Forex trading questions?
Saturday, February 1, 2014
, Posted by Ryanita at 10:59 PM
Joe
The USD/JPY is trading now at about 80.4900 so how much would it cost me to buy 3000 shares of that currency? Also how much money am i required to have to day trade Forex? Because i know you need like 20 grand to day trade stocks. I have been trading stocks now for a couple months and i have a good trading strategy down using MA stochastic and a couple other indicators but will they still be effective in forex trading? Thank You
Answer
There is no minimum to day trade Forex, except the minimum deposit set by your broker (usually $100 to $2000). There are also no restrictions on shorting.
Forex trades in terms of lots, or notional value. And how much you can buy depends on your account type and leverage. In the US, the maximum leverage is 50:1. So, if you buy 1 mini lot of USD/JPY, you would be shorting 10,000 dollars worth of Yen, and that would cost you 1/50 of that amount, which is $200 of margin. Each pip, or 0.01 movement, would gain or lose approximately $1 depending on the currency.
As another example, if you buy one mini lot of GBP/USD, you'd be buying 10,000 dollars worth of GBP, and each pip would be a movement of 0.0001, which would still gain or lose $1.
Honestly, if you're successful in the stock market, I would stay there. But it wouldn't hurt to try Forex on a free demo account. Forex is cheaper to trade, and doesn't have bear markets in the same sense as the stock market. But it's also much more volatile.
There is no minimum to day trade Forex, except the minimum deposit set by your broker (usually $100 to $2000). There are also no restrictions on shorting.
Forex trades in terms of lots, or notional value. And how much you can buy depends on your account type and leverage. In the US, the maximum leverage is 50:1. So, if you buy 1 mini lot of USD/JPY, you would be shorting 10,000 dollars worth of Yen, and that would cost you 1/50 of that amount, which is $200 of margin. Each pip, or 0.01 movement, would gain or lose approximately $1 depending on the currency.
As another example, if you buy one mini lot of GBP/USD, you'd be buying 10,000 dollars worth of GBP, and each pip would be a movement of 0.0001, which would still gain or lose $1.
Honestly, if you're successful in the stock market, I would stay there. But it wouldn't hurt to try Forex on a free demo account. Forex is cheaper to trade, and doesn't have bear markets in the same sense as the stock market. But it's also much more volatile.
How does ForEx leverage work?
Interested
Let's say I deposit $500 into an account. The broker gives me 200:1 leverage. What can I buy on a EURUSD exchange with that? Some brokers automatically set a 100,000 unit buy? I don't understand...
Answer
At 200:1 buying the EUR/USD (based on today's EUR/USD price), one standard lot (100,000) would require about $720 worth of available margin. Most brokers will allow an account to trade down to a lot size of 0.1 standard lots(one mini-lot) requiring about $72 worth of available margin. Finally, there are a few brokers who allow a minimum position size of 0.01 standard lots (one micro-lot) which would cost about $7.2 of available margin.
At 200:1 buying the EUR/USD (based on today's EUR/USD price), one standard lot (100,000) would require about $720 worth of available margin. Most brokers will allow an account to trade down to a lot size of 0.1 standard lots(one mini-lot) requiring about $72 worth of available margin. Finally, there are a few brokers who allow a minimum position size of 0.01 standard lots (one micro-lot) which would cost about $7.2 of available margin.
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