USD/CHF Trading Example

An investor deposit $10,000 in his account.

The account is set to 0.5% margin or 200:1 Leverage. This means that for every $ 5,000 lot (0.05 MT4 Platform) opened, the investor must maintain at least $25 in Margin (= $5,000 x 0.5%) or 5,000/200.

The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy $ 100,000 of the USD/CHF pair.

The market quotes USDCHF 1.0147-1.0150. The investor buys USD at 1.0150 against CHF.

By doing this, he commits in the simultaneous buying of USD 100,000 (20 lots at $5,000) and the selling of CHF 101,500 (= $100,000 x 1.0150) by using $500 as a Margin (= $100,000 x 0.5%) and borrowing USD 99,500 from his broker/market maker (= $100,000-$500)

Result

Account Name

Credit/Debit

Day 1

Comment

USD Account

C USD +100,000 $100,000 Investment

CHF Account

D CHF -101,500 lots (20) x lot value ($5,000) x USDCHF Quote (1.0150)

Result

Balance (USD)

Equity (USD)

Lots Open #

Used Margin (USD)

Usable Margin (USD)

$10,000 $10,000 20 $500 $9,500

(1) Balance = Deposit ($10,000) + Sum of Realized Profit & Loss ($0) = $10,000

(2) Equity = Balance ($10,000) + Sum of Unrealized Profit & Loss ($0) = $10,000

(3) Lots open = Investment ($100,000) / Value of one lot ($5,000) = 20 lots

(4) Used Margin = Lots open (20) x Value of one lot ($5,000) x Margin (0.5%) = $500

(5) Usable Margin = Equity ($10,000) – Used Margin ($500) = $9,500

The US dollar has risen and the USD/CHF quote is 1.0300-1.0303.

 

The investor decides to close out and take profit and enters a sell market order. The order is executed instantaneously and the investor sells 20 lots of USD/CHF at 1.0300.

By doing this, he commits in the simultaneous selling of USD 100,000 (20 lots at $5,000) and the buying of CHF 103,000 (= $100,000 x 1.0300).

Result

Account Name

Credit/Debit

Day 1

Day 2

Comment

USD Account

D USD +100,000 USD -100,000 Sell  lots (20) x lot value ($5,000)

CHF Account

C CHF -101,500 CHF +103,000 Buy  lots (20) x lot value ($5,000) x USDCHF Quote (1.0300)

The dollar side of the transaction involves a credit and a debit of USD 100,000, the investor’s USD account will show no change.

The CHF account will show a debit of CHF 101,500 and a credit of CHF 103,000. This results in a profit of CHF 1,500 = approx. USD 1,456 (= CHF 1,500 / 1.0303) which represents a 14.56% profit on the deposit of USD 10,000.

Result

Balance

Equity

Lots Open

Used Margin

Usable Margin

$11,456

$11,456

0

$0

$11,456

(1) Balance = Deposit ($10,000) + Sum of Realized Profit & Loss ($ 1,456)= $11,456

(2) Equity = Balance ($11,456) + Sum of Unrealized Profit & Loss ($0) = $11,456

(3) All positions are closed, therefore, Lots open = 0

(4) Used Margin = Lots open (0) x Value of one lot ($5,000) x Margin (0.5%) = $0

(5) Usable Margin = Equity ($11,456) – Used Margin ($0) = $11,456

Note: Overnight rollover: For simplicity’s sake, we have disregarded the effect of difference in interest rate between USD and CHF over the 2-day period which would have marginally altered the profit calculation.