Step 1: Read the quote
Your platform shows two prices for EUR/USD, for example 1.0850 / 1.0851.
- 1.0850 is the bid: the price you can sell at.
- 1.0851 is the ask: the price you can buy at.
- The 1-pip difference is the spread, your cost of trading.
Step 2: Decide direction
You believe the euro will strengthen against the dollar, so you decide to buy EUR/USD.
Step 3: Decide where you are wrong
Before you think about profit, decide where your idea is proven wrong. Suppose recent prices bounced from 1.0820. You put your stop loss at 1.0815, about 36 pips below your entry.
Step 4: Choose the position size
Your account is $1,000 and you are willing to risk 1% ($10).
$10 ÷ (36 pips × $10 per pip per lot) ≈ 0.03 lots (3,000 euros).
Step 5: Check the margin
With 1:100 leverage, 0.03 lots of EUR/USD (about $3,255) needs about $33 of margin. The rest of your balance stays free.
Step 6: Place the order
You place a market buy for 0.03 lots, with a stop loss at 1.0815 and a take profit at 1.0920, near the last high. You are filled at 1.0851.
Step 7: Manage and close the trade
Two outcomes are possible:
| Outcome | Price move | Approx. result |
|---|---|---|
| Take profit hit at 1.0920 | +69 pips | +$20.70 |
| Stop loss hit at 1.0815 | −36 pips | −$10.80 |
If you hold the trade overnight, a small swap charge or credit is also applied.
What this example shows
- You decided the maximum loss before entering.
- Position size came from the stop loss and the risk, not from how much leverage was available.
- Costs (spread and swap) are part of every trade.