One of the most liquid and widely traded markets in the world, Forex trading
enables you to speculate on the future direction of currencies through
buying or selling the exchange rate of one country’s currency against
another, with the aim of making a profit.
To Buy or to Sell?
Buying a currency pair, for example EUR/USD, simply means that you
buy the first currency in the pair (EUR) while simultaneously selling
the second currency in the pair (USD) on expectations that the cross
rate price will rise in value and your profits will rise in line with
any increase in that price.
Conversely, selling a currency pair simply means that you sell the
first currency in the pair (EUR) while simultaneously buying the second
currency in the pair (USD) on expectations that the price will fall and
your profits rise.
Currencies can be either bought or sold, but they must be traded against each
other. There are over 150 currency pairs that can be traded but the most
liquid with the highest turn-over are the “majors”.
Major Currency Pairs
EUR/USD (Euro vs. US Dollar)
GBP/USD (UK Pound vs. US Dollar)
USD/JPY (US Dollar vs. Japanese Yen)
USD/CHF (US Dollar vs. Swiss Franc)
USD/CAD (US Dollar vs. Canadian Dollar)
AUD/USD (Australian Dollar vs. US Dollar)
Primary (base) vs. Secondary Currencies
The primary currency, or the base currency, is the reference that defines the contract size. The profit and loss calculation however is always on the secondary currency. Examples are as follows:
Margin Requirements and Leverage
Though a 1% margin is initially required, ICMBrokers has no maintenance margin on standard accounts. In order to guarantee that clients’ accounts do not extend into negative equity, the trading platform automatically closes all positions at the 5% Equity/Margin ratio.
Profit and Loss Calculation Examples
1.3150 (close price) x 5 (lots traded) x 100,000 (contract size) = 657,500
$ 2,000 (Profit)
Major Currency PairsEUR/USD (Euro vs. US Dollar)
GBP/USD (UK Pound vs. US Dollar)
USD/JPY (US Dollar vs. Japanese Yen)
USD/CHF (US Dollar vs. Swiss Franc)
USD/CAD (US Dollar vs. Canadian Dollar)
AUD/USD (Australian Dollar vs. US Dollar)
Primary (base) vs. Secondary Currencies
The primary currency, or the base currency, is the reference that defines the contract size. The profit and loss calculation however is always on the secondary currency. Examples are as follows:
| Currency Pair | Contract Size | Value of 1 pip | Value of 1 pip in US$ |
| EUR/USD | € 100,000 | US$ 10.00 | US$ 10.00 |
| GBP/USD | £ 100,000 | US$ 10.00 | US$ 10.00 |
| USD/JPY | $ 100,000 | ¥ 1,000 | (Divide by current USD/JPY rate) |
| USD/CHF | $ 100,000 | CHF 10.00 | (Divide by current USD/CHF rate) |
| USD/CAD | $ 100,000 | CAD 10.00 | (Divide by current USD/CAD rate) |
| AUD/USD | AUD 100,000 | US$ 10.00 | US$ 10.00 |
Margin Requirements and Leverage
In order to buy or sell 1 contract (lot) of a particular currency pair with
ICMBrokers, an investor must have a minimum of $1,000 in the account, or about
1% margin. In other words, a $1,000 initial margin is required for every
Ccy 100,000 that is traded, which corresponds to a leverage of 1:100.
Though a 1% margin is initially required, ICMBrokers has no maintenance margin on standard accounts. In order to guarantee that clients’ accounts do not extend into negative equity, the trading platform automatically closes all positions at the 5% Equity/Margin ratio.
Profit and Loss Calculation Examples
Buy 5 EUR/USD at 1.3150 | Sell 5 EUR/USD at 1.3190
1.3190 (open price) x 5 (lots traded) x 100,000 (contract size)
= 659,5001.3150 (close price) x 5 (lots traded) x 100,000 (contract size) = 657,500
$ 2,000 (Profit)
Sell 3 USD/CHF at 1.1205 | Buy 3 USD/CHF at 1.1150
1.1205 (open price) x 3 (lots traded) x 100,000 (contract size) = 336,150
1.1150 (close price) x 3 (lots traded) x 100,000 (contract size) = 334,500
CHF 1,650 (Profit)
In order to obtain USD value, the CHF Profit amount must be divided by the Closed Price
CHF 1,650 ÷ 1.1150 (closed price) = $1,479.82
1.1150 (close price) x 3 (lots traded) x 100,000 (contract size) = 334,500
CHF 1,650 (Profit)
In order to obtain USD value, the CHF Profit amount must be divided by the Closed Price
CHF 1,650 ÷ 1.1150 (closed price) = $1,479.82
To know more about our ICM Brokers FX Instruments please click the link: ICM Brokers FX Instruments
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