Instrument: Buy Price: Notional Amount: Leverage: Used Margin:

Buy GBP/USD 1.5163 50,000 GBP 50:1 or 2% of notional amount; pip value = $5 U.S. $1,516

Based on the rules of the forex trading system, the trader enters a sell stop order to automatically close this position should GBP/USD fall to 1.5148 which will risk 15 pips or $75 on the position. This stop is set just below the recent low. The trader does not know how far prices may recover. So, rather than guess a target level, the trader sets the stop order to trail 15 pips behind the market. The stop price will automatically rise with the market but will never be lowered; should the market fall to the stop price, then the trade will be automatically closed. The chart below shows price activity over the subsequent 24 minutes.

GBP/USD did continue to rally and with every new market high price, the stop was trailed to lie 15 pips below that price. After 20 minutes of strength, GBP/USD subsequently sold off and hit the stop order which closed the trade as follows:

Instrument: Sell Price: Notional Amount: Net Gain/Loss:

Sell GBP/USD 1.5195 50,000 GBP Gain = 32 pips = $160 less any applicable fees.

IMPORTANT NOTES

THE RISK OF LOSS IN FOREX TRADING CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.

1. The above example of a forex trading system is for informational purposes only and is not meant to construe trading advice. While prices are actual, the period was selected to best illustrate the particular forex trading system and no implication is being made that this system will always produced positive results.

2. Increasing (decreasing) the leverage and/or notional value in the forex trade example shown above will increase (decrease) the risk, used margin, and magnitude of resulting profit or loss. In choosing these values, the forex trader should consider the amount of available risk capital, trading experience and tolerance for risk.

3. The used margin is the minimum amount of cash that must reside in the forex trading account at all times so long as this currency position is open. Used margin calculation varies in part depending upon the value of the exhange rate upon establishing the position. For multiple positions, the used margin for all open positions are aggregated. Should the account value decline below the used margin, a margin call may be issued and all open positions may be automatically closed by the forex trading platform.

4. The example above assumes the forex trading account is with a U.S.-regulated forex broker. As such and because of the FIFO rule, the stop order is an entry order and cannot be tied to the open currency position. It, therefore, must be manually canceled upon closure of the trade.