Forex, of course, is the best trade you can ever enter to make money-just buying and selling your foreign currencies. However, trying to determine how much money you are making-either in profit or loss-from every single trade can be quite frustrating. Whether you just got started with it or you already have experience in the trading business, knowing your profit and loss really matters. The more you understand these factors, the better choices you will make in markets.
One tool that makes this process much easier is a Forex trading profit calculator. This useful calculator helps you to get a quick idea of just how much profit or loss you might receive from a trade. In the next blog, let’s discuss how it works, why it’s so very important, and how you may use it to fine-tune your forex trading.
Why Calculating Profit in Forex Trading is Important
In any trade involving the forex market, your primary motivation for entering it is to make money in buying and selling currencies. Each trade that you make will either increase your profit or lower your cash balance if the market moves against you. One of the ways for trading successfully is to understand money coming into your account or leaving your account.
If you do not track what is being gained or lost, then you might make critical mistakes in dealing with the forex trade. For instance, you may risk too much money on one single trade because of the absence of proper tracking, or even lose an opportunity as you wouldn’t know what sum of money was at stake.
Knowing your profit helps you make a better choice. You can amend your strategy if you see how much you are making or losing. This help comes in a forex trading profit calculator. It enables you to grasp your profits and losses much more quickly, thus focusing more on your trading strategy than doing complicated math.
What is a Forex Trading Profit Calculator?
A profit calculator for trading in foreign currencies will give you the approximate profit that one might make or lose in any trade. It takes into account the currency one is trading, the size traded, and even the quote from the exchange rate. Equipped with this information, the calculator will give an estimate of how much money you could make or lose.
Example: Let’s say you trade the EUR/USD pair and you go long on one standard lot, or 100,000 units of the base currency. Then, a calculator will immediately calculate how your potential profit or loss would be following the movement of price. Therefore, it makes it super easy and gives you a very good idea of what to expect even before starting your trading session.
How Does a Forex Trading Profit Calculator Work?
Using a forex trading profit calculator is as easy as ABC. Here is step by step.
Select Your Currency Pair: It can be EUR/USD or maybe GBP/JPY.
Select Your Trade Size: Determine how big you want your trade to be. A trade can be made to be executed in lot sizes or a combination of it. The three lot sizes are;
Micro Lot: 1,000 units
Mini Lot: 10,000 units
Standard Lot: 100,000 units
Input Opening Price: It is the price at which you start trading.
Input Closing Price: It is the price where you are going to close the trade or the prevailing market price.
Select Direction: This is what let’s the calculator know if you are long the currency pair and buying or short the currency pair and selling.
Fill up this information, and the forex trading profit calculator will give you your anticipated profit or loss. This way, you can prepare your trades and know when to enter the market.
Why You Should Use a Forex Trading Profit Calculator
A forex trading profit calculator has many benefits to anyone who uses it. Here are some of the reasons why it is a tool that you should never miss if you are a trader:
- Precise Calculation of Profits
A profit calculator in forex will enable you to get very accurate calculations of your profits and losses. You’d be able to make confident plans of your trades; you’d avoid costly mistakes. You’d know right down to the penny how much you stand to gain or lose on a particular trade.
- Better Risk Management
Proper risk management is required for successful trading. A forex profit calculator will help identify risks every time you make a trade, giving you the right size to use in reaching both your stop-loss and take-profit points, protecting the capital and thus controlling the losses.
- Saves Time
Manually calculating your profit and loss is time-consuming, while a profit calculator in fx trading will give you answers in the shortest time possible. With this, you will have enough time to focus on what matters most while trading, such as analyzing the market and developing your strategy.
- Usable
The best thing about a forex trading profit calculator is that it’s straightforward. You don’t need to be mathematically gifted or trained for the job, either. All you have to do is fill in some basic information about your trade and then leave the rest to the calculator. This proves useful for both newbies and pro traders.
- Free and accessible
We have a free of cost forex trading profit calculator on our website and mobile application at Forex Signals. With any additional cost you can see the profit calculator wherever you need. Hence, you can use the profit calculator on your forex trading even sitting at home or travelling.
Know the Lot Sizes and Their Impact on Your Profit
A profit calculator in a forex trade is used appropriately when you know how lot sizes work for your profit or loss. Forex trades execute in lots; these represent the size of the trade. The bigger the lot size, the more money you can make or lose per pip-that is, per small change in price.
Here are three types of lot sizes which are mainly categorized into three:
Micro Lot: 1,000 units Example: Trading EUR/USD in 1,000 euros
Mini Lot: 10,000 units Example: Trading GBP/USD in 10,000 British pounds
Standard Lot: 100,000 units Example: Trading EUR/GBP in 100,000 euros
Knowing about the lot sizes will most definitely help you deal with risks better. The more pips are involved in the lot size, the more money you could gain or lose per pip. You will get to see how much each pip is worth with respect to what lot size you are choosing through a forex profit calculator, which, in turn, helps you make wiser decisions about the trades you are dealing with.
Example: Using a Forex Trading Profit Calculator
Now, let’s try to do an example using the profit calculator for Forex trading.
Imagine that you are in a UK and trade the EUR/USD. You had bought one mini lot of 10,000 euros at the quotation rate of 1.2000. Now you want to know how much you will make the profit if the price goes up by 50 pips.
Now, opening the forex trading profit calculator and entering the following details:
Currency Pair: EUR/USD
Lot size: 10,000 units (mini lot)
Open Price: 1.2000
Close Price: 1.2050
Direction: Buy (long)
On the calculator, you can see that a 50-pip move will bring in a profit of $50. That helps you to forecast your trade, set realistic expectations, and make conscious decisions when it is the right time to enter or exit the trade.
Free Trading Tools at Forex Signals
Along with the free forex trading profit calculator, Forex Signals offers a number of additional free tools to help enhance your trading abilities. Here is a quick overview of what we offer:
- Trading Room Access
Open our free trading room and connect with seasoned professional trading mentors and fellow traders. In this space, you will discover different strategies, ask questions, and learn tips on how to efficiently use tools like the forex trading profit calculator.
- Educational Resources
Forex trading is challenging for beginners. However, we offer free courses, from the beginner’s guide to getting started in forex trading up to implementing advanced strategies. These materials will lead you on how to apply what you learn into basic trade level and how to apply it with the forex trading profit calculator to bring better output.
- Mentorship by Experts
With over 60 years of aggregate experience in the forex market, our mentor team has been in all walks of life and is here to share their experience with you. Whether you need your trading strategy worked out or any tips on using a forex trading profit calculator, our mentors are ready to help you out.
Conclusion
Forex trading can be very rewarding when done with proper planning and correct calculations. A forex trading profit calculator will be an important tool that will help you know your profits and losses while helping in risk management and smarter trading decisions. This tool lets one trade with confidence and exactly know how much money one might gain or lose from a particular trade.
At Forex Signals, we’re here to make you successful. That’s why we provide you with a free forex trading profit calculator that is fused with other valuable tools and resources which can help you become a better trader. You can make your trading even better when you first begin trading or have a little experience with our tools.
So, what are you waiting for? Try our new forex trading profit calculator today to start deciding on the better trades.
