Calculating Profit and Loss in Forex Currency Trading
Forex currency market is not as volatile as stock markets. Online Currency trading market fluctuates mainly with global and regional changes such as natural calamities, leadership changes of nation etc. It is quite common that increasing or decreasing of value of one currency, such as US dollar or Euro, triggers a cycle of events affecting value of most other currencies.
In forex currency market, the profit or loss calculation involves a simple mathematical rule. According to this rule the increase or decrease, from the date of buying, in the exchange rate of the right side currency (BBB in AAA/BBB) determines the profit/loss. If BBB currency increases in value against AAA, then you will receive profit, if reverse loss. The magnitude of increase/decrease of BBB’s value is your magnitude of profit/loss.
Example : You are trading the currency pair USD/EUR. You bought 100,000 EUR at 0.7511. Now the price of EUR is 0.6511 and you want to sell them. According to the rule you will receive a profit of $10,000 [(0.7511-0.6511) x 100,000]. If the value decreased below 0.7511 you will have to suffer loss.
In forex currency market, the profit or loss calculation involves a simple mathematical rule. According to this rule the increase or decrease, from the date of buying, in the exchange rate of the right side currency (BBB in AAA/BBB) determines the profit/loss. If BBB currency increases in value against AAA, then you will receive profit, if reverse loss. The magnitude of increase/decrease of BBB’s value is your magnitude of profit/loss.
Example : You are trading the currency pair USD/EUR. You bought 100,000 EUR at 0.7511. Now the price of EUR is 0.6511 and you want to sell them. According to the rule you will receive a profit of $10,000 [(0.7511-0.6511) x 100,000]. If the value decreased below 0.7511 you will have to suffer loss.
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