Forex Trade

Calculate Forex Prices- Leverage, What Is Leverage? And more

Forex Prices Knowing how to calculate and interpret price movements in the Forex market is the most critical part of this type of investment. Being able to anticipate price movements when the signals and progression have not yet fully developed is the key to making profits. However, lagging behind price movements makes it almost impossible to profit from trades.

Leverage

Leverage or leverage is another crucial concept when considering price movements in Forex Prices. Not everyone has access to lots of 1,000, 10,000 or 100,000 units of a coin. This is why leverage is offered.

What Is Leverage?

It is a form of investment in which debt is used to finance the operation. It is a way to multiply the exposure of the initial capital required. For example, a typical function with leverage is the investment with CFDs. Forex Prices

Leverage in CFDs

With CFDs, the initial capital requirements are much less than the exposure we gain. Thus, with €50, for example, you may be gaining exposure to a €2,000 position. The explanation is that the €2,000 lot is never owned, and therefore it is not required to pay the total amount of its value. It is still gaining full exposure.

The Risk of Leverage

Both profits and losses can exceed the money invested when using leveraged products, so they carry a higher risk than conventional products. For example, even if an investment of €100 is made, the losses can double or triple the initial capital.

Calculating Price Movements Forex Prices

Thus, considering the concepts of PIP, lot and leverage, you can already have an accurate notion of what a movement in the value of a currency pair in Forex means.

For example:

  • There is a lot of 10,000 units on the EUR / USD bee a positive movement of 326 pips since we have taken the lot
  • This would mean that we have had a profit of 326 units (0.0326 x 10,000 = 326)
  • The operation had been accessed with an initial investment of 100 units, thanks to a significant leverage
  • It can be said, therefore, that the price movement has been profitable, and we can now close the operation

Anticipating The Movements: The Analysis

However, in addition to correctly interpreting prices, it is also necessary to anticipate their movements.

In Forex, there are two basic analysis techniques, fundamental and technical.

•          Fundamental Analysis Fundamental

the analysis is limited to economic, macroeconomic, political, social and demographic data when calculating the price movements of Forex currency pairs. Thus, for example, some of the factors that would affect the US dollar would be the macroeconomic data of the US, the statements of the US Federal Reserve, the evolution of the Dow Jones index , the flow of political events in the country, many others. Fundamental analysis is better suited to long-term operations.

•          Technical Analysis

Contrary to fundamental analysis, technical analysis is governed by nothing more than data and graphs, purely empirical facts. There are numerous ways of interpreting graphs and hundreds of tools that help the investor when trading, such as Meta Trader 4 . Technical analysis is much better suited to short-term trading (such as day trading ).

also Read: The ADX Indicator- What is the ADX indicator? Uses, And More

 

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