FX trading explained

An example of a spot FX Trade can be seen below:

1. The US dollar is trading against the Japanese Yen at 116.99/117.02.
2. You think the US dollar will strengthen against the Yen so you decide to buy 500,000 USD at 117.02.
3. Your margin requirement with RBS Spread Trading for currency trades is 1% therefore $5,000 is allocated from your account as initial margin.
4. Later that day you see that the dollar has risen to 117.65/117.68.
5. Therefore you decide to realise your profit and sell dollars at 117.65.
6. Your revenue is calculated as follows: $500,000 (size of position) x (117.65 [sell price] - 117.02 [buy price]) = ¥315,000.
7. This is converted back into dollars ¥315,000 ÷ 117.65 = $2,677, at the end of the day using the mid-close price.
8. There is no commission on this trade, there is also no financing charge as the position was not held overnight.