How to make money in foreign exchange trading EUR/USD = avatradeopenaccount.1800 At th avatrade login time, you used the $11,800 saved to exchange to 10,000 euros two weeks later, EUR/USD = 1.2500 At this time, you sold the 10,000 euros held two weeks ago, to exchange to $12,500 At this time, you will have $12,500 in h avatradedemo, compared to two weeks ago 11,800 cashback forexs, you have 700 dollars. The reason is simple: when buying or selling foreign exchange, you must sell one avatradeforex at the same time as you buy another currency. grasp the two basic knowledge points, read the quote will become very convenient: (1) the front of the currency is the base currency, the back of the currency is the settlement currency (2) the base currency is always the unit of 1 base currency can be in addition to the U.S. dollar, but also the British pound (GBP), Australian dollar (AUD), or the euro (EUR) and other currencies, for example, GBP/USD1.7366 said 1 pound In this case, an increase in the exchange rate means a depreciation of the dollar, because to convert 1 pound will require more dollars than before In short, an increase in the exchange rate means that the base currency has increased in value, and a decrease in the exchange rate means that the base currency has decreased in value For example: USD/JPY 120.01, in this group of quotes, the dollar is the base currency USD/JPY 120.01, which means that 1 dollar is equal to 120.01. means that 1 USD is equal to 120.01 JPY regardless of buying/selling, is trading the base currency When the USD is the base currency, if the exchange rate rises, it means that the USD increases in value while the other currency depreciates relative to the USD If the USD/JPY we mentioned above rises from 120.01 to 123.01, it means that the USD can now be exchanged for more JPY than before If a currency pair does not For example, EUR/JPY 127.95 means 1 euro to 127.95 yen Lets look at the following example of GBP/USD: the currency on the left, the base currency (BaseCurrency), like the pound here the currency on the right, is the settlement currency (CounterCurrency), also known as the markup currency (QuoteCurrency), like here the base currency of the U.S. dollar is always in front of the U.S. dollar / Swiss franc, the U.S. dollar is the base currency, the Swiss franc is the markup currency, also called the settlement currency Similarly, in the GBP / U.S. dollar currency pair, the pound is the base currency, the U.S. dollar is the markup currency markup currency is also called the settlement currency, because the profit and loss of foreign exchange transactions are always used to settle the currency The currency pair base currency settlement currency profit loss USD/CHF USD CHF CHF GBP/USD GBP USD EUR/GBP EUR GBP AUD/JPY AUDJPY JPY The left currency is the base currency, the right currency is the settlement currency, base currency/calculated currency = 1 base currency can be exchanged for how much settlement currency? When buying GBP/USD, the exchange rate at this point makes the prompt: how many units of the settlement currency do you have to spend to buy 1 unit of the base currency? In this example, how many dollars would you have to spend to get 1 pound? Similarly, when you sell 1 unit of GBP/USD, the exchange rate will indicate: How many units of the settlement currency will you get when you sell 1 unit of the base currency? In this example, how many units of USD do you get for selling 1 GBP? What does buying EUR/USD mean when the base currency is the base currency for buying and selling? It means that you are buying the base currency, the euro, and selling the settlement currency, the dollar. Long and short in foreign exchange trading, you need to determine whether to buy or sell If you buy, it means you buy the base currency, while selling the settlement currency, you expect the base currency to appreciate, and then at a relatively high avatradelogin, the base currency to sell the industry terminology, this is long, you have a long hand please keep in mind that novices: long (goinglong) = buy (Buy) the same reason, if You want to sell, it means you sell the base currency, and at the same time buy the settlement currency after selling the base currency, you are itching for the base currency to depreciate, and then at a lower price, the base currency and then buy back is similar to selling dogs, you first sell the dachshund, and then buy the dachshund back after the price of the dog has fallen This is called short, you have established a short position please remember: short ( Goingshort) = Sell (Sell) Buyprice and Sellprice All foreign exchange quotes consist of two prices: Buyprice and Sellprice The Sellprice is the price at which you sell the base currency while buying the settlement currency This is the best price in the current market for you to sell the base currency Remember, when buying Remember, when buying a currency, you use the bid price on the right side of the quote board, and when selling a currency, you use the sell price on the left side. The price difference between