A forex market is a wide global network of sellers and buyers actively involved in the sale and purchase of currency at an agreed price. The forex market does not have a centralized marketplace to carry out the acts of trading and therefore, it is also referred to as the over-the-counter type of market. The exchange of currency between people is carried out through computer networks.
With so many people actively involved in the sale and purchase of currency worldwide, the amount of capital involved has also increased to a large extent. And with the involvement of so much money in forex trading activities, the risks associated with it have also increased. Traders want to make sure that their investment will yield proper returns and they also want to assess the potential risks and losses involved with their money. All these needs have given a rise to the invention and adoption of forex trading calculators. There are a number of forex trading calculators available online like profit calculator forex P&L, pip calculator, margin calculator, position size calculator, and more. These trading calculators are powerful tools designed to assess the position size, probability of profits and losses, and other parameters that are important for traders.
What Do We Mean by a Forex Trading Calculator?
Forex trading calculators are computerized tools that are used to evaluate the possibility of profits and losses associated with trading transactions. A trader can easily perform calculations for various forms of currency pairings and commodities by using trading calculators. Forex trading calculators are equipped with technically advanced algorithms that enable the calculation for all types of forex transactions and provide accurate results within seconds.
Importance of a Forex Pip Calculator
Pip is an abbreviation for ‘point in percentage’. A pip forex calculator is a tool that calculates the smallest price movement or the exchange rate that takes place between a currency pair. A forex pip calculator is efficient in calculating the pip value for various currency pairs, commodities, and indices using account base currency, live market quotes and indices. For the majority of currencies, the pip value lies on the fourth decimal place, this is however an exception for the Japanese Yen as its pip value lies on the second decimal place. Pip calculators are a great innovation as they observe and calculate even the smallest changes taking place in the price movement of a currency pair.
Steps to Use a Forex Pip Calculator
Currency Pair: The first step to calculate the pip value is by choosing a currency pair that has a comparable value with each other. A currency pair consists of a base and a quote currency, for example, USD/CAD or AUD/USD.
Decimal Place: The value of a pip lies on the fourth decimal place of a currency for example 0.0001 this has an exception though, Japanese Yen has its decimal place at the second place and is quoted at 0.01.
Size of the Trade: As the size of the trade increases, the pip value also increases. The trade size is directly in proportion to the value of the pip.
Spreads: The value of the pip is directly proportional to the spreads in the value of the currency. Spreads help a trader to evaluate the trade cost by drawing the difference between the bid and ask price.
What Are the Benefits of a Forex Pip Calculator?
There are numerous benefits that a forex pip calculator provides:
- A pip forex calculator is a great tool for assessing the potential of profit and loss as it calculates even the smallest change in the price of the preferred currency pair.
- This calculator can be even used to determine the value of pip for another currency that is not native to the trader.
- A forex pip value calculator is a computerized tool therefore all the calculations performed by it will provide a trader with 100% accurate results with no possibility of error or bias.
- A forex pip calculator helps in saving a lot of time as it performs calculations within seconds and provides the most accurate computerized result.
Forex Margin Calculator
A forex margin calculator is a great tool that helps a trader to estimate the amount of margin he needs in his trading account in order to maintain and open a position. Or, it allows a trader to determine the capital he needs in the account to run a trading strategy smoothly. Margin calculators also play an essential role in assessing the level of margin and leverage required by the trader in order to open a buy or sell position. The margin calculator calculates the required margin based on the notional value along with the maximum amount of leverage offered by the company.
Advantages of Using a Forex Margin Calculator
A know-how of the forex margin calculator can help magnify profits to a large extent. There are several benefits of using a forex margin calculator:
- A margin calculator helps a trader estimate the amount of money required in order to open and maintain a buy-sell position and to run a trading activity smoothly.
- Forex margin calculators are powerful tools that enable a trader to determine the lot size along with the level of leverage required to maintain a trading position.
- Traders are able to see how their money grows and how it is exactly used to run a trading strategy with the help of a forex margin calculator and the transparency it provides.
- Less amount of personal capital is committed in margin trading, which helps a trader to put those extra funds towards other investment opportunities.
Forex Profit Calculator
A forex profit calculator or a profit and loss calculator is a potent trading tool designed to help traders evaluate the potential of profits and losses based on the outcome of trading activity. Profit and loss calculators are capable of predicting the outcome of trading activity before taking an action. Profits or losses are calculated in monetary value using the number of lots traded, market data, and the direction of the trade. The forex profit calculator is capable of calculating profits and losses for all currency pairings including cross-currency pairs.
Steps to Using a Forex Profit Calculator
- Currency Pair: Choose the currency pair that needs to be calculated and has a comparable value against each other for example USD/CAD, USD/JPY, or EUR/USD, etc.
- Open Price: The price or cost of the currency pair at the time of initial purchase is called the open price.
- Choose the Volume of Trade: Trade volume refers to the number of lots or securities sold during a trading session.
- Closing Price: A closing price refers to the final price at which a currency was traded during the end of a session of trading on a particular trading day.
- Operation: The position of the asset that is owned by a trader with the intent of buy or selling is referred to as an operation.
Advantages of Using a Forex Profit Calculator
There are numerous benefits associated with the use of a forex profit calculator:
- Forex profit calculators perform all the calculations by following computerized mathematical algorithms therefore, the results generated are 100% accurate.
- Profit calculators help in saving a lot of time for the trader as well, as the calculations performed give results within milliseconds.
- A novice trader can largely benefit by using a profit and loss calculator as they lack experience and deep knowledge of the forex market. A profit calculator helps to assess the probability of profits and losses and promotes informed decision-making.
- The format of a forex profit calculator is very easy to understand and is also supported on devices with different configurations.
Bottom Line
Forex market is growing at a rapid pace with more and more traders showing willingness to trade currencies. To facilitate easy and efficient trading, various trading calculators have also been introduced through which traders can easily calculate profit and loss, margin requirements, pip value, position size and more. Trading calculators provide clarity of decision before implementation, hence making it a useful tool for traders, especially new ones to reap maximum benefits out of trades.
