Tutorial 2

1. Explain what is a leverage in forex trading

the use of borrowed funds to increase one's trading position beyond what would
be available from their cash balance alone.

2. What is margin?
a portion of your funds that your forex broker sets aside from your account
balance to keep your trade open and to ensure that you can cover the potential
loss of the trade.

3. Define what are pips

measures the amount of change in the exchange rate for a currency pair, and is
calculated using last decimal point. Since most major currency pairs are priced to
4 decimal places, the smallest change is that of the last decimal point which is
equivalent to 1/100 of 1%, or one basis point.

4. You are quoted EUR/USD at a Bid and Ask of 1.2500 - 1.2501.

If you are Bullish of Euro, which is the rate you will receive
If you are Bearish of Euro, which is the rate you will receive

5. Determine the cross rate of EUR/CHF with the following quotes

6. Determine the cross rate of EUR/CHF with the following quotes

CHF/USD 1.1170 1.1185 and EUR/USD 1.2454 - 1.2463

7. Calculate the pip value of the following EUR/GBP standard lot rate in USD.
Rate quoted as EUR/GBP: 0.86263 EUR/USD 1.06084 GBP/USD 1.2555

8. What is Lot size

 Lot size is the number of currency units that will be buy or sell by trader.
The standard size for a lot is 100,000 units of currency.

9. You are given the EUR/USD rate as 1.10. You plan to trade a standard lot.
a) Calculate the value of your trade
b) Suppose your broker gives you leverage of 1:100. How much must you
have to trade? 1100$
c) Suppose your trade were profitable by 1 pip, calculate your profit
10$

 Standard lot size is 100,000 units

 1 pip for std. lot is $10

10.You believe that signals in the market are indicating that the British pound
will go up against the U.S. dollar. You open one standard lot (100,000 units
GBP/USD), buying with the British pound with a 2% margin requirement.
Current rate is GBP/USD 1.5000.
a) Calculate how much margin you need to trade 1 position 3000
b) Calculate the profit or loss you make if the closing quote is 1.5050
1 pip for std. lot is $10
$500