So, here I am in the Forex Mechanical Trading System known for instance as Fapturbo or Megadroid or maybe Ivybot (The big three). How do I figure out if I am making money or not?
Never fear, online forex brokers will have a trading platform that automatically calculates your profits and losses for you.
But it's important to understand what’s going on, regardless of whether it’s broken down for you or not.
Besides, calculating profit and loss is really simple. As I told my son, who was never good at math, “when it’s your money, you’ll be surprised at how good you are”.
There's only two simple formulas to remember.
When USD is 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
Let's look at some real examples to help you understand.
First we'll look at an example when USD is the quote currency (2nd).
To keep things simple let’s assume the broker requires 1% margin, which means you can trade $100,000 in currency for $1,000.
So let's say you are looking at EUR/USD which is currently trading at 1.2518/9. You predict the euro will rise in value against the dollar so you execute a trade to buy Euros,
which means you also simultaneously sell USD.
You buy $100,000 units at 1.2519. Remember since you are buying you have to take the ask price, which is the second number in the quote.
Your calculations are correct and the price rises to 1.2532/3.
You initiate a trade to sell EUR and buy USD. This time you use the bid price, which is 1.2532.
Since you bought at 1.2519 and sold at 1.2532 your profit was 17 pips, or 0.0017. Now we need to convert that into real money.
So take your formula above:
Profit = Price Change in Pips X Units Traded
Or,
Profit = 0.0017 X 100,000 = $170.00
An easy rule to remember is that when trading a standard sized lot (100,000) of a currency pair in which USD is the quote currency, a pip is always equal to $10. 17 pips equals $170.
Now, let's look at an example where USD is the base currency. We'll execute a buy of 100,000 units of USD/JPY at 117.22.
The price rises and we sell at 117.35. We just made 13 pips.
To calculate our profit we use the second formula:
Profit = Price Change in Pips X Units Traded / Exit Price
Or, Profit = .13 X 100,000 / 117.35 = $110.78.
Trade Foreign Exchange – with Forex Mechanical Trading Systems.
Did you find this information on Forex Mechanical Trading Systems useful? You can learn more about how this information can help you on Currency Trading Strategies with reviews on the Robot software programs on my website. Click here: forexcurrencyforex.Com
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