ForexFutures786

August 11, 2009. Forex , Foreign Exchange or Currency trading in Spot or Futures Market is always considered risky . Good brokers always inform their prospective clients to read and understand the agreement between client and Brokerage house or Member Firms which always says and advise their clients that Never ever Invest that much amount into “Forex, Foreign Exchange Trading , Currency Trading in both Spot and Futures” which you can not afford to loose.

Forex & Futures are quite volatile now a days. whenever there is any news favoring US dollar or Currencies markets are reacting very sharply in their respective direction,falling are gaining more than 300 points at a time. Now those who are familiar with the markets can easily understand what does this means.

Take the example of Spot British pound. Last week British pound was trading as high as $ 1.7040. It fell from this level to $ 1.6752 on concern that recession is deeper than anticipated earlier and Bank of England is reported to increase its plan of Asset purchase. Now if you calculate the difference between two prices it is 288 points. Multiply this by 10 which is equaling to $2880 . That Means If some body had sold British Pound at $ 1.7040 and it came down to $ 1.6752 and he had liquidated his sold British pound position exactly at 1.6752 than His profit will be $ 2880 less commission, in one lot or contract or vise versa If he had bought at $ 1.7040 and sold at $ 1.6740 than his confirm loss would be $ 2880 plus commission.

In case He sold September British Pound ( Future contract ) and assuming Future price same as we have mentioned in Spot i.e $ 1.7040 and offsetting price $ 1.6752. Again the difference will be the same 288 points. Now we have to multiply this difference with 6.25 which is equaling to $ 1787.50 plus or minus commission subject to individual arrangements with their broker or Company.

Now one can easily understand that what we mean by volatile Market, when prices of any currency or commodity are falling or rising rapidly.We advise all currency and commodities traders,Investors to trade with stop loss subject to their initiated Buy or Sell positions.