In order to make a profit in fx business one has to be very clever in implementing strategies and plans. Now, one has to understand that there are a number of positions based on which a trade is declared completed. This article will help traders to learn about the open position in forex trading and this post will also shed some light on other fx trading positions with examples.
Lets’ start with Open positions
Open positions can be defined as a position which is still not closed and active. It also suggests that open positions are the type of trades which have been already made by the trade but the trade is not completed. In addition, the trade can incur profit or loss as the open position trades are usually active for a longer time, so this is one of the best things about open positions.
But after the closing of position, rather after the execution of the trade all the profits and losses are apprehended and thus the trade remains no longer live.
To define it in simple terms, the trader's open position fx trading can be described as a trade which is already established and trade is yet to be closed along with an opposition trade. Open position can exist following parameter-
- Buy or long position
- Short or sell position
How to close open position forex trading?
In order to close an open position, the trader is required to reverse trade which is necessary to open it (the same thing applies for selling the assets or vice-versa).
In addition, it is also important to mention that the same thing can take place spontaneously when a position touches it expiration or when it has a limit.
Let’s us consider few examples in order to understand it in more detailed manner
Understanding the calculations in trading is very important as it is considered to be the starting point.
Let’s consider the currency pair of Euro/US dollar
First consider the lot size:
- Standard lot = 1.0 lot (100,000 units)
Pip value is $10
- Mini lot = 0.1 lot (10,000 units)
Pip value = $1
- Micro lot = 0.01 lot (1,000 units)
Pip value = $.10
Now moving towards the calculation part
For an instance, a purchased Euro/US dollar (long) Mini lot 0.5 lots (50,000 units) position along with the leverage of 200:1 and the trade has been entered at a market price of $1.3000.
So, the USD value of the position initiated will be around
= 50,000 units x $1.3000 which equals to $65000.
In addition, it can also be mentioned that just with a margin requirement of 0.5% which accounts for the leverage of 1:200 leverage, the outcome will be around $355 and it is required in order to open the position.
Note: Margin requirement will be measured by the currency base selected for the account by the trader only (US dollar, Great Britain Pound, and Euro)
Hope that open position in forex trading is now clear to the traders.
What are the 4 steps to forex position trading?
- The first step is to use small position size.
- The second step suggests using low leverage
- The third step suggests using lengthy time frames
- Last but not the least, the final step is to wait and let the market unfold for the trade setup of the trader.