Through our ten years of experience in which we
have dealt with many companies all around the world, when we dealt
with Windsor our concepts about this kind of business had changed.
It was the only time we find a company that cares about the interest
of the client more than he does, and for the first time we see a
company that gives the price exactly as it is without thinking of
making more profit from the client
If the client
is given a Forex , (foreign exchange) quote e.g.
GBP/USD "1.4550/60" then this
represents the bid/ask spread for these two currencies. The rate of
1.4560
represents the rate at which the client can Buy GBP against
the US dollar. The rate of 1.4550 is the rate at which the
client can Sell GBP against US dollar.
If the client wishes to
speculate on GBP/USD believing that the GBP will strengthen against the
USD
(going long), then the client will buy an (X) number of lots
of GBP (each lot being GBP 100,000.00). This trade is called
(opening buy).
If GBP appreciates against the USD and the client wishes to close
the position when the quote is 1.4675/1.4685, then
the client will
sell
the lots of GBP or any number of them @
1.4675 (closing sell). The profit/loss that results from
this trade is calculated by subtracting the purchase price
from the selling price and multiplying it by the size of the trade
(profit/loss calculation).
Selling price-Purchase Price x Size of Trade=
Profit/Loss
1.4675-1.4560 x 100,000.00=US$ 1,150.00 Profit
If the client wishes
to speculate on GBP/USD believing that the British Pound will weaken
against the US Dollar then the client needs to sell GBP
(going short).
If the quote is 1.4567/77 the client may
decide to Sell 3 lots of GBP (3 x GBP 100,000.00 @
1.4567 (opening sell).
If the British Pound depreciates against the US Dollar and the
client wishes to close the position when the quote is
1.4473/83, the client
will decide to Buy 3 lots of British Pound @
1.4483. The resultant profit/loss is calculated as
such:
Sell Price-Purchase Price x Size of Trade = Profit/Loss
i.e.
1.4567-1.4483 x 3 x 100,000.00 = US$ 2,520.00 Profit
In the two examples above, if the currency in
question moves in the opposite direction to the direction shown above, the
profit on these trades becomes a loss.
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