Understanding how to control and manage your risk as a trader is essential. When trading in a volatile market, it is crucial to consider the potential gains, losses, and trading expenses. Compared to investing, which uses a buy-and-hold approach, trading involves active engagement in the financial markets. Therefore, a trader’s capability to be profitable over the long term is a prerequisite for trading success.
A trader is anyone who participates in the buying and selling of financial assets on any other financial market. They can buy or sell on behalf of another person or organization. The duration that an investor or trader hangs onto an asset is the main distinction between them.
Therefore, consider using the forex trading calculator before making your next trade. It will show you all of the risks involved. The trading Calculator, often known as the Forex Calculator, is a useful & effective tool that enables you to quickly and easily calculate your potential profits and control your risk.
This article discusses a forex calculator and how we can use it to predict the possible outcome of trade results.
While trading in volatile markets, it is essential to learn to manage your risk and consider the profits, losses, and trading costs. The trading calculator enables you to easily and accurately calculate before actually executing the next trade. The trading calculator helps you to determine the trade specifics like:
- A trading calculator facilitates you to calculate the potential profit and loss associated with the trade.
- Contrast the outcomes for various opening and closing rates.
- Determine the needed margin of the trade position.
- Provide information about the pip value.
What is a Forex Trading Calculator?
The forex calculator is an effective and powerful tool that will assist you in calculating the main parameters of the transaction, such as the size of the contract and the item’s cost. Both experienced and beginner traders who work in the financial markets can use the trading calculator. In addition, the trader can choose whether or not to make a deal after using the Forex calculator.
What Data does Trading Calculator Require?
A trading calculator is a multi-purpose tool (also known as a forex calculator, a forex trading calculator, a leverage calculator, or a leverage trading calculator) that is useful and efficient for both professionals and beginners investors in the financial markets.
For using the trading calculator, the initial data for a transaction must be entered as follows:
- Select the trading instrument on the forex trading calculator that you want to use. The “Contract specifications” page contains all the terms and conditions for trading each asset.
- Specify the number of lots.
- Select the leverage amount you want to use for your transaction. Specify your account currency.
- The forex calculator will provide you with all the transactional details after you click “Calculate.”
How to use Forex Trading Calculator?
Forex calculator provides you with ease of Convenience while making a trade. You will save a lot of time by using the trading calculator, which instantly calculates margins, profits and losses, swap values, and pip values. The time you’ll save by utilizing a forex calculator can be used much more effectively to analyze your next trading opportunity.
Before using the forex trading calculator, you need to specify the transaction details.
In this article, we have listed the steps on how to use the forex trading calculator effectively:
Step 1: Enter the trading instrument you want to use.
Step 2: Choose your account’s currency.
Step 3: Include your preferred leverage
Step 4: Select between buying and selling.
Step 5: Lastly, select the trading platform that you will use.
The computation results in the forex trading calculator will help the trader to find out when he/she should open a position and other necessary details like the spread and required margin.
How to Read the Calculation Data Received from the Trading Calculator?
Although using a forex calculator is simple & straightforward, beginner traders who haven’t sifted deep into the Forex market may require an explanation of the computation data they receive from the forex trading calculator. The information mentioned here will help you understand and analyze the data (spread, pips, margin, and swaps) received from the forex calculator, depending on the selected trading calculator.
- Server: The trading server used by the forex calculator. The account type must match the server.
- Point value: Point value is the minimum asset price change.
The following formula is utilized to determine point value according to an asset’s value:
<One Point Value> = <Contract> * (<Price> + <One Point>) – <Contract> * <Price>
- One point’s value is its cost in the currency mentioned.
- A contract is a contract size in the instrument-based currency.
- Price is the value of the currency pair.
- The pricing step is one point (one point).
3. Spread: In the forex trading calculator, It is the price difference between the ask and the bid.
4. Margin: Margin is financial collateral traders use to safeguard themselves against credit risk. The contract size and the selected leverage value determine the margin amount.
The formula used to calculate the margin is below:
<Margin> = <Contract Size> / <Leverage>
5. Contract Size is the number of transactions in the base currency of the selected trading instrument.
Explanation of the Terms used in the Forex Trading Calculator?
1. Profit & Loss
The position’s actual outcome after calculating with a forex calculator. While negative values indicate the trade going in loss, positive values indicate realized Profit.
2. Spread Cost
Spread cost is the sum of the costs a trader will pay the broker, and it is calculated using a forex trading calculator by multiplying the instrument applied by the volume of trade.
3. Swap Days
It refers to the number of days when the position is open between swaps. Swaps, or daily overnight interest fees, are charged on every available part a day and plus.
