 |
How To Use Leverage For Great Results With Forex
Author: Gerald Mason  | Posted: 04-11-2007 | Comments: 0 | Views: 30 | Rating: (51)  (?) 
When you execute a Forex trade, you are purchasing an amount of currency, termed a lot. The amount of currency in one lot depends upon the type of account you have. In a standard account, one lot is usually equal to U.S. $100,000; in a mini account, one lot is $10,000.
But Forex trading accounts are leveraged, which means you don't have to own that expensive lot of currency; you just have to control it, and if you do, any profit it earns is yours. To obtain the right to control a lot of currency, you put up a much smaller amount of money in a sort of rental agreement called a margin deposit. In a standard account, to control that U.S. $100,000, you must put up $1,000 of your own money; in a mini account, to control $10,000, you need to put up $100.
The leverage influences the amount of profit you earn, as well. In a standard account, one pip of a currency pair that has the U.S. dollar as the base is equal to U.S. $10; in a mini account, one pip equals to $1. This means that, should you correctly forecast the movement of the market and execute a trade that earns you two hundred pips (not an unrealistic goal), if you have a standard account, your profit will be $2,000; if you have a mini account, it's $200.
To maximize your profits in Forex trading, you don't have to trade a standard account; not every beginning trader can afford to. Instead, if you believe you have a good forecast on the market, you can trade more than one lot. To continue the above example, if your successful trade earned you two hundred pips and you had purchased five lots of that currency, in a mini account you would have put up $500 of your own money-but earned a profit of $1,000 (two hundred pips times five lots). In a standard account, you would have put up $5,000-and earned $10,000.
The number of lots you can trade depends upon the margin in your account. That's not the amount you deposited; that also includes any open trades you have running, taking into account any profits or losses you may incur.
There are two types of orders that can be placed in Forex trading. The most common type is called a market order, and it simply purchases or sells the currency pair at the going market rate. This sort of trade is quickly arranged-with some online trading platforms, one click can do it-so it's the order you want to place when the market is moving rapidly. (If you do the one-click thing, always edit the trade to put in a stop-loss; more on that in a minute.)
The other kind of order is called an entry order, and it's what you use when you want to purchase or sell a currency pair but only at a certain price. For example, say the GBP/USD is range-bound, moving sideways in a channel, going up and down but not far enough to entice you into a trade.
But there are indications that the Cable might soon break out of that channel. So you could place an entry order to purchase but only after the price rises above a certain point. If the Cable breaks out, your entry order would be triggered, and you would purchase the currency pair when the price rises above your pre-arranged point. If it doesn't, you aren't stuck with a currency pair that's going nowhere, and the still-dormant entry order would cancel after a certain length of time.
A stop, also called a stop-loss, is a pre-arranged point where you decide you would like to get out of a losing trade. A limit, also called a take-profit, is a pre-arranged point where you decide you would like to exit a winning trade. Although it may not seem so on the surface, both are important. Properly using stops and limits defines the extent of your risk and encourages disciplined trading.
Rate this Article:
Current: 0 / 5 stars - 0 vote(s).
Article Source: http://www.articlesbase.com/finance-articles/how-to-use-leverage-for-great-results-with-forex-251963.html
|
Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free! |
|
Related Articles
Great Tips For Successful Forex Trading
By: Gerald Mason | 28/09/2007 | Finance
Knowing how to trade in Forex is simply just not enough to be successful. In this largest and the most liquid financial market in the world, you need to have more than the knowledge and skills to be successful. You need to know about the different things involved in Forex...
What Is The Forex?
By: Gerald Mason | 04/11/2007 | Finance
Simply put, the Forex is the foreign exchange market. It's where travelers, banks, and companies that do business internationally change money, in effect buying one currency and selling another.
Profits are made from the difference in value between the two currencies (the exchange rate). Because currencies are no longer tied to...
Forex Trading - Finding The Best Time To Trade
By: Gerald Mason | 28/09/2007 | Finance
Trading in the worlds largest and the most liquid financial market is one of the best ways to earn money. Here, if you know how, when, and what to trade, you can be sure that you can earn huge amounts of profit. It is a fact that a lot of...
