Objective Forex - earning money on currency speculation. So far we have talked a lot about the foreign exchange market. But issues such as a start-up capital needed to work on the Forex and how much profit can be expected to work on Forex is still not considered. In this chapter we will try to clarify.
Since the currency exchange in the exchange office - a kind of simplified model of earnings on forex, we start it with its review. Theoretically, the profit can be obtained from the purchase / sale of currency in exchange offices, but (as we shall see in the course of reading the chapter) the amount of such income is negligible compared with the possibility of earning on Forex through the Internet.
So, imagine that we have 1000 dollars, and we want to make money on currency speculation in the exchange office. Imagine that the US dollar against the Japanese Yen in exchange office of USD / JPY 104.15 / 106.65. We expect the growth rate of the Japanese yen against the US dollar, so decides to buy the Japanese Yen on all of our dollars. From the previous chapter, we know that the rates of purchase / sale are the base currency, ie, in this case the US dollar. In this formulation, we are selling dollars and currency exchange buys them. Course of purchase (bid) is listed first in the quote, so we get 104.15 * 1000 = 104,150 yen.
If we now sell our Japanese Yen back for US dollars, according to the quote above we get 104 150 / 106.65 = 976.56 dollars. That is, in this operation, we toleratelosses, and their size is 1 000 - 976.65 = 23.35 dollars. What we need to make a profit? Obviously, we need the sales price in the quotation USD / JPY dropped below the original purchase price, ie the selling price should fall by more than 250 points. Note that the 250 - it is the size of the spread in the quotation, that is, the sale price must change at least the value of the spread, so that we at least have returned back our 1000 US dollars. The problem is that the exchange rate changes on 250 points, we can wait a long time (weeks or months) depending on the current state of affairs in Forex. But suppose that the exchange rate is still changed by as much as 500 points in the right side for us, that is was the USD / JPY 99.15 / 101.65. What kind of profits we get to sell our Japanese Yen? And we get 104 150 / 101.65 = 1 024.59 US dollars. But our net profit from the transaction will amount to 1 024.59 - 1 000 = 24.59 USD.
In practice, you can wait very long for changes in exchange rates by as much as 500 points. That is 24.59 US dollars may be our monthly or quarterly income. Naturally, this is - not the profit that we would like to receive. But you can rest easy, because the work on Forex, things are different!
From the previous example, we have learned an important lesson - the smaller the size of the spread in the proposed quote you, so it is more beneficial to you as a trader. In the exchange offices spread can be hundreds of items, and the quotation itself is updated, usually once a day. Forex is the size of the spread depends on the hand, charge you a quote. Private investors in the Internet, sets the size of the spread of its online brokerage (commission house). Therefore, it is advisable to choose the online broker to offer more favorable conditions. Depending on the traded currencies, the spread size, typically ranging from 1 to 10 points. But, as mentioned earlier, in periods of instability of the currency market there is the practice of increasing the size of the spread Internet brokers, and it also should not be forgotten.
Another lesson we have learned from the previous example is that for a living on speculation with exchange rates at an exchange office need to buy the currency, so that at the right moment to perform the reverse operation, that is, sell it. And the example of the exchange, to buy the Japanese Yen for US dollars, we need to have on hand the necessary amount in dollars. This, of course, obviously, but in Forex things a little bit easier, and this will be discussed later. Another thing you should pay attention to in the case of the exchange point - is that for currency speculation, we only use our available cash on hand. Of course, nothing prevents us to go and get a bank loan, but no bank will not give you credit for speculation in the foreign exchange market, and would you like to lose themselves in such speculation most of the loan and go into debt? With Forex same case again, things are easier. Using the principle of margin trading, which will be discussed in the next chapter, we can, having a relatively small capital (even a few thousand dollars), to control the capital hundreds of times greater than our available funds. The more capital we are in control, the more we can earn. After all, if we were buying the Japanese Yen in 1000 US dollars, and, say, 100 000, would have earned 24.59, as much as 2459 dollars, and it's worth it to continue to study the Forex, is not it? So, let's finish with the example with an exchange office and proceed directly to the Forex market.
