LONDON, May 31, 2012 /PRNewswire/ --
Use our guide to educate yourself on how to trade forex following a decline in currencies, such as the Euro, with a spot forex trading account from City Index.
It was reported on Wednesday 30 May 2012 that the Spanish government's 10-year bond yields had increased to 6.7%.
With yields reflecting the level of investor demand in return for a holding bond, and a higher yield being a reflection of higher perceived risk - how will you trade on the Euro?
European Commission Urged Spain to 'Speed Up' Reform
On the same day (Wednesday 30 May 2012), the European Commission urged Spain to speed up and implement reforms to cut their deficit.
Within their annual economic health check of European Members, the European Commission said that in 2012, Spain's economy would shrink by 1.8% and 0.3% in 2013, adding that the unemployment rate would hit 25.1% in 2013 also.
With investors looking for a light at the end of the tunnel, they may have to wait; on Friday 25 May 2012, Spanish banking group Bankia asked for a 19 billion Euro bailout which was met with uncertainty as to how the Spanish government will raise the funds to bail out the struggling lender
Take a Position on the Falling Euro
Through a City Index forex trading account, you can take a position on the future price movement of 37 currency pairs.
In addition, there is potential to profit from currencies that are both rising, as well as falling by buying (going long) or selling (going short) the first currency in that pair.
Below, we offer a brief example using the EUR/USD currency pair.
Going Short on the EUR/USD
When you trade on a currency pair - as mentioned above - you are trading on the first currency in that pair.
In this example, that would be the Euro.
Let us say that the EUR/USD pair is being offered through the City Index trading platform for 1.2421/1.2422.
Following negative economic news out of Spain in recent weeks; you expect the Euro to fall against the US dollar and therefore decide to go short and sell €10,000 on EUR/USD at 1.2421.
In the event you are correct and the Euro depreciates against the US dollar to 1.2312 - you decide to take your profits by buying back.
City Index is now offering the EUR/USD pair at a price of 1.2311/1.2312. You buy to close at 1.2312 - 109 pips lower than your buy price - netting you a profit of $109, i.e. (1.2421-1.2312) x10,000 = $109.
However, you could have been wrong and the market had moved against you. Had the Euro appreciated or strengthed against the US dollar by 109 pips - you'd have netted a loss of $109.
Trading Forex with City Index
To find out more and start trading forex, visit the City Index website where you can access a range of trading tools and resources within their Learn to Trade area: http://www.cityindex.co.uk
Access Free Forex Trading Articles
If you found this guide helpful, you may like to know that through City Index - you can access a range of free forex trading articles.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.
We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.
SOURCE City Index