Short positions are taken when a trader sells currency in anticipation of a downturn
in price. Making this move allows the investor to benefit from a decline. Long positions
are taken when a trader buys a currency at a low price in anticipation of selling
it later for more. Making these moves allows the investor to benefit from changing
market prices. Remember! Since currencies are traded in pairs, every forex position
inevitably requires the investor to go short in one currency and long in the other.
Purchase price: Rs. 52.2500
Price increases by one tick: + Rs. 00.0025
New price: Rs. 52.2525
Purchase price: Rs. 52.2500
Price decreases by one tick: Rs. 00.0025
New price: Rs. 52.2475
The value of one tick on each contract is Rupees 2.50. So if a trader buys 5 contracts
and the price moves up by 4 ticks, she makes Rupees 50.
- Step 1: 52.2600 – 52.2500
- Step 2: 4 ticks * 5 contracts = 20 points
- Step 3: 20 points * Rs. 2.5 per tick = Rs. 50
(Note: please note the above examples do not include transaction
fees and any other fees, which are essential for calculating final profit and loss)