In order to work on the Forex through the Internet, you must select Internet broker (hereinafter, for convenience, we shall call it simply a broker).Your broker offers you the account to which you must transfer a certain amount of money, called a security deposit. The size of the security deposit - the question and philosophical and practical at the same time. It all depends on how aggressive you are going to trade, what size the lever (it will be discussed in the next chapter) you use, how many lots (of which will be discussed a little later) open at the same time, what is the experience of Forex trading have, and so on. D. For the novice trader is recommended to have at least 1 500 - 2 000 USD security deposit. Security deposit is usually stored in special multi-accounts that your broker opens for you in the bank, which is served. Typically, most online brokers - is overseas companies registered in offshore zones. Therefore, the accounts opened in US dollars, but it is (in contrast to the example of the exchange office) does not mean that you can only work with the dollar quotation. In order to buy the Japanese Yen, Pound Sterling over the Internet trader does not necessarily have to run past. This is the advantage of the forex market - you can make a difference in exchange rates without actual delivery of the currency, that is, the value date as such loses its meaning. With the insurance deposit US dollars, we can make a deal with any other currency. Recall the example of the exchange, where we expect the growth rate of the Japanese yen against the US dollar, or in other words, the fall of the dollar against the Yen in the quote USD / JPY. And what if we conversely expected growth of the dollar against the Yen? It would be logical to buy US dollars for Japanese yen, but what if in the hands of us, only 1 000 dollars and there is Ian? Obviously, in exchange office, we would not be able to make such a deal. And while working on the Internet Forex trader can make such deals, because the actual delivery of the currency (as we said) does not occur - the money earned solely on speculation and profit is converted into the currency of account of the security deposit that is in US dollars.
But the principle of earnings remains the same - to make a deal, we must first buy the currency cheaper in order to sell it more expensive. Or sell the currency more expensive at first, then to buy it cheaply, that in principle - the same thing. It is always one currency is bought or sold for other currencies. The first stage of the transaction on the Forex is called opening position. The second stage is called theclosing position. At the time of closing the position calculated profit or loss from the transaction, which are either credited or debited from the security deposit. Open position you can either buy or sell the base currency. If you open the position of buying currency, such a position is called a long position (long). If you open a position of currency sales, such a position is called a short position (short). When, for example, say "I have an open long position of the US dollar to the Japanese Yen" means that in anticipation of the appreciation of the US dollar against the Japanese Yen was purchased a certain number of dollars for yen.
Minimum lot size in Forex is called a lot (lot). Its size is expressed in the quote currency, but as a rule, equivalent to US $ 100 000. Working in the foreign exchange market, you open and close a position, the size of which is always an integer number of lots. The question that you have probably now emerged - how a private investor can work on Forex, where the minimum transaction amount is so great? Do not worry, the principle of margin trading, which will be discussed in the next section, allows you to control a capital of US $ 100 000, with the insurance deposit just a few thousand dollars and risking only his security deposit.
Even the principle of margin trading does not help those who have no such amount. After all, someone has a relatively small free capital (about a thousand US dollars), but also wanted to work on Forex. For such investors, the Internet brokers introduced the concept of a mini lot (mini lot),which is equivalent to US $ 10 000 and can be easily monitored security deposit of one thousand dollars. Some brokers even offer micro lots (microlot), the size of which is equivalent to only 1 000 dollars, and to control it enough to just a few hundred dollars, however, these items are used much less frequently. In practice, you, as a novice Internet trader will most likely be working with small lots.
It should be noted that the greater your security deposit, the more items you can keep both open for trading. After all, depending on the strategy that every trader works out for itself, you may need several open positions at the same time - this should be taken into consideration when bidding.Therefore, always monitor the size of your security deposit.
What is the approximate income you can get from a deal on Forex? Imagine that we are working with small lots, with a damage deposit of US $ 1000, and the forecast growth of the US dollar against the Japanese Yen at the current rate of USD / JPY 104.75 / 80. As we can see, the size of the spread is only 5 points, which is typical for Forex and significantly less than in the example of the exchange point. Suppose that we open a long position on the dollar one mini lot at the rate of 104.80 Japanese yens per dollar. Our forecast of a course is justified, and at the close the dollar position of the yen is USD / JPY 105.10 / 15. Thus, we were able to "catch" beneficial to us in the course of the movement of 105.10 - 104.80 = 30 points. Note that the items correspond to the quote currency, ie the Japanese Yenam. In order to calculate the size of our income in US dollars must be translated 30 points in dollar equivalent, and multiplied by the size of a mini lot 10 000. To transfer points in dollar terms, we divide 0.30 to the US dollar selling rate for the Japanese Yen, ie 0.30 / 105.15 = 0.0029. The resulting value corresponds to 29 points in dollar terms and by multiplying it by 10000 we get the size of our profits - $ 29. It should be noted that the movement of rates in our sample was only 30 points, and this motion to our existing 1000 dollars we managed to make a profit of $ 29. In practice, such a movement courses can "catch" Forex for a few hours or even minutes.
To summarize the chapter, comparable revenues derived from the operation in exchange office, described earlier in this chapter and the operations on Forex, as described later in this chapter. It is obvious that the opportunities offered by Forex, do not go to any comparison with the exchange point. Profit, which is theoretically earned exchange office for the month in Forex can be earned in one hour! Continue to study the material site forexanewway and soon you will learn how to make the work at Forex bring you a steady income.
