Forex Trading as we all know involves buying and selling currency pairs in order to earn a margin or profit on our transaction. But how does one really calculate how much one has profited or lost in a transaction. Here I would like to tell you an easy method to calculate what you stand to gain or lose at a particular open position.



Let us take an example to demonstrate how to calculate you expected earnings from a Forex trade. Let us suppose that the current ask/bid price for EUR/USD currency pair is 2.3240/45. By the given statement we mean that using one Euro you can buy 2.3245 US dollars or it also means that by selling one Euro you will receive 2.3240 US dollars. Let us assume that you are thinking about buying Euros and go ahead and execute this trade. You buy 1,000,000 Euros after paying 2,324,500 US dollars and wait for the value of Euro to appreciate.

Let us suppose that after waiting for a certain amount of time the value of Euro appreciates and the Euro is now valued at 2.3287/90 against the US dollar. Looking at this situation you think about selling your 1,000,000 Euros at the selling price of 2.3287 and thus receive 2,328,700. Looking at your buy price and you sell price, there is a difference of 42 pips (2.3287-2.3245), thus a profit of 4,200 on the whole transaction. Thus in this way you can easily calculate how much you are going to earn or lose in a transaction. This method can also be applied to your overall trade session by counting the total number of pips and then using them to calculate your total profit or loss for the trade session.

Author: Coast Dwane
Article Source: EzineArticles.com
Provided by: Latest trends in mobile phone



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