Forex Trading Examples

Compiled below are Forex trading examples. Please note that these are just examples; be aware that trading Forex is speculative and involves significant risk.

USD/CHF Trading Example

An investor deposit $10,000 in a Markets.com Trading Account.
The account is set to 0.5% margin or 200:1 Leverage. This means that for every $ 5,000 lot opened, the investor must maintain at least $25 in Margin (= $5,000 x 0.5%).
The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy $ 100,000 of the USD/CHF pair.

Day 1 – USD/CHF Quotes = 1.0147-1.0150

The market quotes USDCHF 1.0147-1.0150. The investor buys USD at 1.0150 against CHF.
By doing this, he commits in the simultaneous buying of USD 100,000 (20 lots at $5,000) and the selling of CHF 101,500 (= $100,000 x 1.0150) by using $500 as a Margin (= $100,000 x 0.5%) and borrowing USD 99,500 from Markets.com (= $100,000-$500)

• Transaction Flows Report - Day 1
  

  Account Name	Credit/Debit	Day 1	Comment
  USD Account	C	USD +100,000	$100,000 Investment
  CHF Account	D	CHF -101,500	# lots (20) x lot value ($5,000) x USDCHF Quote (1.0150)

• Client Account Report – Day 1
  

  Balance (USD)	Equity (USD)	Lots Open #	Used Margin (USD)	Usable Margin (USD)
  $10,000	$10,000	20	$500	$9,500
  (1)	(2)	(3)	(4)	(5)

(1) Balance = Deposit ($10,000) + Sum of Realized Profit & Loss ($0) = $10,000
(2) Equity = Balance ($10,000) + Sum of Unrealized Profit & Loss ($0) = $10,000
(3) # Lots open = Investment ($100,000) / Value of one lot ($5,000) = 20 lots
(4) Used Margin = # Lots open (20) x Value of one lot ($5,000) x Margin (0.5%) = $500
(5) Usable Margin = Equity ($10,000) – Used Margin ($500) = $9,500

Day 2-USD/CHF Quotes = 1.0300-1.0303

• The US dollar has risen and the USD/CHF quotes 1.0300-1.0303.
  The investor decides to take his profit and enters a sell market order in the Market trading platform. The order is executed instantaneously and the investor sells 20 lots of USDCHF at 1.0300.
  By doing this, he commits in the simultaneous selling of USD 100,000 (20 lots at $5,000) and the buying of CHF 103,000 (= $100,000 x 1.0300).
  

• Transaction Flows Report - Day 2
  

  Account Name	Credit/Debit	Day 1	Day 2	Comment
  USD Account	D	USD +100,000	USD -100,000	Sell # lots (20) x lot value ($5,000)
  CHF Account	C	CHF -101,500	CHF +103,000	Buy # lots (20) x lot value ($5,000) x USDCHF Quote (1.0300)

The dollar side of the transaction involves a credit and a debit of USD 100,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 101,500 and a credit of CHF 103,000. This results in a profit of CHF 1,500 = approx. USD 1,456 (= CHF 1,500 / 1.0303) which represents a 14.56% profit on the deposit of USD 10,000.

• Client Account Report– Day 2 (AFTER TRADE EXECUTION)
  

  Balance (USD)	Equity (USD)	Lots Open #	Used Margin (USD)	Usable Margin (USD)
  $11,456	$11,456	0	$0	$11,456
  (1)	(2)	(3)	(4)	(5)

(1) Balance = Deposit ($10,000) + Sum of Realized Profit & Loss ($ 1,456)= $11,456
(2) Equity = Balance ($11,456) + Sum of Unrealized Profit & Loss ($0) = $11,456
(3) All positions are closed, therefore # Lots open = 0
(4) Used Margin = # Lots open (0) x Value of one lot ($5,000) x Margin (0.5%) = $0
(5) Usable Margin = Equity ($11,456) – Used Margin ($0) = $11,456
Note: For simplicity's sake, we have disregarded the effect of difference in interest rate between USD and CHF over the 2-day period which would have marginally altered the profit calculation.

Source: http://www.markets.com/education/forex-education/forex-trading-examples.html