The trade

Imagine that you sold $100 worth of EUR/USD with a leverage of 1:100 at the exchange rate of 1.5558.

The details of your trade are:

EUR/USD 1.5558
Investment $100
Leverage x100

In plain English, what you've just done is sold (100X100=) 10,000 USD worth of EUR.
Now, less than an hour later, the EUR/USD rate has decreased to 1.5533. (A minor change of -0.15%)


The difference between the open and close rates is 25 points. (1.5558-1.5533=0.0025)
In the EUR/USD each point represent 1 USD which bring us to a profit of 25$ over this short-term small-size trade.

EUR/USD (Sell) 1.5558
EUR/USD (Buy) 1.5533
Difference 0.0025
Points 25
Profit $25

This means that this seemingly insignificant fluctuation in the rate allows you to cash in $25 from an initial investment of $100.

In other words you just made 25% profit on your investment, thanks to 0.15% movement in the pair's rate.

On the example trade that we've just seen, your risk was limited to the initial investment and your reward was unlimited, which is good if you are very certain regarding your decisions. However, as a beginner you shouldn't trust yourself too much, as you are bound to make mistakes. By learning about special trade order features, you will be able to hedge your risks.

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