Question: Example of Forex trading calculation for EUR/USD (Margin, Profit and Loss)
Can you explain FX trading calculation for EUR/USD trading with an example?
Understanding the calculations involved in placing Forex trades is an important starting point and should be understood clearly, no matter the size or direction of the position.
With that in mind let’s review a few examples:
A Buy (Long) EURO/USD “Mini-Lot” 0.5 Lots (50,000 unit) position, with 200:1 leverage, entered at a market price of $1.3000.
The USD value of the position will be: 50,000 units * $1.3000 = $65000. With a margin requirement of 0.5% (1:200 leverage), the result will be $325 required to open the position.
Pip Formula= 100,000(Lot Size) * .0001 (tick size) = $10.00
50,000 * .0001=$5
Taking a Trade in Play and Closing it out
Assuming you’ve now opened the position in the market. The market moved in your favor 70 pips to a market rate of 1.3070.
At this point you’ve earned $335,
after covering your spread costs (5 * 70 – 15=335).
Basically on a half a lot EURO/USD position leveraged 200 times. The Margin requirement and spread cost to get in $325 and $15 (spread cost)= $340. At $5 a pip, after a 70 pip move your position earned $350 in the market. Upon closing out you should have $690 USD (assuming no rollover/swap fees applied).
Close out the position pay the spread cost $15, and enjoy.
Direct Rate Currency Pair Trade Examples: EURO/USD
Direct Rate Pairs involve any pair in which the USD is the quote (base/quote).
The EURO/USD is considered a direct pair EURO-base, USD-quote.
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