Taking A Look At The Forex Calendar

Taking A Look At The Forex Calendar

A Forex calendar is a document that has all the important economic indicators and events. The document helps you in keeping track of the Forex estimates made by Forex experts. As a trader, you will find all the information that you need in order to predict the future.

Where to Find A Forex Calendar

There are many calendars provided by different brokers and financial organizations. All you need to do is to go online and find these calendars. If you are working with a professional broker you will definitely find a calendar on the broker's website.

You can also make your own calendar. Here you need to visit the online calendars and choose the most important indicators and paste them into your document. You should then choose the ones that are of importance to you and save. This will help you to act accordingly.

Indicators Found On the Economic Calendars

Indicators are the ones that give you information about a given survey or occurrence. Some of the notable indicators that you will find on the calendars include:

Consumer credit report: popularly known as CCR, this is a report that aids in estimating the changes in the dollar amounts brought about by the issuance of unsecured loans aimed at purchasing consumer goods.

Although, the indicator isn't a big market mover, it will help you in predicting the future spending levels of the consumers-if more loans have been given it means that consumers have more money to spend. The report also aids in informing you on the position that you should take when trading the retail sales and personal consumption reports.

Consumer confidence index (CCI): it's usually released at 10am EST of every Tuesday of each month. It's usually a survey of over 5,000 US households and it intends to show the spending power, financial health and confidence of the average American consumer.

The survey comes with three headline figures: the index of consumer sentiment, current economic conditions and index of consumer expectations. This survey is usually a big market mover since the confidence of the consumer is of great importance for the performance of the country as a whole.

How to Read The Forex Calendar

It's very easy to read the calendar as all the information you need to know is given to you in black and white. The information comes in different colors where red is the most important, orange is less important while yellow shows the information is not important at all.2

forex promotion code

How to Choose the Best Forex Robot?

How to Choose the Best Forex Robot?

The Forex market operates for 5 days a week for 24 hours daily and there are various automated Forex robot signals that help traders interpret the various indicators that are useful for trading. What is the best Forex robot?

There are various factors that determine the movement of the pair of currencies that are traded. Past performance and trends are taken into account while determining the movement of currencies during actual trading. These robots will be analyzing real time data automatically and determine the right trading pattern.

The Forex market is volatile and even experts who have lots of experience in trading are not able to interpret the various factors that determine the movement of the pair of currencies. Individuals who are new to Forex trading would find it difficult to interpret the signals correctly and trade in a profitable manner.

When you are determining what the best Forex robot to use is, you will need to keep in mind that it is easy to use. If the system is complex, it will be difficult to understand and use.

There are various Forex robots that are available in the market and you can read the reviews of those that are available to find out what is the best that is available in the market.

• fully automatic
• inbuilt loss protection mechanism and
• low account investment.

If you are unsure about what is the best robot that is available there are various demo versions that can be downloaded. They will help you understand the various strategies that are used in Forex trading.

FAP Turbo

It is very easy to install the system and there are many strict standards that need to be met before the trade is completed. The program is supposed to give the best winning rate among automated Forex robots.

The trade is done only when there is a definite trend that will help in making money. You will be able to consistently make profits if you use these systems correctly. There are highly developed mathematical algorithms that are used in these systems and they will be used to calculate the movement of the currencies.

Forex MegaDroid

Traders will be able to increase their profits when they use this trading system. The program is supposed to be exceptionally accurate and delivers super performance consistently.

The other consideration that you will need to keep in mind while determining what is the best is your budget. These automated systems are available in different prices and you can make the choice based on your individual budget. Investors will be able to take better decisions when they use Forex robots for the purpose of trading.

Simple Ways For You To Succeed With Forex Trading Education

Simple Ways For You To Succeed With Forex Trading Education

While many people have heard of Forex trading education, not everyone is willing to try it. It could be intimidating or appear difficult to most people. When spending your money, it doesn't hurt to be cautious! Before investing in trading, educate yourself. It is important to keep up with information about Forex. Here are a few tips that will help you do that.

