Understanding Margin And Leverage

If you intend to buy dollars in the bank or money-changer for some purpose, you must submit a certain amount of money in the amount of rupiah worth of dollar currency you want to buy. Online forex transactions through brokers on the Internet is different from such transactions. In the forex-trading online, you buy a certain currency with another currency that you borrowed from the broker. Let's say you bought 1 lot EUR / USD at 1.3450 exchange rate means that you have purchased with borrowed 100.000 Euro 134.500 U.S. $ from your broker. Your broker does not lend money never worried that much because the dollar 100.000 Euros you buy you never actually take but you keep returning the same broker.

Yet your broker requires a deposit which is intended to cover the risk of loss if the currency moves in the direction of adverse position your transaction. This deposit is called margin, a much smaller amount than the actual transaction value.

The comparison between the actual value of the transaction with the required margin is known as leverage. The amount of leverage provided by the broker is not the same, usually ranging between 10:1 to 500:1. For instance, a broker set a leverage of 200:1, then for 1 lot of transactions valued at U.S. $ 100.000 is required margin of 500 U.S. $.

Advantages And Disadvantages Margin

With the margin so your capacity to be doubled in trading far above the funds you have. Let's say you have a fund of $ 2000 in your account. If your broker gives leverage of 200:1 then you have the ability to conduct transactions for a maximum of $ 400,000. However you practically impossible to use all the funds available for margin, you also must leave sufficient funds to cover losses that may occur in the transaction.

Because your ability to trade into the fold any movement on the currency markets will have an impact also doubled, be it profit or loss. Let's say a fund of $ 2000 that you have decided to use $ 500 dollars as margin for the purchase transaction currency pair EUR / USD as much as 1 lot on the price of 1.3440. A few hours later EUR currency moves up so that the value of EUR / USD to 1.3475. If at this price you decide to close the transaction then you get a profit of 35 pips. Since 1 pip in currency EUR / USD is worth $ 10/lot then your profits in this transaction is 35 x $ 10, which is $ 350. Margin allows you 17.5% profit from your investment in just a few hours. But if the market moves against your position, say in this case the value of EUR / USD fell to 1.3410 and you decide to close the transaction to avoid further losses you will incur a loss sebesa 30 pips, or $ 300. In this case the use of margin to make you lose 15% just in a short time.

Because the impact is doubled, whether profit or loss, then you must be very careful in using margin when trading. Carelessness in the use of margin-trading forex is often the biggest cause of fatal losses of a trader.

currency exchange in forex

Once we learn whether it was in the forex Forex Introduction I've posted before this time now we learn about the following currency exchange rate we submit penjelasanya
Exchange Rates

Just as in other trade instruments, the forex transaction prices stated in the bid price ( 'BID') and demand ( 'ASK'). Price quote ( 'BID') is the price level where a trader can sell the currency, instead asking price ( 'ASK') is the price level where a trader can buy currencies.

An easy way to remember: 'bid' or the price of 'sale' is always lower than the 'Ask' or price 'buy', in other words a forex trader always buys at a price higher than the selling price. The difference between purchase price and the selling price is called the 'spread' is none other than the transaction costs to be paid by a trader.

forexprices (9k)

For a beginner, read the currency pairs at first seemed a little confusing. But it is actually quite easy if you remember two things:

1. The currency was first mentioned base currency.
2. The value base currency is always 1 (one).
So let's say the exchange rate of currency pairs USD / JPY 121.76 value it means that 1 U.S. Dollar (USD) is worth 121.76 yen (JPY). If the exchange rate USD / JPY moved up to the mean value of 121.92 U.S. Dollar, Japanese Yen rises as compared to 1 U.S. Dollar is now worth 121.92 yen. Or conversely, the currency fell against the yen today as U.S. Dollar to buy 1 U.S. Dollar Japanese Yen takes the value greater.

Of all the currency pairs of U.S. Dollar, there are four currency pairs where the U.S. Dollar is not the base currency. These four currency pairs are GBP / USD, EUR / USD, AUD / USD, and NZD / USD. If the specified exchange rate GBP / USD is 1.9864 means that 1 British Pound is worth 1.9864 U.S. Dollar. If the value of GBP / USD rose to 1.9918 so happened pound sterling currency strengthened against the U.S. dollar, or vice versa U.S. Dollar is weakening against the pound sterling. So to keep in mind, if the currency pair to rise or fall in value so that is strengthened or weakened the base currency.

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