WHAT IS FOREX TRADING

EURO/USD • FOREX trading is buying and selling

of one currency against another.
• Individuals speculators trade
currencies directly in order to
benefit from the movement in the
Buying Rate Selling Rate foreign exchange rate.
1.4920 1.4928
For example:
USD/YEN • If the Japanese Yen is
strengthening, one may want to buy
the Japanese Yen against the US
Dollar, expecting the Japanese Yen
to appreciate in value.
Buying Rate Selling Rate • Similarly, if the Japanese Yen is
weakening, one may sell the
93.10 93.18 Japanese Yen against the US Dollar.
 WHO ARE THE FOREX
MARKET PLAYERS
• The largest
traded market in
the world.

• Daily traded
volume
estimated USD
3.2 trillion a day

• Operates 24
hours a day from
Monday to
Friday
 ADVANTAGES OF FOREX VS STOCK TRADING
FOREX
Two way market, can profit
from upward or a downward
market movement
Low capital outlay of 1% of
100,000 contract value
No takers required at
anytime during the 24 hours
trading
High liquidity with great
efficiency with huge
international trading volume
of USD3.2 trillion a day
STOCK
One way market, can profit
from
an upward market
movement only
High capital outlay of 100%
of full contract value
Takers required at all times
during the short trading
hours
More vulnerable to liquidity
risks, due to small
domestic trading volume
 THE TRADING REQUIREMENTS
Currency Pair Contract Value Margin Requirement Trading Min. Price Movement Brokerage Fee
Hours (value per pip)

EUR/USD EURO 100,000 USD1000 24 hours 0.0001 USD 60/lot

Per lot Fixed at USD 10/pip settlement
GBP/USD GBP 100,000 USD1000 24 hours 0.0001 USD 60/lot
Per lot Fixed at USD 10/pip settlement

AUD/USD AUD 100,000 USD1000 24 hours 0.0001 USD 60/lot

Per lot Fixed at USD 10/pip settlement

USD/JPY USD 100,000 USD1000 24 hours 0.01 USD 60/lot

Per lot Varies USD9-USD11/pip settlement

USD/CHF USD 100,000 USD1000 24 hours 0.0001 USD 60/lot

Per lot Varies USD8-USD10/pip settlement

• The margin requirement to trade a currency pair is USD1000 per lot

• Each pip movement carries a value of USD8 to USD11 depending our what
currency pair

For example: EUR/USD 1.4900 to 1.4901, movement of 0.0001 x

100,000 = USD10/pip
 POTENTIAL RETURN AGAINST CAPITAL OUTLAY

• Movement from 1.2574 to 1.3741 is 0.1167 (1167 pips) x US10 /pip = US$11,670

• Trade taken: Bought 1 lot of EUR/USD at entry level 1.2574 and take profit at exit level 1.3741
• Number of pips make for profit is 1167 x US$10/pip
Ratio of Return
• calculated at: Profit Return US$ 11,670/lot US$1 : US$11.67
Capital Outlay US$ 1,000/lot 116.7% in 8 trading days
 POTENTIAL RETURN
AGAINST
CALCULATED RISK

• Buy EUR/USD at entry level 1.2425, projecting profit level at 1.2715 = 290 pts x USD 10/pip

• Calculated risk projected at cut loss level 1.2333 = 92 pips x USD 10/pip Risk Ratio

• Profit against Losses : Potential Profit Return USD 2,900 US$ 1.00 : US$ 3.15
Projected Cut Loss USD 920 (Losses) (Profit)