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Forex Bond
It 'very surprising, the large amount of people who spend a lot of time to study forex trading but never really understood the basics of forex to see. Since many people in this area with the promise of extreme profits with little or no knowledge, rarely interested to know and understand these basic concepts, until it's too late. In this article I will try to explain some basic concepts, the Forex are importantto understand and implement money management. I will guide you through their importance, and I will explain a number of practical examples, what is its exact meaning.
To understand these concepts, we must first understand what has happened in forex trading. If you buy a pair of Forex trading, in fact a contract for the purchase of one currency for another exchange. In the case of EUR / USD - for example - you buy a contract to buy euros with U.S. dollars. The contractSize, which is known as a value for batch type, the price of this contract, and usually is $ 100,000. This means that if you want to buy 1 lot - this is simply a contract - the EUR / USD, you have to come up with $ 100,000.
Forex Trading Pip
This is when one of the most interesting concepts called leverage - comes into play. How can you buy this contract, if only $ 1000? Your broker to borrow in position 100 times what you put forward and allow you to purchase the contract (thisthat is, leverage 100:1). Sun bear only $ 1000 and buy a $ 100,000 contract. However, it will be able to obtain the same victory / loss as if you were the $ 100 000 has been fixed. Thus, for example the purchase of which will produce a lot for USD 10 pips profit or loss depending on where the market moves (a pip is 0.0001 of a change in the EUR / USD). So if the market moves 100 pips in your favor, you win $ 1000 and if moves 100 points against you lose all your money. Of course, ifThey have to do with high leverage and the batch is large, who are risking a lot of money because you manage your positions in order to put a certain amount of risk must.
The first thing you need to do is let to decide its position, the risk, not the other way. You need to decide where to exit the market and then calculate the size of the lot, the maximum loss that you would want to have and not vice versa. Lets say you have an account and would like to set 1000 USDThe output 100 pips from your entry price. What you lot size to 2% risk? For an account of 1000 USD, 2% $ 20, you should say USD 20 / 100 pips, which corresponds to 0.2 USD per pip trade. For this you need to pip value, action is needed at 0.02 from Lots 1 lot is equal to $ 10 per pip. So, if you take a position on a volume of 1000 $ 0.02 bill, and then close when the market is 100 against you, you lose 2% of your account, you effectively reduce the risk. Since youget into a position of 0.02 you need a lot to offer 2000 USD, should be proposed only $ 20 with a means of leverage is 1:100.
It 'important to understand this, that the lever is not good or bad in itself. Use only determines the size larger batch, you can take the correct exit and act the lot size is what determines the true risk. 1:100 leverage an account can be calculated with good low-risk trading. However, it is obvious that trade very unhealthycan be done with high leverage, whether this risk is not precise, but this is not possible in a low-leverage the amount of money necessary to win positions and the amount of money or losing it takes to pip, a much smaller percentage lower limit of the account.
We hope that with this article you will have more use of the concepts of contract size, lot size, and with them and learned how to determine risk. It 'clear that it is important to understand the meaning of all these words, if youYou just want to calculate the risk in currency trading and increase your chances of survival in the long run.
Lever, size of contract and other basic concepts of ForexMy Links : Free forex ebooks site Traderlive-fx & Stock Electric water heaters energy star
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