Trading Scenario – Trading Falling Prices

Trading Scenario – Trading Falling Prices

If, on the other hand, you believe that the euro will weaken against the dollar, you'll want to sell EURUSD.

• You sell euro

We quote EURUSD at a Bid price of 0.9875 and Askprice of 0.9880 and you decide to sell euro 100,000 at aBid price of 0.9875.

• The market moves in your favour

The euro weakens against the dollar and the EURUSDis now quoted at bid 0.9744 and ask 0.9749.

• Now you buy back your euro

You buy EUR at an ask price of 0.9749.

• Your profit/loss is then

Sell price-buy price x size of trade (0.9875 minus 0.9749) multiplied by 100.000 = USD 1260 Profit

Remember that trading EUR 100,000 as we have done in our examples, does not mean that you have to put up euro 100,000 yourself. On a 2% margin means that you have to deposit 2.0% of euro 100,000, which is euro 2,000 on margin as a guarantee for the future performance of your position.

Trading Scenario – Trading Rising Prices

Trading Scenario – Trading Rising Prices

If you believe that the euro will strengthen against the dollar you'll want to buy euro now and sell it back later at a higher price.

• You buy euro

We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 euro for 0.9875 USD or buy 1 euro for 0.9878 USD. In this example you buy euro 100,000, at the quote price of 0.9878 (ask price) per euro.

• The market moves in your favor

Later the market turns in favour of the euro and theEURUSD is now quoted at Bid 0.9894 and Ask 0.9896.

• Now you sell your euro and get the profit

You sell euro at a Bid price of 0.9894.

• The profit is calculated as follows

Sell price-buy price x size of trade (0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit (Note that the profit or loss is always expressed in thesecondary currency)