Alpari (US)’s mission is to provide innovative currency trading technology combined with quality execution, tight spreads and competitive margins.
Balance is the total financial result of all completed transactions and deposits/withdrawals on the trading account.
Floating Profit/Loss is current profit/loss on open positions calculated at the current prices.
Equity is calculated as balance + floating profit - floating loss.
Free margin means funds on the trading account, which may be used to open a position. It is calculated as equity less necessary margin.
Calculating profit/loss
For example, EUR/USD exchange rate is 1.4758/1.4760 and your leverage is 1:100. You believe that EUR/USD will go up and buy 0.1 lot of EUR/USD at 1.4760 (Ask price) - for the contract size refer to Table 2. As we can see from Table 2, 1.0 lot of EUR/USD is 100,000 EUR, which means that 0.1 lot (our example deal size) is 10,000 EUR.
So, you buy 10,000 EUR and sell 10,000*1.4760=14,760 USD. In fact, to fund this position you do not have to have 14,760 USD but only 147.60 USD. The rest of the money (in our example 12,381.93 USD) is leveraged to you by Alpari (US).
The leverage (or gearing) mechanism allows you to open and hold a position much larger than your trading account value. 1:100 leverage means that when you wish to open a new position, you need to support a deposit 100 times less than the value of the contract you are interested in.
For example, you believe that EUR/USD is moving higher and buy 10,000 EUR and sell 14,476 USD. Assuming you are right and EUR/USD goes up to 1.4850/1.4852 and you decide to close the position: when you close a long position you sell the base currency (10,000 EUR in our example) and buy the quote currency (10,000*1.4850 = 14.850 USD):
| Transaction | EUR | USD |
| Open a position: buy EUR and sell USD | + 10,000 | - 14,760 |
| Close a position: sell EUR and buy USD | - 10,000 | + 14,850 |
| Total: | 0 | + 90 |
Note: When you close a short position you buy the base currency and sell the quote currency.
To fund this position you only need 100 EUR (approximately 125 USD) not 10,000 EUR. The profit on this position is 90 pips (1.4760-1.4850=0.0090). A pip or point is a minimal rate fluctuation. For EUR/USD 1 pip is 0.0001 of the price.
This example shows a favorable outcome. If EUR/USD had fallen you would see a loss, not a profit. This loss will be magnified as a result of leveraging. For example, if you close the position at 1.4670, your loss would be $90. Should you have doubts about your understanding of risks, please consult a qualified financial adviser.
Lot Size is the number of base currency, underlying asset or shares in one lot defined in the contract specifications.
Lot is an abstract notion of the amount of base currency, shares or other underlying asset on the trading platform.
Transaction (or deal) size is lot size multiplied by the number of lots.
Long Position is a buy position whereby you profit from an increase in price. In respect of currency pairs: buying the base currency against the quote currency.
Short Position is a sell position whereby you profit from a decrease in price. For currency pairs: selling the base currency against the quote currency.
Completed Transaction consists of two counter deals of the same size (open and close a position): buy then sell or vice versa.
Leverage is the term used to describe margin requirements: the ratio between the collateral and the value of the contract. 50:1* everage means that you can control $100,000 with only $2,000 (2%).
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*A higher degree of leverage can lead to great gains as well as greater losses.
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