3. Buy Swaps
In the forex calculator, it means Interest earned due to maintaining a Buy position available during specified days.
4. Selling Swaps
The interest resulting from holding a selling position available during the specified number of days.
5. Contract Size
In the trading calculator, standard lot sizes differ between instruments. Shares are generally traded in 1000 units, and FX pairs in 100,000 units. The remaining instrument range from fractions of Bitcoin to ounces of gold.
6. Stop Order profit & loss
In the forex calculator, it refers to Similar to Profit & Loss, but with a stop order adjustment.
7. Limit Order profit & loss
The same as Profit & Loss, with a predefined limit order adjustment.
8. Exposure symbol A
Exposure symbol A indicates the instrument you buy or sell.
9. Exposure Symbol B
In the forex calculator, the amount of currency is used to buy or sell the instrument.
The bid refers to the price that a trader set to sell an asset & a broker buys it and you can calculate it simply with a forex calculator.
Ask refers to the price that a trader set to buy an asset & a broker sells it.
12. Instrument Spread
In the forex calculator, the instrument spread is a typical Bid/Ask spread for this instrument.
Leverage is the proportion of a position’s notional value to the margin required to open it. (e.g., leverage 1:500 means that EUR 100,000 contract requires as low as 200 EUR margin). With the forex calculator, you can adjust your leverage for forex trading. However, the leverage for index CFDs is fixed and cannot be altered. It’s very easy to determine using a forex calculator.
14. Pip Value
Pip value is the most common currency increase and stands for % in points. One pip represents a price increment of 0.00010 for foreign exchange (Forex) instruments quoted to the fifth decimal place (for example, GBPUSD -1.32451); for foreign exchange (for example, USDJPY -101.522) instruments mentioned at 3rd place after the decimal point, one pip represents a price increment of 0.010.
An Index Point, another name for a price increment of 1.0 for indices, is equal to 1 pip. Tick Size is equivalent to 1 pip for other instruments. You can get the pip value using a forex calculator in a single click.
A standard volume phrase used in the forex trading industry (traders talk about several “lots” in Forex and usually several “contracts” with CFDs).
- One standard lot, or 100,000 units of the base currency, is equal to 1.00.
- One mini lot, or 10,000 units of the base money, is equal to 0.10.
- One micro lot, or one thousand units of the primary currency, equals 0.001.
Forex Trading Calculator – FAQ
What makes a trading calculator necessary?
Ans. A trading calculator is not necessary. You can perform this whenever you want if it is possible to manually calculate the open positions and the appropriate trading levels. In contrast, a trading calculator will help you save a lot of time because it instantly calculates margins, profits, losses, etc. Using a forex calculator to analyze your trade, you can utilize the time you save. Therefore, a trading calculator will be much more beneficial.
How can we calculate profits from the forex calculator?
Ans. During the open trade, There will be Profit or loss, representing the trade’s current market value. This Profit or loss comes along if you decide to close the deal at any point. To determine the matter, you earn “x” Profit. However, you require a forex calculator.
What does the margin in the forex calculator mean?
Ans. Borrowing money from the broker to open a more prominent position than you could with your fund or capital is known as margin, sometimes known as buying on margin. In other words, you don’t pay the entire cost of the traded asset. Instead, you need to contribute a portion of the position referred to as margin-and the broker lends you the remaining funds. The trading calculator determines the required margin for each of your trades.
In addition, the amount of capital required to establish a position can be calculated, allowing you to create a trading strategy that works.
Can I determine the risk associated with each trade using the trading calculator?
Ans. The trading calculator can produce several data points that will tell you your risk in each trade, even though it cannot provide you with an objective risk assessment. For any business, you can use the trading calculator to estimate your position size and your risk/reward ratio. Finding out the risk you are taking on with a particular trade is made much easier with the help of this information.
Additionally, you can determine the value of each pip in your transaction, which is crucial to understanding your prospective profits and losses, using a forex calculator.
What are the advantages of forex leverage?
Ans. The most obvious advantage of using leverage in trading is to improve capital efficiency and obtain substantial potential Profit. But there are further advantages as well:
- First, with leverage, you can profit from even slight price swings.
- Second, you can start trading with little starting capital by using leverage.
- Third, since leverage is a loan without interest, you don’t incur additional costs when you borrow money.
What benefits does a trading calculator offer?
Ans. You can use the forex Calculator to guide your trading selections before opening positions for the selected instruments. The Forex calculator is crucial since changing the trading parameters can significantly impact margin, swap long or short, and spreads, which are calculated in pip units.
As a result, all traders should use the Forex calculator to calculate their trades in advance and select the best trading parameters.