newbie question

[zbees]

i am new to forex, i would like some advice on the following scenario:

For example,
you enter a long position using $1000 with 400x leverage (so $400,000) and a short position with the same amount at the same time on AUDUSD when it is 80c. then 6months later it is 70c, your long position would been a complete loss (so you are down $1000) but the short position would gain over $5k profit?

 

[Jaydee]

You are losing 10c on the long position and gaining 10c on the short position, so the net profit will be 0. Due to spreads, commissions or both, you will actually lose money in this kind of hedged trade.

 

[Rhody Trader]

To add further clarification - Any single trade can lose more than the amount you put into it, up to the point where it goes beyond the margin call limits for your overall account position. So as Jaydee says, if both trades are in the same account the gain on the short and loss on the long would offset each other. You could use two seperate accounts, however, as your losses on either position would be limited to the amount you have in each account (actually a bit less given margin call). Of course if you did that you could actually run the risk of both accounts losing because a whippy market forced margin calls on both sides.

 

[lancenicolase]

Unfortunately, I have to agree with two previous posts as your profit will be 0 minus commission thus you'll have a loss. Plus you'll have to pay interest on long position. Thus it's double minus.