You think that the Euro to US Dollar (EURUSD) rate will increase, and on your balance you got 2000 USD (fx4u-classic account). At the cost of 1.2750 you buy 150,000 Euro for 150,000 * 1.2750 = 191,250 USD.
Since it might be a bit complicated for a beginner to figure out how to make funds in Foreign exchange, they offer you this example:
After a time period, the exchange rate increases. You sell 150,000 Euro at the rate of 1.2850 and get 150,000 * 1.2850 = 192,750 USD back!
This is feasible because of the credit, which lets you make transactions worth 100 times over funds obtainable on your balance (in this specific case, the maximum sum obtainable for transactions is 2000 * 100 = 200,000 USD).
Thus, after purchasing at a low rate and selling at a high rate, the difference 192,750 - 191,250 = 1500$ is your profit! You have earned 75% of preliminary funds in your account, while the rate increased by 0.8%.
Another way of making a profit on Foreign exchange is based on the decrease of the quotation rate of the EURUSD money pair:
Having created a actual account with 200 USD in it (same type of account - fx4u-classic), you select the upper and lower limits on the Euro to Dollar chart and sell 15,000 Euro (0.15 lot) at the upper limit for a cost of 1.2850 (bid cost) USD for 1 Euro, which equals 19,275 USD (15,000 Euro multiplied by the rate of 1.2850).
You have funds in USD in your account, but you can sell Euro using the automatic borrowing process. Hence, the company lends you 15,000 Euro free, which you can sell by sending a selling request. Due to the leverage, the actual deposit is 100 times less than the sum sold: 15,000/100 = 150 euro. At a rate of 1.2850 this equals 192,75 USD. This sum is going to be a deposit for a credit (marginal) transaction for your account. The maximum feasible deposit in this case equals 200 USD.
Thus, due to the fall in the exchange rate you earn the difference between sold and bought, which is 19,275 - 19,125 = 150 USD. You managed to earn 75% (150 dollars) of your preliminary sum of 200 USD due to a rate decrease by 0.8% (from 1.2850 to 1.2750) in one day.
Then in the coursework of the day the cost drops to the lower limit and you pick to buy 15,000 Euro at a cost of 1.2750 (ask cost) USD for 1 Euro, which equals 19,125 USD. The 15,000 Euro that you have bought are written off your account towards the repayment of the company loan, while the difference is left in your account.
The company takes a commission in the kind of the difference between the ask and bid prices or spread, which in this example is 3 USD (spread of EuroDollar pair equals 0.0002 or 2 pips). More detailed information on terminology is in the Glossary.
In these examples, the spread is not thought about while calculating percentages of rate changes because of its non-essential influence on the results. In the case of fx4u-cent account the calculations are similar with a difference only in account money - US or Euro cents in lieu of USD or Euro. The consecutive use of the transactions shown gives the income of 75%+75% = 150%. In actual practice a much greater return may be achieved by using corresponding funds management methods. Risk management methods also play an important role in trading
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