Currency Calculation:
Due to the high leverage in Forex trading, currency traders are often confused
how to calculate their profits/losses. Even though our trading platform
automatically calculates all the necessary equations by converting everything
into U.S dollars, it is advisable to understand those calculations in order to build
successful trading strategies.
To demonstrate these calculations, we will be using the most commonly traded
currency- EUR/USD.
Buying a deal size of 10,000 on the EUR/USD means that you are buying
10,000 EUR while selling the equivalent in USD.
Explanation: A trader assuming that the Euro is going to strengthen against the
Dollar will buy Euros and Sell Dollars.
A click on the “BUY” button will allow you to buy € 10,000 while selling
$14,363
€ 10,000*1.4363(ask price) = $14,363
! Remember that one of the benefits of this markets means that your money is
leveraged (Default = x200), allowing you to open trades a lot larger than your
initial deposit. This allows you to maximize your potential profits while taking
advantage of the moving trends.
Once a position is opened, the value of each PIP varies depending on your
position size.
To demonstrate the calculations we will continue to use the example on the
previous page.
€ 10,000*1.4363(ask price) = $14,363
€ 10,000*1.4364(ask price) = $14,364
------------
$00,001 = Each pip is worth $1
€ 50,000*1.4363(ask price) = $71,815
€ 50,000*1.4364(ask price) = $71,820
------------
$00,005 = Each pip is worth $5
• This calculation will always give you the value of each PIP in the
secondary currency.
Simple formulas
1) (Deal size)/10,000 = value of each PIP in the secondary currency.
(This formula is only for currencies with 4 digits
after the decimal point)
Example: EUR/USD € 10,000/10,000= $1 per PIP
2) (Deal size)/ 100 = value of each PIP in the secondary currency.
(This formula is only for currencies with 2 digits
after the decimal point)
Example USD/JPY $10,000/100= ¥100 per PIP
• Calculations can be adjusted to the desired currency accordingly.
PIP values that are not in USD can be easily converted to the currency
requested by using the relevant pair.
Example: Step 1) USD JPY Bid price =114.23 Ask price =114.29
Step 2) USD/JPY $10,000/100= ¥100
Step 3) PIP value/ Bid price = value of PIP in desired rate
¥100 / 114.23 = $0.8754
It is always advisable to calculate your potential profits and losses before taking
the trade.
Due to the high leverage in Forex trading, currency traders are often confused
how to calculate their profits/losses. Even though our trading platform
automatically calculates all the necessary equations by converting everything
into U.S dollars, it is advisable to understand those calculations in order to build
successful trading strategies.
To demonstrate these calculations, we will be using the most commonly traded
currency- EUR/USD.
Buying a deal size of 10,000 on the EUR/USD means that you are buying
10,000 EUR while selling the equivalent in USD.
Explanation: A trader assuming that the Euro is going to strengthen against the
Dollar will buy Euros and Sell Dollars.
A click on the “BUY” button will allow you to buy € 10,000 while selling
$14,363
€ 10,000*1.4363(ask price) = $14,363
! Remember that one of the benefits of this markets means that your money is
leveraged (Default = x200), allowing you to open trades a lot larger than your
initial deposit. This allows you to maximize your potential profits while taking
advantage of the moving trends.
Once a position is opened, the value of each PIP varies depending on your
position size.
To demonstrate the calculations we will continue to use the example on the
previous page.
€ 10,000*1.4363(ask price) = $14,363
€ 10,000*1.4364(ask price) = $14,364
------------
$00,001 = Each pip is worth $1
€ 50,000*1.4363(ask price) = $71,815
€ 50,000*1.4364(ask price) = $71,820
------------
$00,005 = Each pip is worth $5
• This calculation will always give you the value of each PIP in the
secondary currency.
Simple formulas
1) (Deal size)/10,000 = value of each PIP in the secondary currency.
(This formula is only for currencies with 4 digits
after the decimal point)
Example: EUR/USD € 10,000/10,000= $1 per PIP
2) (Deal size)/ 100 = value of each PIP in the secondary currency.
(This formula is only for currencies with 2 digits
after the decimal point)
Example USD/JPY $10,000/100= ¥100 per PIP
• Calculations can be adjusted to the desired currency accordingly.
PIP values that are not in USD can be easily converted to the currency
requested by using the relevant pair.
Example: Step 1) USD JPY Bid price =114.23 Ask price =114.29
Step 2) USD/JPY $10,000/100= ¥100
Step 3) PIP value/ Bid price = value of PIP in desired rate
¥100 / 114.23 = $0.8754
It is always advisable to calculate your potential profits and losses before taking
the trade.
Thu Mar 14, 2024 6:43 am by Anament
» How to be successful in forex?
Wed Mar 06, 2024 9:50 am by Anament
» Can anyone provide insights on the Forex Recovery Bot available on CheaperForex?
Sat Mar 02, 2024 2:20 am by Anament
» What is the MultiPair RobotForexPro EA?
Thu Feb 29, 2024 6:08 am by Anament
» Learn about forex trading
Mon Feb 05, 2024 9:35 am by Anament
» What is base currency?
Sun Feb 04, 2024 2:28 am by Anament
» What is a retracement in forex?
Fri Dec 08, 2023 2:02 pm by Anament
» What is a bid-ask spread?
Tue Oct 31, 2023 7:46 am by Anament
» What are important values in a candlestick?
Sun Jan 15, 2023 2:29 am by Anament