Avoid emotional trading. You can get yourself into deep financial trouble if you allow panic, greed, and other emotions rule your trading style. It's impossible to completely remove emotion from the equation, but if they are the primary driver of your trading decisions, you are in trouble.

If you want to be a successful Forex trader, you need to be dispassionate. This will reduce your risk level and prevent you from making poor decisions based on spur of the moment impulses. It is impossible to entirely separate emotion from business, but the more you are able to control your emotions, the better decisions you will make.

To succeed in Forex trading, sharing your experiences with fellow traders is a good thing, but the final decisions are yours. Tapping into the advice of those more experienced that you is invaluable, but in the end, it is your own instincts that should guide your final decisions.

For instance, you could lose more moving a stop loss than leaving it be. Always follow the plan you created.

When a Forex trader wants to minimize their potential risk, they often use a tool called the stop order. After an investment falls by a specific percentage,determined by the initial total, an equity stop order halts trading activity.

Research your broker when using a managed account. The broker should be experienced as well as successful if you are a new trader.

Some people think that the stop losses they set are visible to others in the market. They fear that the price will be manipulated somehow to dip just below the stop loss before moving back up gain. There is no truth to this, and it is foolish to trade without a stop-loss marker.

When it comes to Forex trading, there are some decisions that are going to have to be made. It's not surprising that this may cause some people to shy away from Forex trading education entirely. If you have already been trading, or are ready to begin now, take the tips you have learned here and apply them for your own benefit. It's important to stay current with the latest news. Think about your purchases before spending money. Be smart about your investment choices.

Greg discovered very early on that trading Forex required a serious approach to Forex trading education for it to be of long term profitability. Since Greg began speculating on the currency market his account and confidence have grown exponentially and he now uses his skills to teach others to be profitable through Trading Signal Solutions and their forex trading strategies.

Binary Options

What Are Binary Options?

Binary options are estimates of underlying assets performance during a given time frame. To understand the beauty of BO trading, let’s first take a look at how investment in other trading markets usually works.

In most forms of investment the investors actually purchases the asset they invest in and the value of the profit and loss is determined upon the changing value of the asset. If the investor sells the asset back to the market whenever its value increases then they're making a profit, and if they sell the asset back to the market when its value decreases, then their money is lost.

This type of investment requires the investor to constantly worry about when to sell the asset and get out of the market to avoid exposing his entire account to the market’s volatility. Conversely, BO trading is simpler.

In options we trade on the market and not in the market like other trading methods, and thus the amount of psychological stress isn’t expressed, as you are just predicting the asset's movement for a predetermine time frame.

The Definition of binary options

The word binary stands for “having two parts”. Generally speaking, all you need to do is predict either “Call” or “Put“. BO trading has only two investment possibilities for you to predict and then choose between.

Binary Options

One investment possibility is expressed when you predict that the price of the asset will rise, this type of investment is named “Call” option. The other possibility is presented when you predict that the price of the asset will fall, this type of investment is named “Put” option.

Choosing an asset is the first step of your investment. For instance, if you have an interest in gold prices, you may choose to place a binary investment in gold. Obviously, the more familiar you're with the gold market the better your chances are of successfully predicting the fluctuations of gold prices.

What assets can be traded as Binary Options?

Opteck has a wide variety of binary contracts available to traders. 

You can either trade with:

Indices - Such as Nasdaq, Dow Jones, FTSE, Nikkei and many more 

Forex - Combinations for all the major currencies such as USD, EUR, GBP ,JPY and AUD just to name a few Commodities - Gold, Silver, Oil, Corn, Coffee and several more Stocks - Over 50 of the biggest and most interesting companies in the world from a variety of industries are available in the Opteck asset list, amongst them - Google, Deutsche Bank, Coca Cola and many many more.

Where Can I learn How to trade?

