Last Updated on: 10th January 2021, 04:00 am
It is important to remember that in Forex there are always two notionals, as a currency exchange will always involve two currencies.
A party to a currency transaction is always subject to two underlying notional amounts, those of the currency bought and the currency sold.
For example, a company may elect to purchase EUR 1,000, which will cost USD 1,100. Therefore, the notional amount inU.S. dollar is 1,310 , while in euros, it is 1,000.
Notional amount is also frequently used in the options and futures markets being the total value of a leveraged position’s assets.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.