the bid price and the sell price, which is the spread, is higher than the sell price, because you need to buy and sell currencies from a foreign exchange broker, who provides you with a service and charges a service fee. You buy 1 euro, sell 1.3041 dollars, then sell 1 euro and buy 1.3038 dollars. This goes back and forth, you will only have 1.3038 dollars in your pants pocket, which is 0.0003 dollars less than the earlier 1.3041 dollars. Very simple, you pay the broker $ 0.0003 service fee broker is really a wild goose chase, it is how to make money, you understand? Brokers as long as a simple move between the bid price and the ask price, so that the bid price and the ask price between a price difference, you will be able to sit on the money this price difference, also known as the point almost and point difference according to industry practice, foreign exchange rates are usually marked by five valid numbers, counting from the right to the left, the first called X points, it is the smallest unit of exchange rate changes; the second called X ten points. By analogy if the euro / dollar from 1.1010 to 1.1015, that is, the euro relative to the dollar, up 5 points if the dollar / yen from 100.00 to 100.10, that is, the dollar relative to the yen, up 10 points currency appreciation and depreciation need to look at which economy is performing well, which economy is performing poorly if an economy is performing spectacularly, then this If an economy performs well, then the currency of that country will strengthen and become more valuable because, if it performs better, the more countries will trust this currency EUR/USD. In the handsome brother, naturally, the value of the euro will also rise you have the bottom of your heart, start buying EUR / USD, and then you can wait patiently, after the appreciation of the euro relative to the dollar, harvest profits if the U.S. economy is bullish, the U.S. companies are thriving, and the eurozone countries are like sleeping pigs, sinking in the western part of the world, then, the euro will depreciate relative to the dollar you need to sell EUR / USD, and then wait for the euro to fall bullish. Then wait for the fall of the euro bullish EUR / USD, you need to use the buy EUR / USD trade orders bearish EUR / USD, then you need to sell EUR / USD orders USD / yen dollar is the base currency, is the center of buying and selling 85 years, 1 dollar can be exchanged for 260 yen; after ten years, 1 dollar can only be exchanged for 80 yen ten years, the dollar good decline, can only be exchanged back to the earlier less than a third of 1 Yen Japanese economic prosperity, the yen will have the momentum of appreciation after World War II, Japans rapid economic growth, the rapid establishment of a large industrial force, becoming a powerful economic power in this context, since 1985 the yen continued to appreciate, the yen appreciated three times in ten years relative to the U.S. dollar For example, suppose the dollar / yen exchange rate from 1 U.S. dollar = 260 yen, to 1 U.S. dollar = 80 yen, the announcer will say The dollar-yen exchange rate has fallen, or the yen has appreciated, which is correct Why? Earlier, to exchange 1 U.S. dollar, you need 260 yen, now, only 80 yen can be used, the people of Japan can also save 180 yen relative to the dollar is worthless, which is called the dollar depreciation, the yen is worth more, called the yen appreciation bullish dollar / yen, you need to use the buy dollar / yen trade orders bearish dollar / yen, then you need to sell the dollar / yen orders dollar / Swiss franc dollar is definitely stronger! The Swiss franc is too high, isnt it?! If you think so, you can buy USD/CHF where the USD is the base currency and CHF is the settlement currency. After you use a buy USD/CHF order, you can wait patiently for the USD to strengthen against the CHF. You do not hide your disappointment in the United States, and naturally, the dollar will go down without the support of the U.S. economic strength You can use sell orders for USD/CHF and then you can travel to Switzerland and wait for the dollar to depreciate under the clear blue sky of the Alps Lot size, leverage and profit/loss lots The unit of the foreign exchange contract is the lot (Lot) can be subdivided into standard lot (Standardlot), mini-lot (Minilot), micro-lot (Minilot), and micro-lot (Minilot). (Minilot), Microlot (Microlot) and Nanolot (Nanolot) a standard lot represents 100,000 units of the base currency 1 standard lot of the GBP / USD contract is what it means? It turns out that it represents 100,000 pounds for how many US dollar lots of currency Standard lot 100,000 base currency Microlot 10,000 base currency Microlot 1,000 base currency Nanolot 100 base currency Take Deutsche Bank Forex for example, its standard lot is 100,000 base currency units but Deutsche Bank Forex does not limit traders to one standard lot, or you can choose to lose your lot. Lot currency is measured in points, EUR/USD rose from 1.3600 to 1.3610, which means that EUR/USD rose 10 points leverage leverage in human