Profit in Forex Trading Explained
{While trading in forex market, traders must pay close attention to two important rules:
1. Get rid of your LOOSING trades and let your winning trades run
Every FOREX trader has loosing trades. The secret of minimizing the losses is not to worry about few loosing trades. Rather be disciplined and at the end of the day concentrate on having more more winning trades than losing trades.
When you see beyond doubt that you are in a losing trade, don’t keep losing money. Don’t expect that market will turn around and you will recover your losses. Most of the time it never happens. Waiting for recovery of losses end up in more losses. Ignore a loosing trade. Remember, there will be many other profitable opportunities. Your objective should be to minimize your losses and maximize your gains.
2. NEVER enter the Market without an exit strategy.
It means that whenever you enter the market place a Stop Loss Order. This strategy will protect against big losses.
Before initiating any trade, you have to calculate at what point ( price) you would be exiting, because the market changed direction, and you would want to cut your losses.
To make profits, in the FOREX, a trader can enter the market with a *buy position* (known as going “long”) or a *sell position* (known as going “short”).
As an example let’s assume you anticipate EURO will go up as compared to USD. So you buy the EUR/USD pair meaning you will simultaneously buy EUROS, and SELL dollars). You can initiate a trade using your PC or laptop and the software that is running is Fap Turbo, an excellent software for forex trading. Assume that the EUR/USD pair is trading at: EUR/USD: 1.3500. That is you have to sell 1.3500 USD to buy one EURO. After four hours, the currency pair EURO/USD is quoted as EURO/USD: 1.3540. You sell the EURO and make a profit of 40 PIPS which is translated to 400 dollars for a regular lot and 40 dollars for mini lot.
The following is another example:
consider this scenario involving the USD/JPY currency pair:
In the curency pair USD/JYP, USD is the base currency and JYP is the quote currency. Selling the currency pair implies selling the base currency and buying the quote currency. You sell the currency pair if you believe the base currency (USD) will go down relative to the quote currency (JPY), or equivalently, that the quote currency (JPY) will go up relative to the base currency (USD).
HOW TO CALCULATE PROFIT OR LOSS?
The Profit Calculations, on the Short-sell trade scenario below, may seem somewhat complicated if you’ve never been in the FOREX market before, but this process is continually calculated through your broker trade station (software). I show you this process below so you can see how a profit might occur.
The current bid/ask price for USD/JPY is 90.50/90.54, meaning you can buy $1 US for 90.54 YEN, or sell $1 US for 90.50 YEN.
Suppose you think that the US Dollar (USD) is overvalued against the YEN (JPY). To execute this strategy, you would sell Dollars (simultaneously buying YEN), and then wait for the exchange rate to rise.
Your trade would be the following: you sell 1 lot USD (US $100,000) and you buy 1 lot JPY (9,054,000 YEN). (Remember, at 1 % margin, your initial margin deposit for this trade would be $ 1000.)
As you expected, USD/JPY falls to 89.50/89.54, meaning you can now buy $1 US for 89.54 Japanese YEN or sell $1 US for 89.50.
Since you’re short dollars (and are long YEN), you must now buy dollars and sell back the YEN to realize any profit.
You buy US $100,000 at the current USD/JPY rate of 89.54, and receive 8,954,000 YEN. Since you originally bought (paid for) 9,054,000 YEN, your profit is 100,000 YEN.
To calculate your P&L in terms of US dollars, divide 100,000 by the current USD/JPY rate of 89.54
Total profit = US $1116.92
Take advantage of Forex automatic Trading Robots
There is a class of software that runs on trader’s computer. This software take buy or sell action
depending on market conditions. They have enough intelligence to do so. They are called trading robots. There are many in the market. One well known robot is Fap Turbo. In my opinion this one is the best if price/performance is the consideration. For more information go to
Forex Trading Profit Explained