Forex Profits – About Forex Trading Profits
Profits are made by using margin trading, where a relatively small deposit is required to control much larger positions in the market. 1 percent margin deposit is required by a recommended broker. Therefore, $100,000 of trade currency is controlled by $1000.
Currencies are traded in dollar amounts called lots. One lot is equal to $1000, which controls $100,000 in currency. This is margin. A margin call can occur when your trading account drops below this minimum $1000 per lot traded.
Currencies are traded on a price interest point (pip) system. Each currency pair has its own pip value. The goal of a trader is to capture as many profitable pips as possible. Values are determined by mathematical formulas and according to the exchange rate of the particular pair. Some pip values are fixed, whereas others can fluctuate slightly as one currency gains or loses strength against the other.
Below is a list of the six major currency pairs with their approximate price and pip values. The currency listed first in the pair is called the base currency. The current price of a currency is called the spot rate. (The fluctuating rates are subject to change over time.)
Reference:
Page 23-24 (Forex Made Easy – 6 Ways to Trade Forex)
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