Basic Calculating Profit and Loss of Forex Trading
The basis for calculating the profit and loss of forex trading If you want to become a forex trader, then you must know how you will get profit or loss from this transaction. Trading is a simple activity that is buying anything in its form (house, car, motorbike, etc.) and waiting for the price to rise at a certain value and then sell it to make a profit.
Forex trading is the same as other forms of trading, only in forex trading is the currency traded.
Suppose you buy an Australian currency (AUD) using Dollar (USD) and you sell it when the value of the Australian currency (AUD) is valued higher than the price when you bought it then you will get a profit equal to the difference between the selling price minus the purchase price.
In forex trading all currencies pair, for example AUD / USD and you can freely sell and buy which country currency according to the trend forecast you believe.
The following is an example of calculating the profits of forex trading with AUD / USD currencies pair by following the downtrend.
In this example we open the Open position Sell at point 0.7339 and close the Close Buy position at the point 0.7082 because we believe that the Australian currency will weaken then we will get a profit or loss of 257 PIP (0.7339 – 0.7082).
How come it can profit even though the value of the Australian currency decreases and we close the position with a value lower than the value at the time of purchase. Where does the calculation come from?
Now that’s the draw on forex trading that we are allowed to have a currency before buying it based on the contract value. So when you open a real Sell position you don’t have an Australian currency (AUD), in this example, but you already have a contract value by giving a broker in the form of a guarantee. And when your prediction is correct after studying the economic conditions of Australia so that the currency is weakened, you can buy it with a lower value or Close Buy.
Because of this advantage we can reap the benefits both when the currency weakens or strengthens based on the economic conditions of a country. And this is what is interesting in forex trading even though the price goes up or down we still profit. Now if you are still confused and for easier calculation of Profit / Loss when Open and Close positions this is the simple formula
Profit / Loss (PIP) = (Point Close Sell – Open Buy Point)
Profit / Loss (PIP) = (Open Sell Point – Close Buy Point)
And if we look carefully that the calculation formula above is the same as the calculation when we buy and sell something in this life that is the Selling Price minus the Buy Price .