You can calculate a position’s profit and loss by understanding pip value and position size. However, you must factor in swap rates (if open trades are left open overnight) and commissions to arrive at a final profit/loss number.
Another crucial concept to grasp is that if a winning or losing deal has not been liquidated, the profit or loss is unrealized profit/loss (possible profit or loss). To realize profit or loss in your trading account, you must close a trade. The profit or loss can then be calculated.
Multiplying the position size (units traded) by pip movement, or simply multiplying the pip value by pip movement, is the basic calculation. While many people appreciate the convenience of a Forex Calculator, it is critical to grasp the mechanics of the calculation.
If the quote and account currencies are the same (USD).
Consider a 20-pip increase in EUR/USD from $1.2160 to $1.2180. Because a normal lot size in Forex is 100,000 units, you would have made 600 USD if you had purchased three lots and closed the position (300,000 x 0.0020). Multiplying the pip value by the price movement is another way to do it (30 USD x 20 pips).
The same price movement gets 60 USD if you enter three mini lots (30,000 units) (30,000 x 0.0020 or 3.00 USD [pip value] x 20 pips). In the same position, a 30 pip drop in EUR/USD would result in a loss of 90 USD.
Trading the EUR/USD with a euro-denominated account.
Assume a 50-pip rally increases the currency pair from $1.2160 to $1.2210, using the same EUR/USD exchange rate. One normal lot is worth 8.22 EUR in pip value. As a result, multiplying the pip value by the price movement (8.22 EUR x 50) yields a profit of 411 EUR.
You may also use pip movement to double the trade size (in euros [100,000 / 1.2160]). (82,240 x 0.0050).An account currency not included in the currency pair (GBP) – assume the GBP/USD rate is $1.3532.
A rally from $1.2160 to $1.2190 equals a 30-pip advance, using the same EUR/USD rate as before. For two mini lots, the pip value is 1.48 GBP. As a result, a 30-pip gain or loss equals around 44 GBP (1.48 GBP x 30).
Profit/loss can alternatively be calculated by multiplying the trade size (in GBP [20,000 / 1.3532]) by the pip movement (14,779 x 0.0030).
Risk Warning: Derivatives are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading Derivatives. You should consider whether you understand how Derivatives work and whether you can afford to take the high risk of losing your money. Please read our full Risk Disclosure.
Copyright © Interactive LTD
Interactive Brokers Central Europe Zrt. Licensed and regulated by the Central Bank of Hungary (Magyar Nemzeti Bank) (license number H-EN-III-623/2020). Registration authority: The Register of Companies of the Central Court. Office address: 1075 Budapest, Madách Imre út 13-14., Hungary. Trading in the investment markets online is speculative and carries a high level of risk, thus may not be suitable for all investors. If you are thinking of trading online in the investment markets, you should be aware of all the risks associated beforehand and take your investment objectives and level of experience into consideration. You should not speculate with capital that you can’t afford to lose, as there is a possibility you may lose some or all of your invested capital. Please note that interactive-live.co and its partners and associates, do not accept clients or client funds from the US and North Korea. Read our full risk discolure.