history played an important role in the new era of mankind lever to pry the stone, the Egyptians also used leverage to build the magnificent pyramids ancient Greek mathematician Archimedes even boldly said give me a fulcrum, you can pry up the whole earth! In foreign exchange trading, leverage also plays a powerful power just a few hundred dollars, through leverage, you can mobilize tens of thousands of dollars leverage also has different multiples, such as the United States, the highest leverage is 50 to one, while the British leverage to 200 to one and 100 to one mostly choose what leverage, depending on your trading preferences to buy 1 standard lot of EUR / USD (EUR / USD = 1.000) For example, to buy Euros, you do not need to sell $100,000 at the current exchange rate You can use leverage, for example, at a leverage of 100 to 1, you only need to sell $1,000 to buy 100,000 Euros If you use leverage of 200 to 1, you only need to sell $500 At this point, you have built up a position of 100,000 Euros, EUR/USD The higher the leverage, the lower the margin you need to put in. The broker will clearly indicate the amount of margin required in the trading platform. When the currency appreciates, you are making more money but if these currencies depreciate, the more you buy, the greater the loss. When he sells this currency, he expects it to depreciate When EUR/USD is quoted at 1.3705, it means that 1 euro can be exchanged for 1.3705 dollars If one buys ten standard lots of EUR/USD, it is equivalent to buying one million euros, and at the same time, he sells dollars at 1.3705 If EUR/USD rises by two hundred points, the trader sells euros at 1.3905 to sell the euro will be profitable, but if the euro / dollar fell two hundred points, to 1.3505, that is a loss settlement currency for the U.S. dollar trading profit and loss = (sell price - buy price) * the number of lots traded * contract units Example: EUR / U.S. dollar, 100,000 units of the standard lot contract sold 2 lots of euros, after closing to buy 2 lots of euros sell price: 1.4350 buy price: 1.4300 Profit and loss calculation method: (1.4350-1.4300)*2*100,000 profit and loss = (0.0050)*2*100,000 profit = 1,000 U.S. dollars to 1 standard lot for the transaction unit, all settlement currency for the U.S. dollar currency pairs, the value of each point is 10 U.S. dollars for example, EUR / USD, 1 point X 1 standard lot X 100,000 euros = 10.00 U.S. dollars Settlement currency is not the U.S. dollar base currency for the U.S. dollar trading profit and loss = (sell price - buy price)/close price x number of lots traded x contract units For example: USD/JPY, 100,000 units of the standard lot contract first sell 10 lots of USD/JPY, then close the position to buy 10 lots of USD/JPY, that is, first sell and then buy close the position sell price: 116.00 buy price: 114.50 profit and loss calculation method: (116.00 -114.50)/114.5*10*100,000 profit/loss = 0.0131004*10*100,000 profit = 13,100.4 USD is traded in 1 standard lot, and when a non-USD currency is the settlement currency, the value per point is 10 units (JPY is 1000 units) of the settlement currency For example, when a trader buys 10 standard lots When the USD/CHF exchange rate is 1.1665 and the USD/CHF rises to 1.1666, the traders position value rises from 1,166,500 to 1,166,600 CHF, earning 100 CHF based on the prevailing USD/CHF exchange rate of 1.1666, converting 100 CHF to USD: 100 CHF / 1.1666 = 85.72 U.S. dollars base currency for non-U.S. dollars, that is, the currency pair for the cross-board when trading profit and loss = (sell price - buy price) x cross-board settlement currency / U.S. dollar exchange rate x the number of lots traded x contract units For example: EUR / GBP, 100,000 units of the standard lot contract first sell 10 lots of EUR / GBP, after closing to buy 10 lots of EUR / GBP, that is, first sell and then buy to close the position sell price: 0.9136 buy price: 0.9036 close the position when the GBP / USD: 1.6320 profit and loss calculation method: (0.9136-0.9036)/1.6320 * 10 * 100,000 profit and loss = (0.9136-0.9016) x 1.6320x10x100,000 profit = 16,320 U.S. dollars to 1 standard lot for the transaction unit When the non-US dollar currency is the settlement currency, the value of each point is 10 units (the yen is 1000 units) of the settlement currency profit and loss has been calculated for you currently, the foreign exchange platform can be based on the exchange rate changes, automatically calculate the profit and loss of traders traders do not need to take a pen and paper, where the tedious calculation of the occupancy margin calculation method of the settlement currency for the non-US dollar a. The base currency is the US dollar For example: USD/JPY, the price is now 88.68, to buy a standard lot, the margin used is 100,000x1/100=1000 USD If you are a fan of the lot, the contract unit is 10,000, then the margin used is 100 USD. Calculated in accordance with the above method II, the base currency is not the U.S. dollar, including the euro / yen, pound / yen, etc. Crossover used margin = contract unit x the number of contract lots x crossover base currency / U.S. dollar exchange rate / leverage multiplier For example, the pound / yen, buy a standard lot then the margin used is 100,000x1x1.6287 (that is, the exchange rate of the pound / U.S. dollar)/100 = 1628.7 U.S. dollars in this currency pair, the British pound is the base currency, in the calculation of the occupancy margin, the use of the exchange rate should be the British pound / U.S. dollars of other classes such as the euro / yen and the Australian dollar / yen, etc., the method is similar to the settlement currency for the U.S. dollar used margin = contract units x the number of contract lots x the exchange rate / leverage multiplier for example: the British pound / U.S. dollar, the current price of 1.6287, to buy a standard lot The margin used is 100,000x1x1.6287/100=1628.4 USD If you are a fan of the lot, the contract unit is 10,000, according to the above formula is equivalent to 162.84 USD About the interest rate above is the impact of exchange rate changes on trading profit and loss In addition to exchange rate changes, the interest rate of the currency will also have an impact on the traders final profit and loss Traders need to use the brokers published interest rates as the basis for the introductory course, we will not repeat the order types market orders and pending orders There are some basic order types that all brokers offer, such as market orders market orders: orders to buy or sell foreign exchange at the current market price, for example, the current price of EUR/USD is 1.2140, if you want to buy EUR at that price, you need to buy EUR at that price. If you want to buy euros at that price, you need to click on the trading software such as buy a button, then your order at this moment has been generated to see the price, and then click on the transaction, its that simple! The only difference is whether to buy or sell in addition to the market order, there is an important order - pending orders pending orders: refers to orders used to buy or sell at a specified price with such orders, you will be able to buy or sell currency at the specified price For example, the current price of EUR/USD is 1.2050, you feel that the price breakthrough of 1.2070 is worth buying At this point, you have two options, one is Sit in front of the computer and wait until the price rises to 1.2070 buy; there is also an easy way, you can immediately create a pending order to buy EUR/USD at 1.2070, to be precise, belongs to the pending orders in the stop-loss buy orders, when the price rises to 1.2070, your trading software will automatically help you buy pending orders include four types of transactions: 1. Stop-loss buy orders - in the current price above the pending buy orders 3. Limit sell orders - in the current price above the pending sell orders 4. Stop-loss sell orders - in the current price below the pending sell orders stop-loss orders and stop-loss orders: the order refers to when the market price reaches or after the specified price buy or sell stop orders can limit the traders losses when the price starts to run in the direction of no profit, can make losses Minimize if the price reaches the set price line, the traders position will be automatically closed Example: Most of these orders are for protection purposes For example, we opened a long order in the position of 1.1888, we take into account that if the market direction is wrong up to 10 points of loss, then we can set a stop-loss price of 1.1878 stop-loss order Take Profit Order: Take Profit Order is designed to be used when the market After the quotation reaches the expected profit level, take profit and close two special orders trailing stop: the order is synchronized with the price trend movement, reducing the loss caused by retracement, traders do not need to keep an eye on the market trailing stop price will automatically move with the market quotation, and this is automatically handled by the trading software even if your network is interrupted, your orders are still protected Example: In When setting a trailing stop, it is necessary to be clear about how a point is calculated for a currency pair For example, if we open a long order near 1.1888 and we want to set a trailing stop order of 12 points, then we should fill 0.0012. And for USD/JPY, we should write 0.12 which is 12 points below our stop loss price at this point in the selling price So if the current selling price is If the sell price rises to 1.1902, then our new stop level will be set to 1.1899. As mentioned above, please note that our trailing stop level moves in one direction with the price. OCO orders: is the two standard pending orders, respectively in a particular price of the upper and lower position, when one of them is filled, the other will be automatically canceled for example, the current price is, you want to buy above, or in the sell if you set the order, then when the price reaches, the system will automatically implement the buy operation, and at the same time cancel the pending order to sell 1.1985