Good Day to everyone and Welcome again in my blog,
Hope you are all doing great for past few days.I was unable to continue for a vacation. So, I am sorry about that. From today- I am starting to continue again. This is 9th consecutive article on the "Forex learning". Hope, you guys also find its interesting. For the people, who just got here today, this is my successive article on Forex learning. This one is the "Ninth/9th"one. Here the previous ones-
2.Learning Forex
3.Learning Forex
4.Learning Forex
5.Learning Forex
6.Learning Forex
7.Learning Forex
8.Learning Forex
Well, today's topic is- how Profit and Loss occur in Forex. Also, what should you know about this.
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As you already know, you can buy or sell on Forex market.
Opening a trade is very straightforward. The process of opening a trade is simple and if you have experience in trading in the stock market, then you can understand it quickly.
Suppose you bought 10,000 euros for EUR / USD at 1.1800 exchange rates, with $ 11,800 dollars. Two weeks later, the EUR / USD exchange rate increased to 1.2500. Then if you sell it for $ 12,500 dollars you will gain $ 700 dollars.
Exchange rate is the ratio of prices of another currency relative to a currency. For example, the exchange rate of USD / CHF indicates how many US dollar can be bought for 1 Swiss franc at the exchange rate, or how much you can buy Swiss Franc with 1 US dollar.
I already discussed about this on my previous blogs. Still doing it, because of your convenience.
In each trade you buy a currency at the same time and sell another. Therefore, the price of currency pair in Forex market is expressed through quotes.
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Base currency / Quote currency = Bid / Ask
The previous currency of the slash (/) is called the base currency and the subsequent currency of the slash (/) is called the quote currency.
Here GBP is the base currency and EUR is the quote currency.
At the time of buying, the exchange rate indicates how much unit Quote currency is needed to buy 1 unit base currency. For example:1.1575 EUR has to pay for buying 1 British pound.
When selling, the exchange rate indicates how many unit quotes can be found when selling 1 unit base currency. For example, if you sell 1 British pound, you can have 1.1575 EUR.
The base currency is the basis of the buy and the sell. If you are GBP / EUR , you are buying the base currency GBP and at the same time selling Quote currency EUR. In simple words, buying GBP, selling EUR.
If you believe that the currency pair will be stronger, the base currency will be stronger than the Quote currency, then Buy. If you think the base currency will be weaker than the Quote currency, then open sell position.
First of all you need to decide whether you buy or sell.
If you want to buy (buy base currency and sell quote currency), that means you want to increase the base currency price and you will sell it at a higher price. Long or long position in the traders' language. Remember, long = buy (long = buy)
If you want to sell (sell base currency and buy a quote currency), that means you want to reduce the price of the base currency and you will buy it at more lower price. Take short or short positions in traders' language. Remember, short = sell (short = sell).
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Two prices are shown in all Forex quotes. Bid and Ask. Almost every bid price is lower than the Ask Price.
Bid is such a price that the broker wants to buy a base currency instead of the Quote currency. That is, bid for sale is the best price.
Ask is a price at which the broker wants to sell the base currency instead of the Quote currency. In other words, the best price is to buy.
The difference between bid and ask is spread.
The price quoted at EUR / USD is 1.36298 and the Ask Price is 1.36301.That is, spreads 3 pips here.
If you click on sell you can do the sale at 1.36301. And if you click on buy, you can do it at 1.36298.
Well this is all for today! I am not going to put any more in it. Let's talk about the later part in the next one. Feel free to leave a comment, if you have any queries. I will try my best to give you the desired answer.