The Opteck academy provides novice and experienced traders a valuable resource for learning and improving your binary options trading techniques and strategies. Every registered Opteck trader has high quality educational material at his fingertips and a smart and diligent trader will always do better than the investor relying on gut feelings and luck

How do I trade With Opteck?

You begin by choosing an asset you wish to invest in, let’s say that you are in fact interested in the gold market. If you think that the price of gold is going to rise in the next hour – you simply decide how much you want to invest, the time frames (in this case 1 hour) and instruments. The consequence of these actions could mean a 100% profit on your behalf.

You can Open an account and start trading right away or, if you would like to try trading for practice purposes first you can try our Binary option demo platform with no risks involved.

Binary Options Demo Accounts

When you first discover Binary Options then you can often become slightly overwhelmed by all of the different types and kinds of Binary Options that you are going to be able to trade online, and as such many trading sites will allow new customers to sign up for a demo trading account.

There are many benefits to be had by you setting up and starting to trade via a demo account, for trading Binary Options online can be a little confusing at first, but once you master the different types of Binary Options available, the way to trade them all as well as getting to grips fully with the many different types of Binary Options trading platforms there is some serious money to be made on a day to day basis!

Please do keep on reading if you are new to the world of online Binary Options trading for we will enlighten you on everything there is to know about trading Binary Options via a demo account and you really should opt to set up a demo account if your are new to this potentially very profitable way of trading.

How Do Demo Binary Options Account Work?

When you set up and open a demo trading account at any online Binary Options trading set that offers them, you are going to be able to place just as many types and kinds of trades as you can when trading for real money, however being a demo account you will never be forced to make a deposit and all wins and losses will not be for real.

You will have no restrictions what so ever on the different kinds of assets, indices or currency pairings you can trade against when using a demo account, and once you sign up and register for one you will be given a set of demo credits which is what you will be using to trade with.

The demo credits can be restocked should you use them all up, and anyone who is seriously considering placing any type of Binary Options in the online environment really should set up a demo account for once you do you can always use that demo account, even if you are already trading for real money.

How do I set up a Demo Account?

Setting up a demo trading account is one of the easiest things you can do, for all you need to do is to visit any of our listed Binary Option trading sites and click on the demo account button, you will then simply need to fill in your details and an account will be instantly opened up for you.

Once you have filled in the registration form which takes a minute or so you will then be given your own unique username and password, and then all that is required for you to do is to log into the demo account.

When you first log into your newly created demo account you will find it comes pre-stocked with demo credits and then you are free to start trading on any of the available Binary Options, use the main menu as the way of accessing each trading market for that is the easiest way to navigate around the trading platforms!

Once you have found a Binary Option that interests you then simply click on the Put or Call button depending on whether you think the value of that asset or commodity is going to rise in value or decrease in value, choose the number of demo credits you wish to wager on that option and then click on the OK or Confirm button and your trade will be placed!

You can always keep track of any live or previously placed Binary Option trades by clicking on the history button, which will bring up a complete overview of all of your trades placed using your demo account, and this will also show you all losses and profits made.

If at any time you wish to start trading for real money than all you need to do is to switch over to the real money version of the trading platform, make a deposit and then start to trade.

Don’t forget that when you make your very first and initial deposit you may also qualify for an additional bonus so make sure you claim it to give your trading bankroll a boost in its value!

What are the Benefits of Using a Binary Options Demo Account?

There are lots of unique benefits of using a demo account as an introduction to Binary Options trading and the main one is that you are going to be able to use the demo accounts at different sites to allow you to find a trading platform that you find the easiest one to use.

There are many different trading platforms available at different sites and not all of them are as user friendly as they could be, so by setting up demo accounts at a few different Binary Options trading sites you are going to find a site you like the look and feel of!

Of course being new to the world of Binary Options trading, a demo account is going to allow you to place different types of trades including but certainly not limited to One Touch Trade,

Full Time Period Binary Options trades as well as being able to trade currency pairings, and by placing demo trades should you make any error then it is not going to be an expensive error as you are not placing trades with real money!

