The Profit Calculator
Before taking a trade, it is very important to know what you stand to gain or lose from it.
A Profit Calculator is a simple tool that will help you determine a trade’s outcome/profit, then you will be able to decide whether to continue and take a trade or not.
You can also set different bid and ask prices and compare the results.
It Measures the profit or loss of a trade based on your trading account’s base currency, opening trade price, trade direction, trade size, and closing trade price.
How to use a profit calculator
- Pick the currency pair you wish to trade
- Choose if you are selling or buying
- Set the open and close price
- Select in which currency you would like to see the results
- Type the number of units in the trade (position size).
- Click on the Calculate button.
The profit/loss is shown below this button (a negative value indicates a loss).
- To compare new values, just change them and use the Calculate button again to see the results.
Calculating Profit and Loss
To clearly understand how the profit and loss calculation is arrived at, we shall consider some examples on how to calculate profit or loss with a formula.
The following two examples illustrate how to calculate profit or loss after taking a trade.
If the current bid/ask for USD/CAD is 1.2338/1.2340, and you want to buy 10,000Euros at 1.2340, meaning you can buy $1 at 1.2340 CAD or sell $1 at 1.2338 CAD.
Buying $10,000 each at 1.2340 you will pay (10,000 x 1.2340) = 12340 CAD.
After taking a trade, price rises to 1.2515/1.2517 and you close a trade realizing your profit.
Since we were buying USD while selling the CAD, to close trade we must sell the dollar and buy back the CAD.
To calculate your profit,
Selling $10,000 at 1.2515, you will receive (10000 x 1.2515) = 12515CAD
Net profit = (12515 – 12340)
= 175 CAD
To change your profits into dollars, you simply divide your answer with the current exchange rate (price), USD/CAD at 1.2515.
Profit = 175/1.2515
Now from the example above, let’s say we decide to sell USD/CAD and trade at the same price1.2338/1.2340. To sell $10,000 you pay 12338CAD (10,000 x 1.2338).
However, USD strengthens after taking a trade and closed with your stop loss to1.2515/1.2517. This means your minimum loss attained after selling $10,000 at 1.2517 and received 12517 CAD.
You sold $10,000 at 1.2338 CAD, receiving 12338 CAD. You buy back $10,000 at 1.2517, paying 12517 CAD. The difference is (12338 – 12517) = -179 CAD
Total Loss = (179) CAD
To convert it to dollar, we simply multiply by the current rate, USD/CAD rate, 1.2517
= Total loss in dollars = ($143)
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...