In any ?teach me to trade? guide, you will find information on leverage. It is the ratio between the amount used in the transaction and the amount controlled on the market. It differs from broker to broker. It can be 10:1, 100:1, 200:1 or any other combination. The formula for calculation is 100/coverage percentage. If you pay enough attention, learning to trade forex is not difficult at all.

The following sample will be clarifying on leverage. Suppose we have a Leverage of 100:1.

That means that if you want to buy a batch of 10,000 dollars, you must have in your account

minimum $ 100.

100 * 100 = 10,000

Each PIP (point) is worth $ 1. If you had 200:1 leverage, then you should have in the account only $ 50, but each PIP (point) is worth $ 2. It is very good if you win and the pair is moving in your favour, but at the same time it is very bad when you register loss. It is a tricky aspect when you are learning to trade forex. Banks in general use the leverage of 10:1. No ?teach me to trade? guide advises anyone to use more than 100:1.

The next point of learning to trade forex is the cost of a trade (exchange). Although on the forex market there are not fees to pay, the broker should also be rewarded. He will receive a number of PIPS in the pair that will be traded. It is very easy to calculate:

Cost = Spread

That means, cost-BID = ASK. See the example above taken from teach me to trade tips.

Learning to trade forex also involves rollover or permutation transactions. Although forex is open 24/24, a day of trading is defined. It helps to fix prices for banks, operations of clearing transactions, etc. In the U.S. A. the trading day begins at 17:00 EST and it ends at the same time, the next day. If you have a trade still open at 16:59 EST, it will be considered open for the next day. The cost of this permutation is the reference interest between the two countries that represents currencies.

For example:

Suppose you have a trade USD / JPY.

Suppose you have bought $ 10,000 dollars.

The reference interest in the U.S. is 3%.

The reference interest in Japan is 0.50%.

Both are annual.

The difference will be 3-0.50 = 2.50%.

2.50% of 10,000 = $ 250

$ 250/365 (days) = $ 0.68

You will receive $ 0.68 for each day of your rollover.

If you had bought in exchange 10,000 yen, then the interest would have been negative:

0.50 - 3 = -2.50%

The next teach me to trade tip is the red phone (Margin Call). It is the fear of any trader. It is the phone call that informs you that the value of your account is approaching zero.

This happens if you still have open trading opened, but which evolves against you.

Usually, the first phone call of this kind is when the account reaches 4% to 0. The second is at 2% when your broker will liquidate all the open positions. Therefore, you should be aware that participation in the stock market can also bring you losses.