How to Trade in Money Markets

How to Trade in Money Markets
By [http://ezinearticles.com/?expert=Marius_Dumsa]Marius Dumsa

In the following section you'll notice a short summary of successful real life trading selections in such money Markets as: Forex, Futures, Indices and Contracts for distinction. I advise you to look at this section after you get yourself familiar with the essential material regarding trading financial instruments.

Buying the EUR/USD currency pair in the Forex Market

Conditions: Funds: 100 USD.

The credit leverage chosen by the client: 1:200.

For instance, at 09:15 h., I tend to purchase 0.1 lot of the EU currency, but in real terms 10 000 units at the value of 1.5415 USD for 1 EUR. Buying such a large quantity of Euros needs the total 1.5415*10000 = 15415 USD.

Not all traders offer interest-free credit leverage up to 1:200. Thus, during this case I have only 15415/200 = 77.08 USD of free funds on my trading account.

One pip is adequate 1 USD when the EUR/USD trade is 0.1 Lot. Later that day, at 21:45 h., the value reaches 1.5550. If I tend to decide to take profit at this time by closing the trading position manually (directly from the Meta Trader 4 terminal) or by using the choice to set a "Take Profit" order in advance, which might be executed automatically on the Easy Forex trading server at the indicated price.

The distinction between the position's opening value and closing value is 1.5550-1.5415 = 0.0135 (i.e. 135 pips*).

The profit earned equals 135*1 = 135 USD. So, the total funds on the trading account when the position is closed: 100+135 =235 USD. As a result, the return on the investment is 135 in about 13 hours.

If I had opened a buy position of 0.01 lot (using 7.71 USD of funds on our Easy Forex account), I might have received 13.50 US dollar if I had opened a foothold to buy 1 lot (using 770.75 USD of funds on our Easy Forex account), I might have received 1350 USD.

2. Selling the EUR/USD currency pair in the Forex Market

Initial conditions: Funds (on the Easy Forex trading account): 2000 USD. Our credit leverage 1:100.

At 09:10 I tend to open a EUR Sell position with a volume of 1 lot (in real terms: 100 000 units) at the value of 1.5730 USD for 1 EUR. To open such a position it's not needed to have previously purchased Euros as a result of all financial operations are going to be calculated in U.S. dollars. Without a leverage, selling such quantity of Euros would need the whole 1.5730*100000 = 157300 USD.

With a leverage of 1:100 I tend to only need 157300/100 = 1573 USD of free funds on the Easy Forex trading account. One pip is adequate to 10 USD of profit or loss for a trader once the trade volume is 1 lot EUR/USD.

At 15:55 the value reaches the worth 1.5640. The choice to require profit is made precisely at this point. It's possible to close a trading position manually, directly from the Meta Trader 4 terminal, or by setting a "Take Profit" order in advance, so it will be executed automatically on the Easy Forex trading server at the indicated price.

The distinction between the position's opening value and closing value is 1.5730-1.5640 = 0.0090. The profit earned equals 90*10 = 900 USD. That the total funds on the trading account after the position is closed: 2000+900 = 2900 USD. As a result, the return on the initial investment is 45th in 6 hours forty five minutes.

If I had opened a position with a volume of 0.01 lots (using 15.73 USD from our Easy Forex account), the profit would have been 9 USD. If I tend to had opened a Sell position with a volume of 0.1 lots (using 157.30 USD of funds on our Easy Forex account), the profit would have been 90 USD.

* Pip - the smallest price change that a given exchange rate can make.

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My Idea: [http://proforexreviews.com/etoro-trading-platform-review/]forex trading market is not to get rich quickly. Trading in forex currency market is a big risky investment, but you have to realize that investment is not a risk, investment is risk management.

Article Source: [http://EzineArticles.com/?How-to-Trade-in-Money-Markets&id=7908002] How to Trade in Money Markets