How Are Profits & Losses Calculated In The Forex

How Are Profits & Losses Calculated In The Forex

Profit or loss is the outcome of an investment in forex market. Sometimes you earn profit due to good and effective strategies but on the other hand you have to bear losses. Forex trading is also a matter of luck so in spite of all these things is cannot be ignored. In the process of profit and loss calculation the spread and interest differential are considered. Moreover there are many tools that can help to calculate profits and losses automatically. The names of two most common tools are profit calculator and interest calculator. Most of the platforms provide facility of calculating profit and loss automatically. Here are the methods which illustrate how to calculate profit and loss in forex trading.

Example 1:

The rate of EUR/USD is 0.9517/22 and decided to sell 10,000 EUR. Your trade is executed at 0.9517.

10,000 EUR * 0.9517= 9,517.00 USD

Selling price:               10,000 EUR

Purchase price:            9,517.00 USD.

After trade the market rate EUR/USD decreases to EUR/USD=0.9500/05. You buy back 10,000 EUR at 0.9505.

10,000 EUR *0.9505= 9,505.00 USD

Selling:                        10,000 EUR for 9,517 USD

Purchase:                     10,000 back for 9,505.

The difference is your profit which is: 9,517.00-9,505.00= $12.00 USD

Example 2:

The rate for USD/JPY is 115.00/05 and decides to buy 10,000 USD. Your trade is executed at 115.05.

10,000 USD*115.05= 1,150,500 JPY

Purchase:         10,000 USD

Selling:                        1,150,500 JPY

The market rate of USD/JPY falls to 114.45/50. You decide to sell back 10,000 USD at 114.45.

10,000 USD*114.45=1,144,500 JPY

Purchase:         10,000 USD for 1,150,500 JPY

Sold:                10,000 USD back for 1,144,500 JPY

The difference is your loss which is: 1,150,500-1,144,500= 6,000 JPY. You should note that your loss is in JPY and must be converted back into dollars. So

6,000 JPY/ 114.45 = $52.42 USD or

6,000 *1/114.45=$52.42

You too could make money with forex trading but only thing is that you need to try and get the right kind of advice.

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