Calculating Gains And Losses In The Forex

Before discussing about the calculation of gains and losses on forex, we first need to know the meaning of some terms important points/pips and lot:

Points/pip: the smallest price unit/Movement in forex calculated in units of points/pips. The value of each point varies according the type of currency pair (pair). Say EUR/USD moves from 1.0679 to 1.0690, then it could be said that the EUR/USD moves 11 points, or 11 points.

Lot size: large transaction calculated in the lot. Lot represents how many units of the currency in trade. For easy, let's say to buy paper towels. Paper towels are often sold in a single package containing six wipes pouch (six tissue unit). Well, one package contains six bags of tissue this is referred to as "lot", while six bags of tissues is the number of the unit (size of contract/contract size). But there are also wipes sold a package contains four pockets of tissue (four unit paper towels), right? In forex, unit number (contract size) in one lot can also vary:

Standard lot: 100,000 units (one hundred thousand units; if we trade with the base currency us dollars, then it could be called a hundred thousand USD)

Mini lot: 10,000 units (ten thousand units; if we trade with the base currency us dollars, then it could be called the ten thousand USD)

Micro lot: 1,000 units (one thousand unit; if we trade with the base currency us dollars, then it could be called a thousand USD)

Calculation For Direct Pair

Direct pairs are a pair with USD as the suffix (GBP/USD, EUR/USD, AUD/USD, and NZD/USD), the way the calculations:

Profit/loss = (selling price-purchase price) x contract size x lot

Example:

Buy 4 standard lot EUR/USD 1.2500 and then Sell 4 standard lot EUR/USD 1.2570

Profit = (1.2570-1.2500) x 100,000 x 4

Profit = $ 2,800

Sell 1 standard lot GBP/USD 2.0010, Buy 1 standard lot GBP/USD 2.0000

Profit = (1.2010-1.2000) x 100,000 x 1

Profit = $ 100

There is a method of calculating easy to pair ending in USD:

gains 1 point for 1 standard lot (100,000) is $ 10.

gains 1 point for 1 mini lot (10,000) is $ 1

gains 1 point for 1 micro lot (1000) is $ 0.1

Indirect Rates Calculation To Pair

Indirect pair is a pair with USD as the prefix (USD/JPY, USD/CHF, and USD/CAD), how to calculate profit/loss are as follows:

Profit/loss = (selling price-purchase price)/price liquidation x contract size x lot

Example:

Buy 1 standard lot USD/JPY 65.00

Sell 1 standard lot USD/JPY 110.05

Profit = (110.05-65.00)/110.05 x 100,000 x 1 = $ 45.43

Calculation For Cross Pair

Pairs that do not contain the USD (GBP/JPY, EUR/JPY, AUD/JPY, EUR/GBP, and GBP/CHF) how to calculate profit/loss are as follows:

Profit = (selling price-purchase price) x Rate Base Currency current/Rate Pair x contract size x lot

Example:

Sell 1 standard lot EUR/GBP at 0.6760 price

(EUR/USD is the base currency of EUR/GBP, because the front of the EUR/GBP is the Base Currency)

Buy 1 standard lot EUR/GBP at 0.6750 price Rate EUR/USD: 1.1840

Profit = (0.6760-0.6750) x 1.1840/0.6750 x 100,000

Profit = $ 175,4

Margin and Leverage

Even though the number of units per lot-his big, You need not fear a shortage of capital when trading forex, because forex trading including trading with margin (margin trading). Margin trading means, our capital will be assisted by leverage. Leverage will increase our trading capabilities even though it only had a little capital. With the leverage of 1:100, for example, then just have the capital even though it is 100 USD, trading as if we could have 10,000 USD. Imagine a broker like banks that lend money to you, and when the same menyimpankan that money as well. 100 USD it is a guarantee that is deposited on your broker.

The value of this variable leverage, usually in a ratio of 1:50, 1:100, 1:200, 1:500, 1:000. With 1:100 leverage, you can already trade with Fund 100 x fold capital owned in standard lot, or more than that when you wear a lot of mini or micro. Tempting isn't it? In this way, one small capitalization can forex trading. However, the greater the leverage used, the greater the risk that Your responsibility anyway.