Forex Basics
By: Gerald Mason | 04/11/2007 | Finance
The first thing to notice about currency prices in the Forex market is that there are two of them, called the bid price and the ask price. The second thing to notice is that they don't favor you, the trader; they favor the broker, because that's how he makes his...
Acquiring A Good Knowledge Of Forex
By: Gerald Mason | 30/09/2007 | Finance
Trading has been in existence for many years. It's been there ever since man has learned to make a way of living. Before, people traded goods for other goods; or goods for services and vice versa. All of these things are necessary for survival. But now, trading is not mainly...
Tips For Good Forex Trading
By: Gerald Mason | 03/10/2007 | Finance
Do you want a very good career that has a potential to make you earn a lot of money? Do you want to enter a particular financial market but don't know which one to choose?
If you answered yes to either of these questions, then the Forex market is right for...
A Forex Broker Is Your Best Friend
By: Gerald Mason | 30/09/2007 | Finance
If you traded in the Forex market before or if you're still trading now, you may have heard the term Forex broker a lot of times. However, as an individual trader, you may want to know what is a Forex broker and what they do.
Forex brokers are individuals or companies...
Choosing The Best Online Forex Trading Systems
By: Gerald Mason | 03/10/2007 | Finance
Forex is not really new in the financial market. In fact, it is not only known by big players in the world, but also by small organizations and individuals lately. Now, forex is no longer ruled by the big players; people from all walks of life can actually do forex...
More from Gerald Mason
Creating A Good Backend To Sky Rocket Your Internet Sales
By: Gerald Mason | 23/12/2007 | Internet
If you really want to be successful online, you need a back end system in place that's capable of selling to your customers again and again. If you only sell one product and nothing else, you're losing out on massive amounts of profit everyday.
So, let's take a look at how...
How To Increase Your Click Through Rate
By: Gerald Mason | 23/12/2007 | Internet
It's amazing, the difference a higher click through rate (CTR) can have on your pay per click (PPC) campaign. Not only will you drive a lot more targeted traffic, but you also get better ad positioning for cheaper prices.
This means the difference between an online business that barely pulls its...
Free Traffic Generating Techniques To Drive Tons Of Visitors To Your Website
By: Gerald Mason | 23/12/2007 | Internet
Getting traffic to your site is critical if you want to make money online. However, the wrong traffic won't produce any sales. You need niche-targeted traffic; people who are highly interested in your product or service. If they aren't, they definitely won't buy what you have to offer.
This article is...
Add Bonuses To Improve Greatly Improve Your Sales
By: Gerald Mason | 23/12/2007 | Internet
People love getting free gifts. So, naturally, if your product comes with free gifts, people will be more inclined to buy. Offering free gifts/bonuses is one of the most powerful ways to increase your internet sales. This is because adding bonuses actually increases the perceived value of your product.
This approach...
How To Increase The Life Time Value Of Your Customers
By: Gerald Mason | 23/12/2007 | Internet
This article is going to show you how to extract the maximum value from each of your visitors. The lifetime value of a customer is how much they spend with you over the years until they stop buying.
Most internet businesses have very bad lifetime visitor values. This is...
How To Build A Good Long Term Internet Business
By: Gerald Mason | 23/12/2007 | Internet
Amongst all the hype on the net about how to get rich overnight with a simple website, it's easy to get a little jaded. Many people try their hand at internet marketing, waver around a bit and never get the results they're looking for.
This article is going to show you...
Internet Marketing: How To Write A Good Article
By: Gerald Mason | 23/12/2007 | Internet
Good writing is a critical skill if you want to be successful online. Whether affiliate marketing, creating your own products or article marketing your words are your salesmen.
They are what convert readers into buyers.
This article is going to show you powerful and easy to implement methods guaranteed to make...
When Dating Leads To An Engagement
By: Gerald Mason | 20/12/2007 | Dating
The Engagement
After a considerable time of courtship an engagement is established. An engagement is a mutual promise to enter into marriage in the near future. The young man frequently gives the girl an engagement ring which she wears on the third finger of her left hand. There are two types...
|
|
Finance 