Once you have fully got to grips with using a demo Binary Options trading account you can instantly switch over to trading for real money and that is where all losses and profits made will be for real! 

As mentioned above there are plenty of real money Binary Options bonuses available at various s different trading sites and you really should be utilizing as many of them as you can to increase your chances of making a profit!

Advantages of the Forex Market

What is the Forex Market ?

 The Forex market is the trade arena which allows investors to trade foreign currencies throughout the trading day. This market is the largest in the world and has a daily turnover of 3 trillion USD.

 The market is active 24 hours a day, 5 days a week. The value of the currencies changes every moment throughout the day according to supply and demand levels.

 The Forex market is the most secure medium of investment in the world, in comparison to other channels with a risk factor, such as: stocks, options, bonds and more.

 Just as in a regular market we buy and sell vegetables and in the stock market we buy and sell stocks. In the Forex market we buy and sell currencies, this is our product. There are more than 100 currency pairs in the world which can be traded.

 Currency exchange rates are uniform throughout the whole world. If the exchange rate of the Euro in relation to the USD is 1.5220 in London, it will be 1.5220 in Congo, New York, Australia and Hong Kong.

 The Forex market is largely composed of speculators. Speculators are people like me, or perhaps like you, who buy and sell currencies to profit from the change in the exchange rate of a currency. Only five percent of the transactions are for real purposes of commerce such as: industry, tourism, etc. The remaining 95 percent are for speculation purposes.

This is the zero-sum game: the total gains are equal to the total losses. 

What affects the Forex market?

 The Forex market is affected solely by macroeconomic data, not by microeconomic data. What is macroeconomic data? Raising of the interest rate in a country, the unemployment rate of a country and political conflicts within the country. On the other hand, microeconomic data are the balance reports of a very large company in the country, a large business deal which a large company is about to execute and/or has executed, and more.

 The microeconomic data does not interest the Forex market and does not affect it.

 In other words, the Forex market is affected by large-scale and international events.

 The Forex market is comprises of: currencies and commodities. Today, some brokers also allow trading of indices, futures contracts and certain stocks.

 All the strategies and technical analyses that you will learn here are relevant for currencies as well as for commodities.

 Before we learn what an exchange rate is and how we buy and sell currencies, let's understand more clearly the advantages of the Forex market based on the characteristics which I have presented so far: 

The Forex market has 2 principle advantages:

The first advantage is: liquidity. 

 Have you ever bought a stock and couldn't sell it a specific moment? 

Example: You have bought a particular stock. The stock had risen greatly in only a few months and all of a sudden the CEO resigned, at that moment there was a pause in the trade which lasted a few hours, and the next day the stock decreased by 10%.

 You are stuck with the stock!

 In the Forex market such a thing would never occur.

 If you have Euros, Pounds, Swiss Francs or any other tradable currency, you can sell it at any point in time.

 You will never get stuck with a currency, and this is a great advantage of currency trading. As traders, it doesn't matter what you buy, what important is that at any moment you can cash in your goods – there will always be a buyer.

 There is one very important rule to remember: Until you cash in your goods, there is no knowing whether you have gained or lost.

The second advantage is: In the Forex market there is no control by external financial bodies. 

 A speculator, as great as he/she is, cannot influence the exchange rate.

Central banks intervene in the trading once every decade and are successful in effecting the value of the currency by a total of two percent, a movement of this kind lasts for only a few hours and then the exchange rate returns to its natural price.

 This goes to say that currency trading is fair, and no body, as large as it may be, can affect the market.

 On the other hand, in the case of stock and options, a large broker has the ability to inject tens of millions of USD and by doing so they can change the price of the stock by tens of percentage points – and unfortunately they do so from time to time. 10

What advantages do we have in a market which is influenced by macroeconomic data and not microeconomic data? 

The first advantage – it is much easier to follow and trade, due to the availability and minimal amount of data.

