Forex trading involves a lot of risk, can be and lucrative investment, and is a complex concept at the same time. Forex is the biggest and most liquid market in the world, and many factors determine the price of currencies and other commodities in this market. We are talking about international currencies, so every significant and developed country’s economy can affect the market largely. As many things influence the price of a currency, it is wise to calculate the profit and loss before opening a new position. Every professional trade or uses a Forex profit calculator to evaluate the returns and the possible loss of entering a position. This is a great way to manage risk and develop profit. Here at Aron Groups, you will learn how to use the Forex profit calculator and its terminology. By the end of this article, you will be familiar with different types of Forex profit calculator and their usage.
Table of Contents
What is a Forex calculator?
When talking about forex calculators, we are not talking about the traditional calculators you hold in your hand. But the forex calculator is the most useful tool to simulate how much money and pics a trading position represents in the position is closed in profit or loss. Your father’s profit calculator simulator position opens and closes with different values. You can evaluate the results of the potential profits or loss and money in pips. When trading on forex, many things influence your profit, including the currency pairs, spreads, the size of lots, and the broker fee. It is really hard to calculate the profit and loss of the position using your traditional calculator. That’s why Traders on Forex use Forex calculators, thoroughly designed software that can change how you trade.
On the other hand, calculating the profits of forex considering all their evolved factors is a time-consuming and challenging task to do. Forex is a full-time market, and excellent opportunities don’t last long; you have to quickly calculate the profit position and decide.
Read more: Forex Currency Pairs
Forex profit calculator terminology
You will encounter unique terms in every Forex calculator. Here we will go through some of the most common terms you should be familiar with using the Forex calculator.
Instrument
The instrument or symbol is the underlying acid you want to buy or sell. Trading forex, you can always select from major, exotic, and minor currencies, stock indices, cryptocurrencies, and commodities such as crude oil, silver, and gold.
Buy / Sell
In Forex, you can always participate on both sides of the market with rising and falling quotes. By Choosing the buy or sell option, you can determine your trade direction, either long or short. If you see rising quotes, you would go long; if you see falling quotes, you could go short.
Deposit currency
The term is simple and refers to your training account deposit currency because the calculator needs to know the type of your deposit currency to convert the position to that currency.
Commission
In order to have a clear understanding of the broker commission, you need to go through the rules and regulations of your favorite broker. And remember the type of your trading account will determine the commission you should pay. Sometimes the broker would offer you commission-free accounts, but it will compensate the cost inside spreads.
Contract size or Lots
If this field, you are required to enter the contract size. In forex, the equivalent to the traded amount is calculated as a standard lot size which is 100,000 units of the base currency. Generally, you can choose different types of trading sizes.
Pip
Pip is the abbreviation of percentage in points. If you have noticed, Forex instruments are quoted to the fifth decimal point, and one pip is 0.00010; a pip for assets is quoted to the third decimal point; a pip equals a price increment of 0.010.
Open price or OP
The price at which you open the position.
Close price or CP
Input the closing price for the train.
Leverage
The ratio of your trading size to the amount of margin required for opening a position is called leverage. Using margin trading, you should provide $200 USD to open a 100,000 USD contract if the leverage is 1:500.
Margin
Margin is the amount of capital you have deposited into your trading account to use the leverage.
After providing all the important information, you only need to push the calculate button and get the results. The calculator will provide you with the profit, money, and pip.
Note that if you input a closed price lower than the open price, you will be simulating a stop loss hit, which will change the results, and you will be able to calculate loss as well.
Read more: Forex Trading platforms
Why do you need to use a Forex calculator?
Every professional trader needs to evaluate the amount of risk and profit he will gain out of position before opening one.
Forex Trading has become popular over the years, and many investors from around the world are opening positions in this huge market. As they needed more sophisticated tools to open more significant positions, software and calculators were introduced that are fully designed to predict the profit and loss of a trade.
Using a smart forex calculator, you can open more informed positions, as the most significant function of these tools is to predict and estimate the profit and loss of their position.
Read more: forex market
Types of Forex calculator
As a trader, you have many options for trading on forex, you can use margins, or you can use technical analysis to open a position, so there are different types of calculators you can use to estimate the profit and loss of your position. Some of them are as follows:
Fibonacci Forex calculator
A Fibonacci or a retracement calculator will generate daily with different values to predict approximate price targets. Using this, you will be able to compute the price of underlying assets based on a high and low price.
Forex Profit Calculator
Forex profit calculator is a perfect two to estimate the profit or loss you will obtain holding onto a position.
When you use this type of calculator, you’re actually simulating your position to determine the amount of profit the position will provide you with. You can also use this calculator to test your strategies. To do so, all you need to do is to input different values and study the result.
Pip Forex calculator
Pip is the smallest measure for price movement in Forex Trading and is used to measure price fluctuations in the market. Using this type of calculator, you can estimate the profit and loss of a position in pip.
Position Size Calculator
A position size calculator is a useful risk management tool. This tool can reduce risks and avoid further losses in your trades. Using this calculator, you can estimate the perfect position size for your trade. To get the best result, you must provide the calculator with the currency pair, your pre-assumption contract size, and the currency type you hold in your trading account.
How to choose a forex calculator
As the accuracy and functionality of a calculator determine the preciseness of your calculation, choosing software that is easy to navigate and provides accurate results is essential.
Professional Trading
To get the most out of the position when trading forex, you need to use every possible tool you can find to ensure the success of your position. Forex is a complicated Market that provides you with lots of underlying assets to trade, and it can be tempting for beginners. Never open a position without learning everything about forex and understanding how different tools and trading platforms can alter your trading results. As a beginner, it is really important to use a calculator to learn how different values will change the result of your position. Enter different values into the calculator and see how it changes the results. Without calculating the profit and loss of the position, you’re trading in darkness.
In Aron Groups, you will find useful educational materials and be provided with investment opportunities like currencies, commodities, crude oil, cryptocurrencies, and gold. As a beginner or professional trader, we recommend you use a demo account and test the calculator results in a simulated trading platform before trading with real money.