To Calculate What Your Profit Was, Use The Second Formula: Profit= Price Change In Pips X Units Traded/ Exit Price

Category: Finance, Currency Trading.

Most online forex brokers you pick will have a trading platform that can automatically calculate your profit and loss.

You' ll be able to keep tabs on your broker's honesty that way, but you' ll also have surer footing yourself as a trader if you know all of the fine details behind those calculations you depend on so much. However, you should still understand what goes on behind the calculations. Profit and loss calculations are relatively simple. When the US dollar, also known as USD, is the" quote currency, " or the second of the paired currencies, the formula is: Profit= Price Change in Pips Times x Units Traded. You just need to remember two basic formulas. When USD, is the base, or US currency currency or the first currency in a pair, the formula is: Profit= Price Change in Pips x Units Traded/ Exit Price. USD is the quote currency and we will also say that the broker requires 1% margin.

As an example to illustrate this, let's use the following scenario. This means that you can trade$ 100, 000 in currency for only$ 100 Therefore, if you are looking at EUR or USD, currently trading at 2518/ 9, you predict that the euro will rise in value against the US dollar. Therefore, you buy$ 100, 000 worth of units at 251Remember that you have to take the asking price, or the second number in the quote. Therefore, you execute a trade to buy euros and simultaneously sell US dollars. If your calculations are correct and the price rises to 2532/ 3, you initiate a trade to sell euros and buy US dollars. Which means: Profit= 0017 X 100, 000= $17 In other words, you made$ 170 on that trade.

For this trade, use the bid price, which is 253 Since you bought at 2519 and sold at 2532, you profit was 17 pips, or 001To convert that into real money, we use the formula above, so that it looks like so: Profit= Price Change in Pips X Units Traded. If you trade$ 100, 000 in a currency pair with the US dollar the quote currency, a pip will be worth$ 117 pips equal$ 17 When the US dollar is the base currency, let's say you buy 100, 000 units of USD/ JPY( Japanese yen) at 112The price goes up and you sell at 113Therefore, you just made 13 pips. Which means: 13 X 100, 000/ 1135= $117 So as you can see, this is relatively simple once you get the hang of it. To calculate what your profit was, use the second formula: Profit= Price Change in Pips X Units Traded/ Exit Price.