 For stocks, for example, there are many factors which must be followed. 

 Imagine that you own 4-5 stocks in the NYSE. Let's assume that you are serious investors, not gamblers.

 You have to know who the shareholders are in every company you invest in, what the multiplier is, what the balance sheets look like, the gains and losses report, internal information, such as, for example, resignation of an executive, a large future contract, and so on and so forth. One must know so much information that following them on a daily basis would require many hours each day.

 In the Forex market there are five to six significant data in a month. The firm through which you trade will provide you with these data in real time, and you, with the knowledge that you will gain, will trade accordingly.

 Do you understand the significance? 5-6 pieces of significant information in a month, that's all. You won't have to live in constant chase after changes in companies in which you invest.

The second advantage – the important information reaches everyone at the same time. 

 Let's assume that I am the marketing manager of a large pharmaceutical company, and I am on a flight returning from China, and in my hands is a closed contract with the government of China, a contract which is expected to increase the profitability of the company by 100 billion USD a year.

 Who knows about the deal? myself, the CEO, his wife and her brother. And they don't do anything with that knowledge, right? 'laughter' You made me laugh!!!

 Until it is reported in the news that a huge deal took place with China, there are people who already know, who have made use of it, and the price of the stock already reflects the news. You will be in the second level of decision makers.

Haven't you ever met someone who told you that he/she bought a specific stock based on insider information and the next day it rose by 20%? Yes, yes… it happens...

In the global foreign exchange market, when the American federal reserve Governor publish a decision to increase the interest rate, the whole world knows it in the same exact second and can respond immediately – to buy or sell the USD. There is nobody who has insider information beforehand and who make use of it in an unfair manner. 

Market research and analysis 

The two main approaches for analyzing the movements in the Forex market are the “fundamental analysis” approach and the “technical analysis” approach.

 The fundamental analysis focuses on financial and economical theories, as well as political developments, to determine the forces of supply and demand. 

The technical analysis focuses on price levels and trade volumes, and from these data expectations are formed for future levels of the market.

 The main difference between technical analysts and fundamental analysts is that the fundamental analysts concentrate on causes of movements in the market, whereas technical analysts concentrate on the effects of movements in the market. 
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Forex concepts

Elementary concepts of the Forex Market

Currency pairs , buying and selling rates In foreign currency trading there are always currency pairs – the base currency and the counter currency.

 The base currency – it is in essence our product, it is denoted on the left side of the pair. We always buy or sell the base currency.

 The counter currency – it is the means of payment and is denoted on the right side of the pair. In a transaction involving the EUR/USD I buy or sell the Euro against the USD wherein the means of my payment is the USD. 

The exchange rate is the price of one unit of the base currency in terms of the counter currency. Let's take a look at the Euro against the USD: One Euro is equal to 1.5220 USD.

Spread

Spread is the difference between the buying price and selling price and is the commission which you pay, as currency traders.

 For example: If, for instance, you want to convert USD to Euros at the bank. They will tell you that the buying price is 1.56 and that the selling price is 1.49. In other words, in order to buy one Euro you would have to pay a little more than one and a half USD. If in that very moment you would want to sell your one Euro to the bank, the bank will buy one Euro at a price slightly lower than one and a half USD, so if you sold 1000 USD to the bank you received 641 Euros. By selling the Euros back you will get only 955 USD.

 You paid 1000 USD and received 955 USD, so where are the other 45 USD?

 This is the profit of the CHANGE store – this is the commission they charge from their customers.

 This is the only commission that you will pay; in the Forex market there are no additional commissions.

 It is implied by such that we will always lose because of the spread in the first second after the trade. 

Pips 

Another important concept in the Forex market is “pips” – pip (singular),

 pips (plural) In the Forex market the exchange rate rises by pips and falls by pips. For most of the currencies, the pips are denoted 4 places after the decimal point.

 In other words, if the EUR/USD rate is 1.5220 then the number of the pip is 0.