Since the currency exchange in the exchange office - a kind of simplified model of earnings on forex, we start it with its review. Theoretically, the profit can be obtained from the purchase / sale of currency in exchange offices, but (as we shall see in the course of reading the chapter) the amount of such income is negligible compared with the possibility of earning on Forex through the Internet.
So, imagine that we have 1000 dollars, and we want to make money on currency speculation in the exchange office. Imagine that the US dollar against the Japanese Yen in exchange office of USD / JPY 104.15 / 106.65. We expect the growth rate of the Japanese yen against the US dollar, so decides to buy the Japanese Yen on all of our dollars. From the previous chapter, we know that the rates of purchase / sale are the base currency, ie, in this case the US dollar. In this formulation, we are selling dollars and currency exchange buys them. Course of purchase (bid) is listed first in the quote, so we get 104.15 * 1000 = 104,150 yen.
If we now sell our Japanese Yen back for US dollars, according to the quote above we get 104 150 / 106.65 = 976.56 dollars. That is, in this operation, we toleratelosses, and their size is 1 000 - 976.65 = 23.35 dollars. What we need to make a profit? Obviously, we need the sales price in the quotation USD / JPY dropped below the original purchase price, ie the selling price should fall by more than 250 points. Note that the 250 - it is the size of the spread in the quotation, that is, the sale price must change at least the value of the spread, so that we at least have returned back our 1000 US dollars. The problem is that the exchange rate changes on 250 points, we can wait a long time (weeks or months) depending on the current state of affairs in Forex. But suppose that the exchange rate is still changed by as much as 500 points in the right side for us, that is was the USD / JPY 99.15 / 101.65. What kind of profits we get to sell our Japanese Yen? And we get 104 150 / 101.65 = 1 024.59 US dollars. But our net profit from the transaction will amount to 1 024.59 - 1 000 = 24.59 USD.
In practice, you can wait very long for changes in exchange rates by as much as 500 points. That is 24.59 US dollars may be our monthly or quarterly income. Naturally, this is - not the profit that we would like to receive. But you can rest easy, because the work on Forex, things are different!
From the previous example, we have learned an important lesson - the smaller the size of the spread in the proposed quote you, so it is more beneficial to you as a trader. In the exchange offices spread can be hundreds of items, and the quotation itself is updated, usually once a day. Forex is the size of the spread depends on the hand, charge you a quote. Private investors in the Internet, sets the size of the spread of its online brokerage (commission house). Therefore, it is advisable to choose the online broker to offer more favorable conditions. Depending on the traded currencies, the spread size, typically ranging from 1 to 10 points. But, as mentioned earlier, in periods of instability of the currency market there is the practice of increasing the size of the spread Internet brokers, and it also should not be forgotten.
Another lesson we have learned from the previous example is that for a living on speculation with exchange rates at an exchange office need to buy the currency, so that at the right moment to perform the reverse operation, that is, sell it. And the example of the exchange, to buy the Japanese Yen for US dollars, we need to have on hand the necessary amount in dollars. This, of course, obviously, but in Forex things a little bit easier, and this will be discussed later. Another thing you should pay attention to in the case of the exchange point - is that for currency speculation, we only use our available cash on hand. Of course, nothing prevents us to go and get a bank loan, but no bank will not give you credit for speculation in the foreign exchange market, and would you like to lose themselves in such speculation most of the loan and go into debt? With Forex same case again, things are easier. Using the principle of margin trading, which will be discussed in the next chapter, we can, having a relatively small capital (even a few thousand dollars), to control the capital hundreds of times greater than our available funds. The more capital we are in control, the more we can earn. After all, if we were buying the Japanese Yen in 1000 US dollars, and, say, 100 000, would have earned 24.59, as much as 2459 dollars, and it's worth it to continue to study the Forex, is not it? So, let's finish with the example with an exchange office and proceed directly to the Forex market.
