Typically whenever you are considering the idea of investment, a trader will want to buy at a cheaper price and sell at a higher one. This is the standard model of so called „long” transaction - whenever a trader expects the price on a given market to go up, he/she may take advantage of the prediction (assuming they are correct) and buy the given asset.
In order to do so with the MetaTrader 4 platform provided by Silver Stone FX, one may simply buy a Contract for Difference (later on called CFD) based on assets such as currencies or commodities. The Contract for Difference gives the same financial opportunities and risks, as if one in fact has owned the underlying asset – with exception are voting rights in the case of shares.
How does it work in financial terms? Let us look at a simple example.
Simple example A
The investor expects the price of the EURUSD to go up. In other words, he/she expects the price of the euro (EUR) quoted in US dollars (USD) to rise. He/she buys 1 contract of EUR/USD, with a nominal value of 100 000 EUR at a price of 1,2400.
On the same day the price goes up to 1,2420. The investor decides to close the position at that price. What is his financial result?
Financial result = (1,2420-1,2400)*100 000 = 0,0020*100 000 = 200 (USD)
In the case of the CZK account, assuming that the USDCZK rate is 20, the result is equal to 4,000 CZK.
Please take note that this result on the actual trading platform will be shown in the currency of the account. All the currency conversions are done by the trading platform in real time at market rates, thus the result may differ slightly from those presented here, for simplicity reasons.
It is important to remember that this transaction, as with nearly all transactions on financial markets, could result in a loss. Let us imagine that things went in the wrong direction. The same example but with a negative scenario will look like the following:
Simple example B
Investor had bought 1 contract of EUR/USD, with a nominal value of 100,000 EUR at a price of 1,2400. However, on the same day the price went down to 1,2380. The investor decided to close the position at that price. What was his financial result?
Financial result = (1,2380-1,2400)*100 000 = -0,0020*100 000 = -200 (USD)
Assuming that USDCZK=20, it is equal to –4 000 CZK.
If you would like to learn how to make a transaction in practice, using your Silver Stone FX Trader platform, you can take a look at the Basics of transactions making section of our website.