Using the deal defined in the previous page, the deal definitions are: Buy USD; sell EUR; EUR5,000; Deal rate 1.12043; Stop-Loss 1.13043; no Take-Profit defined; margin AUD 65.35.
The table below shows what would occur under various scenarios:
| Closing Rate | Profit / Loss | Comments | Change in Exchange Rate | Rate of return on investment |
|---|---|---|---|---|
| 1.2200 | Loss USD 100.00 | Maximum loss; the deal was automatically closed already on 1.2052 | -2.00% | -100.00% |
| 1.2150 | Loss USD 100.00 | Maximum loss; the deal was automatically closed already on 1.2052 | -1.60% | -100.00% |
| 1.2100 | Loss USD 100.00 | Maximum loss; the deal was automatically closed already on 1.2052 | -1.20% | -100.00% |
| 1.2050 | Loss USD 98.00 | -0.80% | -98.00% | |
| 1.2000 | Loss USD 48.00 | -0.40% | -48.00% | |
| 1.1950 | Profit USD 2.00 | 0.00% | 2.00% | |
| 1.1900 | Profit USD 52.00 | 0.40% | 52.00% | |
| 1.1850 | Profit USD 102.00 | 0.90% | 102.00% | |
| 1.1800 | Profit USD 152.00 | 1.40% | 152.00% | |
| 1.1750 | Profit USD 202.00 | 1.90% | 202.00% | |
| 1.1700 | Profit USD 252.00 | 2.40% | 252.00% |
The table shows the effect of ‘leveraged’ trading: the trader invests USD 100, for a EUR 10,000 contract. Therefore, a small change in the currency exchange rate reflects a much higher change in value.
The Trader may lose up to 100% of the investment (USD 100), but can gain an unlimited profit.
The table also illustrates the value of PIPs. In this deal, every PIP (the fourth decimal digit) results in a profit or loss of USD 1.00 to the trader. So long as the trader gains on this deal, each PIP is worth $1 on a $100 margin leveraged at 1:100.
Limit Orders (reserving a Day-Trading deal)
Some dealing rooms and platforms offer the trader the ability to set a “reserved” rate for a deal, that would “capture”, if and when such a rate occurs in the market, resulting in a Day-Trading deal.
The trader can define the rate he/she wishes, letting the platform do the watching, until (if and when), it appears in the market. easyMarkets does not charge additional fees for Limit Orders. Setting up a Limit Order is very similar to the process described above for Day-Trading. Should the reserved deal not be realized, the funds which were allocated for it will be returned to the trader’s account.
