Posted by forex at 3:32 AM
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1. Note these two formulas for calculating profit and loss from a forex transaction on a blank sheet of paper. When U.S. dollars are the quote currency (the second currency in a pair), the formula is Profit = Price Change in Pips X Units Traded. When USD is the base currency (the first currency in a pair), the formula is Profit = Price Change in Pips X Units Traded / Exit Price
2. Find out whether USD is the quote currency or the base currency. Note the complete transaction on the page to begin calculations.
3. Calculate the price change in pips by subtracting the price at which the other currency was bought from the price it was sold. Consider profits if the prices increased. Report losses if sold at decreased price. For example, if EUR/USD was trading at 1.2518/9, $100,000 units were bought at 1.2519 and sold when price rose to 1.2532. Since price increased, profit = 13 pips or 0.0013 (1.2532 -- 1.2519).
4. Calculate the profit with the calculator using the first formula noted on top of the sheet. For above example, Profit = 0.0013 x 100,000 = $130.00.
5. Use the second formula for profit/loss if USD is the base currency. For example, 100,000 units are bought of USD/JPY at 117.22. The price falls, and units are sold at 117.12. Calculate the pips in loss since the selling price is low. For given example, Pips = 10 (117.22 -- 117.12)
6. Calculate the net loss by using the second formula in the calculator. Loss = Price Change in Pips X Units Traded / Exit Price. For the above example, Loss = .10 x 100,000/117.12 = $85.38. Report the final and net profits and losses on each transaction on a new blank sheet of paper.