the Euro is going to gain on the US dollar. So you buy 1 standard lot. When you do that, you are actually buying 100,000 Euros (1 standard lot) for $138,050 US dollars (100,000 x 1.3805). At 100:1 leverage, your initial margin deposit would be $1,000 for this trade.
So in our example, let’s say the Euro/USD pair goes up and is now trading at 1.3865/68 and you decide to sell and take profits. You would then sell your 1 standard lot.
When you do that, you are actually selling 100,000 Euros (1 standard lot) for $138,650 US dollars (100,000 x 1.3865). Since you bought 100,000 Euros for $138,050 and sold them for $138,650, you made a profit of $600 or 60 pips.
If on the other hand the Euro pair went down to 1.3775/78 and you sold at 1.3775, you would have a loss of $300 ($138,050 - $137,750). And again, if the account equity fell below the margin requirement, the trade would be automatically liquidated. However, this should never happen to you if you follow sound risk management rules.
So thats a typical trade scenario. Check out our Trade Reviews and our Angel Pair Picks for more specific examples of trades we actually make. Keep learning and mastering Forex right here with your guardian Angels. See you soon!