In order to work on the Forex through the Internet, you must select Internet broker (hereinafter, for convenience, we shall call it simply a broker).Your broker offers you the account to which you must transfer a certain amount of money, called a security deposit. The size of the security deposit - the question and philosophical and practical at the same time. It all depends on how aggressive you are going to trade, what size the lever (it will be discussed in the next chapter) you use, how many lots (of which will be discussed a little later) open at the same time, what is the experience of Forex trading have, and so on. D. For the novice trader is recommended to have at least 1 500 - 2 000 USD security deposit. Security deposit is usually stored in special multi-accounts that your broker opens for you in the bank, which is served. Typically, most online brokers - is overseas companies registered in offshore zones. Therefore, the accounts opened in US dollars, but it is (in contrast to the example of the exchange office) does not mean that you can only work with the dollar quotation. In order to buy the Japanese Yen, Pound Sterling over the Internet trader does not necessarily have to run past. This is the advantage of the forex market - you can make a difference in exchange rates without actual delivery of the currency, that is, the value date as such loses its meaning. With the insurance deposit US dollars, we can make a deal with any other currency. Recall the example of the exchange, where we expect the growth rate of the Japanese yen against the US dollar, or in other words, the fall of the dollar against the Yen in the quote USD / JPY. And what if we conversely expected growth of the dollar against the Yen? It would be logical to buy US dollars for Japanese yen, but what if in the hands of us, only 1 000 dollars and there is Ian? Obviously, in exchange office, we would not be able to make such a deal. And while working on the Internet Forex trader can make such deals, because the actual delivery of the currency (as we said) does not occur - the money earned solely on speculation and profit is converted into the currency of account of the security deposit that is in US dollars.
But the principle of earnings remains the same - to make a deal, we must first buy the currency cheaper in order to sell it more expensive. Or sell the currency more expensive at first, then to buy it cheaply, that in principle - the same thing. It is always one currency is bought or sold for other currencies. The first stage of the transaction on the Forex is called opening position. The second stage is called theclosing position. At the time of closing the position calculated profit or loss from the transaction, which are either credited or debited from the security deposit. Open position you can either buy or sell the base currency. If you open the position of buying currency, such a position is called a long position (long). If you open a position of currency sales, such a position is called a short position (short). When, for example, say "I have an open long position of the US dollar to the Japanese Yen" means that in anticipation of the appreciation of the US dollar against the Japanese Yen was purchased a certain number of dollars for yen.
Minimum lot size in Forex is called a lot (lot). Its size is expressed in the quote currency, but as a rule, equivalent to US $ 100 000. Working in the foreign exchange market, you open and close a position, the size of which is always an integer number of lots. The question that you have probably now emerged - how a private investor can work on Forex, where the minimum transaction amount is so great? Do not worry, the principle of margin trading, which will be discussed in the next section, allows you to control a capital of US $ 100 000, with the insurance deposit just a few thousand dollars and risking only his security deposit.
Even the principle of margin trading does not help those who have no such amount. After all, someone has a relatively small free capital (about a thousand US dollars), but also wanted to work on Forex. For such investors, the Internet brokers introduced the concept of a mini lot (mini lot),which is equivalent to US $ 10 000 and can be easily monitored security deposit of one thousand dollars. Some brokers even offer micro lots (microlot), the size of which is equivalent to only 1 000 dollars, and to control it enough to just a few hundred dollars, however, these items are used much less frequently. In practice, you, as a novice Internet trader will most likely be working with small lots.
It should be noted that the greater your security deposit, the more items you can keep both open for trading. After all, depending on the strategy that every trader works out for itself, you may need several open positions at the same time - this should be taken into consideration when bidding.Therefore, always monitor the size of your security deposit.
What is the approximate income you can get from a deal on Forex? Imagine that we are working with small lots, with a damage deposit of US $ 1000, and the forecast growth of the US dollar against the Japanese Yen at the current rate of USD / JPY 104.75 / 80. As we can see, the size of the spread is only 5 points, which is typical for Forex and significantly less than in the example of the exchange point. Suppose that we open a long position on the dollar one mini lot at the rate of 104.80 Japanese yens per dollar. Our forecast of a course is justified, and at the close the dollar position of the yen is USD / JPY 105.10 / 15. Thus, we were able to "catch" beneficial to us in the course of the movement of 105.10 - 104.80 = 30 points. Note that the items correspond to the quote currency, ie the Japanese Yenam. In order to calculate the size of our income in US dollars must be translated 30 points in dollar equivalent, and multiplied by the size of a mini lot 10 000. To transfer points in dollar terms, we divide 0.30 to the US dollar selling rate for the Japanese Yen, ie 0.30 / 105.15 = 0.0029. The resulting value corresponds to 29 points in dollar terms and by multiplying it by 10000 we get the size of our profits - $ 29. It should be noted that the movement of rates in our sample was only 30 points, and this motion to our existing 1000 dollars we managed to make a profit of $ 29. In practice, such a movement courses can "catch" Forex for a few hours or even minutes.
To summarize the chapter, comparable revenues derived from the operation in exchange office, described earlier in this chapter and the operations on Forex, as described later in this chapter. It is obvious that the opportunities offered by Forex, do not go to any comparison with the exchange point. Profit, which is theoretically earned exchange office for the month in Forex can be earned in one hour! Continue to study the material site forexanewway and soon you will learn how to make the work at Forex bring you a steady income.
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