In this lesson, let’s see what happens when we decide to invest a small amount on Forex, specifically in the EUR/USD currency pair.
The best thing here would be to repeat these procedures on the same platform in order to have a better overall picture and learn how to perform the operations after a first “guided” tour. So, start by downloading the Plus500 platform and installing it.
Example of Forex trading with financial leverage
When you launch the platform, you can easily find the section dedicated to currencies, as seen below.
On the left you can choose other financial instruments, including foreign exchange, or other currency pairs. On the right, we have selected the EUR/USD pair and the graph of the selected pair appears automatically. Given the downward trend, we are aiming for the downside in order to provide you with an example of a trading operation.
To focus on the downside, even if we have not purchased anything previously, we click on the “Sell” button for the EUR/USD pair.
The following window will be displayed.
At the moment we clicked on “sell” the rate was 1.27. This rate will continue to change in real time until we click “sell” once more in this window.
Therefore, decide on a quantity of EUR/USD to be negotiated and click on sell. As you can see, “Use leverage” is displayed and, as a matter of fact, in order to buy €6,000 we use an initial margin of €30 (keep this amount in mind). We could set a stop limit or stop loss, but since we are now explaining Forex leverage, we’d prefer to do that in a later lesson.
However remember it’s always a good habit to at least set a stop loss! This way you’ll avoid incurring any sudden losses in the instrument on which you trade. Click on sell and see what has changed in the main window.
As you can see, under the EUR/USD currency pair, the position we opened has appeared. The ID is its identification number. P&L stands for Profit and Loss.
Still on the same screen, at the top we find information that gives us an overview of our situation, very useful in case you invest in numerous products at the same time.
Now keep in mind that in the Plus500 platform the “margin” entry at the opening of the position includes both the initial margin and the maintenance margin, in proportion 50-50%. In fact, among the items of the account you may note that the maintenance margin is actually equal to €15 (50% compared to €30 margin).
Now, in order to obtain detailed information on every single position we opened, click on “Open Positions” on the left.
As you can see you’ll find all the info and buttons to close the position or set stop limit and stop loss. You can also see the difference between the initial margin and the maintenance margin.
After twenty minutes, let’s close the position. Note that from the moment we took the screenshot and the moment we closed the position, there was another rise, so we lost a little.
By clicking on “Closed Positions”, I can retrieve the data and show it to you:
The operation ended negatively. By investing €200 we lost €0.63 in just 20 minutes.
30 minutes, that’s the time I spent writing this article. During that time I saw that my position was earning more than 7 euro, but I wanted to wait for the final moment to offer a complete picture of the transaction.
Now let’s look at our new general position. Let’s go back to the “Trade” section and at the top we find:
Since there are no more open trades, there is no longer a difference between available and equity. Do you remember how much the previous available budget was? 39,788.78. We must subtract 0.63 and add the €200 of the initial margin, and we reach 39,988.15. There is 1.65 left over, where did it come from?
The answer is in the next lesson!
Go to the next lesson – Trade Forex Safely