FOREX Trading: Examples

Example 1 - FOREX trading. A Trader opens an account of USD 50'000. He buys EUR/USD 500,000 @ 1.3500 at the market and places a stop loss order at 1.3460. The above illustrates that the Traders' maximum risk is USD 2'000 and his margin utilization is 10%. Well above the minimum.

Example 2 - FOREX trading. During the day's trading the FOREX market fluctuates and initially moves down to 1.3480.At this point a Trader has an unrealized loss of USD 1'000 and his margin utilization has fallen to 98% reflecting the effect of the downward move on his margin capacity.

Example 3 - FOREX trading. Later the price moves back up to 1.3600 and the Trader decides to take profit. He sells at 1.3600 making a USD 5'000 profit which represents a 10% return on his account value.