Forex Trading Examples

Please be advised:

  • 1 lot equals 100,000 of the first named currency on the MetaTrader 4 platform
  • Pip values are calculated in the second named currency
  • Profit is calculated by (sell price – buy price) x contract size
  • Profit is converted to the account currency by the price quoted in the currency/exchange rate

 

Example 1

A client buys 1 lot of AUD / USD @ 0.9169
The position is closed @ 0.9179 Profit / Loss is calculated as 0.9179 - 0.9169 x 100,000 = US$100
The profit / loss is converted to the account currency by the following calculation: 100 / 0.9179 = $108.94

 

Example 2

A client sells 0.5 lots of EUR / GBP @ 0.8333
The position is closed @ 0.8403. Profit / Loss is calculated as 0.8333 - 0.8403 x 50,000 = -GBP£350
The profit / loss is converted to the account currency by the following calculation: 350 / 0.5923 = -$590.52

 

Example 3

A client buys 0.5 lots of AUD / JPY @ 77.35 The position is closed @ 78.20 Profit / Loss is calculated as 78.20 – 77.35 x 50,000 = JPY¥42,500
The profit / loss is converted to the account currency by the following calculation: 42,500 / 78.20 = $543.48

To see a visual infographic example of How Forex Trading works, please click here.

Now that you have seen how trades work on a basic level, it’s now time to add a more technical aspect to your trading – charts. Forex charting will help you analyse and determine which way the currencies will move or have moved.