Long Position in GBPUSD
Let’s say the price of GBPUSD is currently 1.5100 – 1.5102. You want to buy, because you expect the price of to rise. When you buy a currency pair, you are buying the first currency and selling the equivalent amount of the second currency in the pair, (or vice-versa when you are selling a currency pair, you are in fact selling the first currency and buying the equivalent amount of the second currency). So in this example you are buying GBP and selling USD, as you expect GBP to strengthen, or go up, versus USD.
You buy 1 Lot, the equivalent of 100,000 GBP, at 1.5102 (151,020 USD). With an account on 200:1 leverage, your margin requirement will be 100,000 / 200 GBP or 755.1 USD. This margin requirement will not be debited from your account, but will be required as a minimum credit balance on your account in order to open the position. When you open the position, this margin is then ‘locked up’ against this position and cannot be used for anything else. The margin requirement may change over the duration of the trade, depending on the movement in the price of the currency pair.
Closing the Position
Now let’s assume that you are proved correct, and the price of GBPUSD rises to 1.5150 – 1.5152. You decide to close your position and sell your 1 Lot at 1.5150.
Your Gross profit/loss (excluding financing costs) would be:
Gross Profit/ Loss = (Closing Price – Opening Price) x lot size
= (1.5150 – 1.5102) x 100,000 = $480 profit
Your Net Profit/ Loss (including financing charges) would be:
Net* Profit/ Loss = Gross Profit – Financing Charges
= $480 – 42 = $438 profit