Been reading up on web sites offering FX facilities. I've been so used to using SBs that one of the examples given in the literature of one site raised the issue of conversion settlement for losing trades.
Let me give an example which was provided from web site
Market quote for USD/JPY is 115.00/05
Trader buys USD 10,000- trade executed at 115.05
10,000 USD*115.05=1,115.050 JPY
(bought 10,000 USD and sold 1,115,050 JPY)
Market rate of USD/JPY falls to 114.45/50. Trader sells back (at a loss) 10,000 USD at 114.50
(10.000 USD *114.50=1,145,000)
Difference in loss is calculated as follows:
1,150,500-1,145,000=5,500JPY.
Loss in JPY is then converted back into dollars.
To calculate amount in USD:
5,500JPY/114.50=$48.04 USD
What i hadn't considered was the last part of the equation (ie conversion of JPY back into dollars.)
Could someone let me know if all FX brokers deal this way?
If the figures were used form a SB perspective the trade would have been more like:
buy @115.05
[email protected]
loss= 55 pips(*currency stake- dollars etc)
I understand that with SB's only the direction of the instrument is traded (ie the currency is never actually purchased- i am therefore assuming that is why there is the conversion factor?)
To be honest i hadn't even considered converting back to the original currency- then again i am new to all this. Any comments would be appreciated.
Cheers
Mick
Let me give an example which was provided from web site
Market quote for USD/JPY is 115.00/05
Trader buys USD 10,000- trade executed at 115.05
10,000 USD*115.05=1,115.050 JPY
(bought 10,000 USD and sold 1,115,050 JPY)
Market rate of USD/JPY falls to 114.45/50. Trader sells back (at a loss) 10,000 USD at 114.50
(10.000 USD *114.50=1,145,000)
Difference in loss is calculated as follows:
1,150,500-1,145,000=5,500JPY.
Loss in JPY is then converted back into dollars.
To calculate amount in USD:
5,500JPY/114.50=$48.04 USD
What i hadn't considered was the last part of the equation (ie conversion of JPY back into dollars.)
Could someone let me know if all FX brokers deal this way?
If the figures were used form a SB perspective the trade would have been more like:
buy @115.05
[email protected]
loss= 55 pips(*currency stake- dollars etc)
I understand that with SB's only the direction of the instrument is traded (ie the currency is never actually purchased- i am therefore assuming that is why there is the conversion factor?)
To be honest i hadn't even considered converting back to the original currency- then again i am new to all this. Any comments would be appreciated.
Cheers
Mick
