Need help from experienced fx traders

Hi,
I am new to FX trading.i would like to get my doubts cleared in fx trading.
First what is a spread and how to calculate P/l of a trade say i bougt eur/usd @1.2243/46 and sold it @ 1.2254/57.
Is it profitable to trade for 10 pips profit per trade. And waht other fees do the brokers charge.

Traders like Nautilius, james, amarnath, pls provide info.

Regards,
Minu

Hi Minukrishna:

Here is how bid offer spread works. Bid is the lower price so when you sell it you get the lower price. Offer is the higher price and when you buy it you always pay the higher price. For eg. 1.2243/1.2246 the bid is 1.2243 and the offer is 1.2246 and the spread is (0.0003) or 3 pips.

In the example that you have given, since you are buying the Euro against you will pay the offer price(the higher price) which in this case is 1.2246. So you bought Euro against Usd at 1.2246.

When you sell it you always get the lower price ie. bid which in the example you have given would be 1.2254. So you sold Euro against Usd at 1.2254

Therefore your profit per Euro would be (1.2254-1.2246) = 0.0008 Euro.

If for example you had bought 10000 Eur/Usd your total profit would be
(1.2254-1.2246)x10000 = 8 Euro

To answer your second question whether is it profitable to trade for 10pips/trade - the answer can be yes and no.

1) For Yes answer - if you trade in large number than you would achieve meaningful numbers at the end of the day or if you trade say 10000 Euro 10 times a day for 10pips than you have a potential to make about 80 Euro (about 5300Rs assuming you get all 10 trades right) - which is meaningful - most bank dealers work this way - where they place large bets (minimum one million Euro and its multiples) for small pips and trade that way several times a day. It still does not always guarantee them a profit at the end of the day!

2) For No answer - if you plan on trading say a 1000 Euro 10 times for 10 pips a day than you would just make 8 Euro for the whole day - assuming you get all 10 trades right!

There are no further expenses that the broker will charge you beside bid/offer spreads.

Another thing you have to bear in mind is whether you can allocate a substantial amount of time, energy and discipline for day trading.

On a personal basis I am a position trader and this gives me time to think about a trade and plan a trade and then stalk a trade and then actually execute a trade.

Hope this helps.

Regards

Nautilus

Thank you Nautilus, now i have got a clear picture. I also request your help as and when i am in doubt.
Thanks again
Minukrishna

This is educational as well:

http://www.proedgefx.com/USdollarwrapup2.aspx?ref=JBAR

The Afternoon US Dollar wrap-up, a daily LIVE broadcast with up-to-the-minute discussion and analysis of the trading days U.S. dollar market action. This live interactive web broadcast focuses on the Chicago Mercantile Exchange electronic futures FOREX markets and the fundamental and technical forces that move them. This daily event includes:

A concise and focused tool to help keep your trading up-to-the-minute and to take advantage of market action;
Serious dialogue about what traders are thinking and how they are positioning themselves and their customers;
Overview and summary of the U.S. trading session and how the U.S. Dollar performed after the Asian and European overnight trading sessions;
Technical market analysis of the major traded pairs at the IMM which include: EURO FX, YEN, BRITISH POUND, SWISS FRANC, CANADIAN DOLLAR and more. Both futures and options are discussed, trading set ups and potentials for immediate execution before and during the next overnight trading session and into the next day will be discussed;