 If the exchange rate was previously 1.5220 and now it rose by one pip, the exchange rate will be 1.5221.

 If the exchange rate fell by 10 pips, it would be 1.5210 and so on.

 The Japanese Yen is different: For the Japanese Yen the pip is denoted at two places after the decimal point, meaning that, if the USD/JPY is at 88.57, then the pip is equal to 7. if the exchange rate rises by 3 pips it would be equal to 88.60 and if it decreases by 27 pips the exchange rate would be 88.30. 

Average daily fluctuation

To become acquainted with the concept, the average daily fluctuation of the EUR/USD is about 100 pips a day. On more turbulent days the fluctuation reaches 200-300 pips, on calmer days the fluctuation reaches 50-60 pips.

 And in terms of percentage?

 If the exchange rate is currently 1.5220 and I want to announce tomorrow that it rose by one percent, it would be represented by a rise of 152 pips.

 So if we said that the daily fluctuation of the EUR/USD is about 100 pips a day, by what percent does the EUR/USD fluctuate on average? About 0.7%-0.8%. and in more turbulent periods – 2% at most. 

From this we can learn of a new and important advantage that exists in the Forex market – this market is stable, and I'm referring mainly to the major currencies: Euro, USD, Pound, Yen and Swiss Franc.

 This is a stable market, with exchange rate fluctuations of half a percent up to one and a half percent throughout the day. There is no possibility that you will trade a currency and lose 10%-15% in one day.

Value of pips

Let's now learn the value of every pip within the confines of a particular transaction. If the exchange rate of the EUR/USD is 1.5220 and you want to buy 100,000 Euros, how many USD do you have to pay? 152,200 USD, of course. A second passes and the exchange rate rises to 1.5221. By how many pips did the exchange rate rise? By one pip. And what is the current value of the 100,000 Euros? 152,210 USD. Which is 10 USD more.

 The value of one pip in a transaction of 10,000 Euros is one USD.

 In other words: In a transaction of 100,000 Euros, each pip has a value of 10 USD.

 And in a transaction of one million Euros – 100 USD.

How are pips calculated?

We take the amount of the transaction that we have performed in terms of the base currency and divide by 10,000 – this is the value of one pip in terms of the counter currency.

 For example: For a transaction of 100,000 Euros we divide by 10,000, and we get 10. This means that the value of every pip is $10.

 If we execute a transaction of 30,000 Euros, every pip worth is 3 USD. For the Japanese Yen the calculation is slightly different. We divide the amount of the transaction in terms of the base currency by 100 and that is the value of the pip.

 For example: A transaction of 100,000 USD in the currency pair USD/JPY, we divide by 100 and the result is 1,000 Yen. Assuming that the exchange rate is 88.00, we divide the 1,000 by 88, meaning, 11.36 USD per pip.

 Example: We will take the currency pair of EUR/GBP and a transaction of 100,000 Euros, each pip is worth 100,000 divided by 10,000 and is therefore worth 10 USD. And in what currency are we paying in? In Pounds. Meaning that every pip is equal to 10 Pounds. 

Size of the spreads

Do you know what the accepted ask/bid spread is for the EUR/USD exchange rate? 3 pips.

 So in order to perform a transaction of 100,000 Euros, which is equal to 152,000 USD how much commission must one pay?

 If every pip is equal to 10 USD in a transaction of 100,000 Euros, and the spread is 3 pips, we will pay 30 USD in commission – a onetime payment which includes the purchase and the sale. 

Commissions 

If to compare the commissions rate paid in the stocks market we will notice that in the Forex market the commissions rate are very low.

 For example, in a 10,000 Euro trade the stock's commission is half a percent hence 50 Euro. In Forex however you will pay only 3 USD commission for a 10,000 Euro trade, for a 100,000 Euro trade you will pay only 30 USD commission and so on and so forth.

