Forex trading comprises a wide network of buyers and sellers who are actively exchanging various currencies with each other at an agreed price, as per a survey published on a reputed forex news website, around 9.6 million people are involved in the global sale and purchase of currency. The forex market is the largest network of financial markets in the world, surpassing the stock market as well. People exchange one currency for the other and speculate on the prices of whether a currency would rise or fall against the value of the other currency. However, it is essential to calculate all the potential risks and profits before trading in any form of currency; therefore, a comprehensive knowledge of forex profit calculation is required.
A trading profit calculator enables a trader to get a good estimate of the profits and losses he/she can make in a trade by entering specific details related to the trade. This is also a very useful forex calculator for novice traders, who usually need to gain more knowledge and experience about basic trading indexes. A forex profit and loss calculator is a very useful innovation for traders as it reduces the probability of risk and loss by providing the most accurate result within seconds. Following a few calculation steps, one can easily derive the probability of profit and losses on their forex trading.
How Does a Forex Profit Calculator Work?
There are several steps to be followed by the trader for the calculation of forex profit and losses:
- Currency Pair: You need to mention the instrument for trading that has a comparable value against the other unit, for example, EUR/USD, GBP/USD, USD/JPY, AUD/JPY, AUD/CAD etc.
- The Opening Price: This refers to the currency pair’s cost at the time of initial purchase. An opening price is different from the previous day’s closing price.
- The Volume of Trade generally refers to the number of lots/security traded during a specific period.
- The Closing Price: Generally refers to the last price of the instrument at which it was traded at the end of a trading day in a financial market. It is also called benchmark price by traders.
- Operation Type: Refers to the position of an asset owned by a trader with the intent of buying or selling, In simple words, whether the position of the asset is long or short.
Example of Profit and Loss Calculation
Let’s assume the currency pair of EUR/USD exchange rate equals 1.05/1.06, and a trader decides to purchase around 100,000 EUR. In this case, a trader spent around 100000*1.06, which equals 106000 USD.
Now we shall assume that within a month, the value of a currency pair changed to 1.12/1.13, the trader then decides to sell the previously purchased value of $100,000. In this case, the trader will make 100000*1.12, which equals 112,000 USD.
In this case, the trader’s total profit is 112000 USD-106000 USD= 6000 USD. This calculation shows that the trader made a profit of 6000 USD. Hence, by using a forex profit and loss calculator, the trader can easily derive results in seconds without the possibility of potential error. This further enhances the scope of making wise trading decisions in the future.
Benefits of Using a Forex Profit Calculator
Using a Forex profit calculator for both seller and buyer has various benefits. A profit and loss calculator will systematically perform calculations without the chance of potential human error or bias. In forex, profits are calculated in the number of pips you made in a trade, and to accurately measure the pip movement, you can take the help of a pip calculator. It makes the calculation of profit and loss very easy and has the following benefits:
- The results are accurate as calculators generate them.
- Even if a trader is caught up in other responsibilities, he/she can make calculations within minutes using a Forex profit and loss calculator.
- The calculator can easily assess the position of short and long-term trades and provides a deeper insight to the trader.
- With the help of a forex profit calculator, one can easily predict profit and losses in the near future and create strategies accordingly.
- The profit and loss calculator is easily available online, and traders can use it anywhere.
- The profit and loss calculator successfully performs complex calculations, avoiding human error and bias.
- The software of these profit and loss calculators is continuously updated, and new features are added to make it more accessible and accurate for the trader.
- These profit and loss calculators are compatible with all devices, such as smartphones, tablets, computers and laptops. They are compatible with all softwares like Windows, Linux, IOS and Android.
- Novice dealers can easily reap benefits from these profit and loss calculators as they need more knowledge of trading indexes.
With the advent of so many cutting-edge forex trading tools, traders can easily obtain data with ease. Trading calculators are a part of that technology, which is now widely used by traders from all across the globe. Traders want to predict profit and losses with as much accuracy as possible for the best returns. These calculators are designed to solve multiple complex calculations within minutes and provide the most accurate result without a chance of potential error or bias. Forex profit and loss calculator is a convenient tool used by traders to manage the risks of the market efficiently. Traders with any experience and skill level can easily use this calculator. So, the next time you decide to place a trade, make sure to use a profit calculator to get a precise idea of how big the lot size should be to make a certain amount of profit.