Forex Day Trading
FOR FOREX DAY TRADING, THIS IS ALL YOU NEED TO KNOW The biggest question Forex day trading traders always ask is, "How much money do I need to buy 1 contract and what happens after I buy it?" For Forex day trading, it can vary based on your Forex day trading broker, but in general to buy 1 regular sized Forex day trading contract, a trader will need about $1,000, and to buy a mini Forex day trading contract a trader will need about $100. This depends on the leverage being offered by the broker. A typical scenario is that someone will open up a small mini Forex day trading account with $500 and get 200 to 1 leverage. They will then buy 2 mini EUR/USD contracts, and this will cost them $130.00. Their $500 Forex day trading account now has $371 in available equity, after the $129 in margin has been deducted. If in the worst case scenario (which can happen), the trade goes completely wrong. It will have to move 185 pips against the trader (which wipes out his $371 in equity) before his position is closed out by the dealer--provided they have zero balance protection. The $130 dollars in margin that was used to establish the position is returned to the account, bringing the balance down from $500 to $130. If the trade works out and gains 55 pips on 2 mini contracts and is sold, then this $110 profit is put into the account, along with the initial margin, and the total balance then becomes $610, less transaction costs. If a Forex day trading trader is using the big contracts in this scenario, everything is the same except it is times 10.
How much does this Forex day trading cost in terms of transaction fees? Well, the Forex day trading spread is typically 3 pips wide in the EUR/USD for most dealers, which is what the trader pays instead of commissions. It's still a transaction cost--anyone who calls Forex day trading "commission free" trading should be hanged. For the minis it equates to $3.00 per side and for the regular contracts its $30 per side. The spreads will continue to narrow and Forex day trading will get cheaper.
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