Forex Trading 101:Forex Functions and ForexMaster terms explained

Currency pairs

$USDJPY 119.23

Base Quote

1: All currencies come in pairs

• This means that US $1 = 119.23 JPY• I.e. US $1 can buy 119.23 JPY at this exact time

Price

$EURUSD 1.1944• 1 EUR can buy US $1.1944 at this exact time.

Buying & selling

2: Trade by buying (longing) or selling (shorting)

When you BUY, you are trading the quote to buy the base.

JPY → USD

EX: If you buy USDJPY, you are in effect trading in your JPY (selling) to get USD (buying)

$USDJPY 119.23

Buying & selling

2: Trade by buying (longing) or selling (shorting)

SELLING is the opposite: trading in your USD (selling) to get JPY (buying)

USD → JPY

[ Tip! ] The easiest way to remember: you are always interacting with the base.

$USDJPY 119.23

Account

[ Tip! ]: Get familiar with the terms & interface!

Account

Daily P&LRealized P&L

+ Unrealized P&L

Realized P&LP&L made after

closing position(s)

Unrealized P&LP&L still tied to open position(s)

Account Value Cash Value

+ Daily P&L

(Profits & Losses)

Cash ValueAmount of funds

available for trading

Margin Value40x your initial Account Value

Margin/leverage

3: Use margin to control a larger positions

What’s ‘Margin trading’?

• Borrowing money from your broker (ForexMaster, in this case) to increase potential profits.

• Use it to control a larger position than the amount you’d otherwise be able to control with your own invested capital.

HOW IT WORKS: Link 1Link 2

[ Tip! ]: The ForexMaster ratio is 40:1

Calculating P&L

After a few days, the new quote price is 1.17670. (This is bad for you, because you shorted and want the price to drop.)

But since you shorted, 355USD represents the amount of money LOST. (Had the point difference X quantity traded been a negative number, then you would have profited.)

Example 1 Let’s say you short 100K of EURUSD @ 1.17325…

1.17670 (current price) - 1.17325 (initial short price) = 0.00355

0.00355 x 100K (position size) = 355USD.

Calculating P&L

After a few days, the new quote price is 119.30.

*REMEMBER: All amounts calculated have to be in USD, because that’s what your account value is calculated in. If USD is the base currency, then you’ll have to convert your profit (which is in quote currency) back to USD.

Example 2 Let’s say you long 400K of USDJPY @ 119.00…

119.30 (current price) - 119.00 (initial long price) = 0.30.

0.30 X 400K (position size) = 120,000JPY.

120,000JPY / 119.30 (current price) = 1005.87USD. This is your profit.

Commission fees

4: Take note of commission fees on trades

• We start out with 100K Account Value. We buy 100K of USDJPY at 120.00.

• You’ll notice immediately that your cash value decreases by $2, maybe $3. This is the commission fee.

Commission fees

4: Take note of commission fees on trades

0. 00002 X (Quote Price X Quantity Traded)• If USD is the quote currency (e.g. EURUSD), then you’re done

calculating. EX: We buy 100K of EURUSD at 1.2000. .00002 X (1.2000 X 100,000) = 2.4 = $2 commission fee.

• If USD is NOT the quote currency (e.g. USDJPY), divide by the pair’s quote price.

EX: We buy 500,000 of USDJPY at 100.00..00002 X (100.00 X 500,000) = 1,000 1,000 / 100.00 (USDJPY quote price) = $10 commission fee

100K of USDJPY at 120.00…

Performance

# All Time Top %: # Percentile of all ForexMaster users. I.e. If your number says 28, then you are in the 28th percentile of all ForexMaster users.

Account Value is updated in real time.

Win RatioHow many trades won vs. lost.

Performance shows yesterday’s stats

Total P&LRealized P&L from

yesterday 10PM GMT

ROI(%)Realized P&L

+ Unrealized P&L from yesterday 10PM GMT