Trading rules

 If you trade a certain product, and you think that its price will rise, you will buy it and if its price indeed rises, you will profit when you sell it, and if you are wrong and its price goes down, you

will lose.

 For example, if you trade wood, and you think the wood

price will rise, you buy 10 tons of wood when the wood

price is 100 USD per ton. And later you sell it when the

price rises to 150 USD per ton, you have profited 500

USD.

 If you thought that the wood price would decrease,

you would wait until the price reached 50 USD per ton,

and then you would have bought the same 10 tons at

only 500 USD. 

The rules are: 

A trader who thinks the value of his product is going to rise, buys more goods and waits for the price to rise in order to sell.

A trader who thinks that the value of a product is going to fall, rushes to sell the goods and make the most of his money.

Traders do not always have to lose everything or gain everything, the trade can be stopped in the middle, and such a situation will be expanded upon further later.

Let's translate this into terms of Forex market:
 If you expect the exchange rate of a currency to rise, you will buy it.
 If you expect the exchange rate of a currency to drop you will sell it.

The sum which you profit or lose depends on the volume of the transaction which you perform. The greater the transaction is, the more you can profit, but you will take on a greater risk and the smaller the transaction is, the smaller the profit will be but you will have taken on a smaller risk. Trading currencies is exactly like buying and selling wood, tomatoes or cucumbers. We buy the goods when we think the price will rise, and we sell the goods when we think the price will fall.

Transaction / Position

 In order to complete a transaction we need to perform a purchase and a sale. If a purchase and a sale were not performed, then the transaction was not completed, and it doesn't matter if you are going to gain or lose in the course of the transaction.

Remember, this is an important rule: realization of the gain or loss occurs only when the transaction is complete.

Position is in essence a transaction.

Opening of the position - opening of a transaction for a currency pair.

Open position – a position which hasn't yet been closed, in other words, the transaction has not yet been completed.

Closed position – a transaction which has been completed, the actions of purchase and sale have been performed.

Leverage

What changes the whole picture, and turns the Forex market into a market of opportunities to profit a lot of money in a short span of time, is leverage.

But…of course, leverage causes trading to become more risky. 

So what is leverage? 

Brokers allow you to perform transactions in sums of money which are much larger than the amounts that you have in your account. Sometimes even up to 400 times more than what you have invested.

 For example: You have deposited 1000 USD, the exchange rate of the Euro against the USD is 1.5220. And you believe that the price of the Euro is about to rise by 100 pips. That is your opinion.

You can pick up the phone and call the broker or give an order via the computer, 24 hours a day “please buy me 100,000 Euros”

Despite the fact that you have deposited 1000 USD and 100,000 Euros cost 152,000 USD, in this case you have taken advantage of a leverage of 152 times the money which you have in your account.

In a transaction of 100,000 Euros, how much is each pip worth. We learned it already, remember? 10 USD. Let's assume that the exchange rate indeed rose to 1.5320. How many pips have you earned? 100. And how much money have you earned? 100*10 = 1000 USD. 

Let's deduct the commission, and the net profit from the transaction will be 970 USD. 

Nearly a 100% return in one day. How great! 

But… what will happen if the exchange rate falls to 1.5120? 

You have lost 100 pips, you have lost all of your 1000 USD. 

Should you leverage?

Later on you will learn whether it is worthwhile to leverage your transactions and by how much. But one must always remember, for whoever wants to leverage – the option is always available, but it's risky. 

When there is a leverage of 300 times you can perform a transaction of 300,000 Euros as well, and if the price rose by 100 pips, you can even earn a 300% return in one day. But if the exchange rate decreases by 33 pips, you have lost your whole investment.

 Why do the firms allow us to leverage?

The answer is simple: It is preferable for

them that we perform a transaction

of one million Euros rather than

a transaction of 10,000 Euros,

in this way the broker earns

a commission of 300 USD

and not 3 USD. 

Later on you will learn

what your interest is as

traders, and why you

shouldn't be tempted to

leverage transactions.