Forex trading Example. How to trade in Forex ?

Here is a trading example using the EUR/USD, the most traded and most liquid currency pair, which has the tightest spreads at every online Forex broker. Let us take an exchange rate of 1.2225, the buy (ask) price with 1.0 lot in volume and leverage of 1:500, a take profit of 1.2300, and a stop-loss of 1.2200.

Buy 100,000 currency units (1.0 lot) at 1.2225 = $122,250

The margin requirement is $122,250 / 500 (1:500 leverage) = $244.50

The take profit at 1.2300 equals a 75-pip move (1.2300 - 1.2225) x 100,000 (1.0 lot) for a profit of $750

The stop loss at 1.2200 equals a 25-pip move (1.2225 - 1.2200) x 100,000 (1.0 lot) for a loss of $250

The risk/reward ratio is 1:3 ($750 / $250)