How to Calculate your Profits and Loss in Forex ?
It is important to learn in Forex How to Calculate your Profits and Loss in Forex
So, we decided to share with this helpful lesson about it
To illustrate an FX trade, consider the following two examples.
Let's say that the current bid/ask for EUR/USD is 1.4616/19, meaning you can buy 1 euro for 1.4619 or sell 1 euro for 1.4616.
Suppose you decide that the Euro is undervalued against the US
dollar. To execute this strategy, you would buy Euros (simultaneously
selling dollars), and then wait for the exchange rate to rise.
So you make the trade: to buy 100,000 Euros you pay 146,190 dollars
(100,000 x 1.4619). Remember, at 2% margin (50:1 leverage), your initial
margin deposit would be approximately $2,923 for this trade.
As you expected, Euro strengthens to 1.4623/26. Now, to realize your
profits, you sell 100,000 Euros at the current rate of 1.4623, and
receive $146,230
You bought 100k Euros at 1.4619, paying $146,190. Then you sold 100k
Euros at 1.4623, receiving $146,230. That's a difference of 4 pips, or
in dollar terms ($146,190 - 146,230 = $40).
Total profit = US $40.
Now in the example, let's say that we once again buy EUR/USD when
trading at 1.4616/19. You buy 100,000 Euros you pay 146,190 dollars
(100,000 x 1.4619).
However, Euro weakens to 1.4611/14. Now, to minimize your loses to sell 100,000 Euros at 1.4611 and receive $146,110.
You bought 100k Euros at 1.4619, paying $146,190. You sold 100k Euros
at 1.4611, receiving $146,110. That's a difference of 8 pips, or in
dollar terms ($146,190 - $146,110 = $80)
Total loss = US $80.
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