# Profit and loss in trading currencies

We all trade for profit, and profit way is known:

Which is to buy at a price and sell at a higher price in the bullish market.

Or sell at a price and buy at a lower price in the falling market.

In either case, the selling price must be higher than the purchase price.

But the wind may be carried out by what the ships do not desire .. !!

You might expect a currency to go up and buy it, but you may find that the price of the currency has fallen against your expectation, and this will invite you to sell at a lower price than the purchase price and you will suffer loss.

This happens in any area of trade anyway …

It is important for you, of course, to know how to calculate the result of a transaction you made on a currency .. Have you made a profit or loss.

To know profit or loss on any currency, use the following equation:

Profit or loss = number of contracts (lot) * point difference * point value.

If the output was positive, it was a profit, but the negative output was a loss.

Let’s take assumed examples that we are dealing with a company whose point value for each currency is equal to the values we mentioned on the previous page.

Example 1

Suppose you bought 1 lot of pound at GBP / USD = 1.4926

Then sold it at GBP / USD = 1.5085

How much profit or loss have you made?

Answer:

We first calculate the difference of points from the equation for the pound and the euro.

Points difference = (selling price – purchase price) * 10000

= (1.5085 – 1.4926) * 10000 = 159

That is, we sold 159 points profit

Now we calculate the actual profit:

Profit or loss = number of contracts (lot) * point difference * point value.

= 1 * 159 * 10 = $ 1590 on the basis that the value of one point per pound = $ 10

We have made a profit = $ 1590

Example 2

Suppose you bought 2 Euro Lot at EUR / USD = .9762

And his price at EUR / USD = .9793

Calculate how much profit or loss you have?

Answer:

We first calculate the difference of points from the equation for the pound and the euro.

Points difference = (selling price – purchase price) * 10000

= (9793. – 9762.) * 10000 = 31

We sold 31 points profit.

We now calculate how much we actually won

Profit or loss = number of contracts (lot) * point difference * point value.

= 2 * 31 * 10 = $ 620 based on the value of one point per euro = $ 10

We won in this deal $ 620

Example 3

Let’s say you bought 3 lots of yen at USD / JPY = 123.08

And his price at USD / JPY = 123.62

Calculate your profit or loss

Answer:

We first calculate the difference of points from the formula of the yen.

Points difference = ((selling price – purchase price) * 100) * -1

= (123.62 – 123.08) * 100) * -1 = -54 points loss

Because we bought the yen at a price and at a lower price.

Now we calculate the actual loss

Profit or loss = number of contracts (lot) * point difference * point value.

= 3 * – 54 * 8 = – $ 1296 on the basis that the price per point for yen = $ 8

We lost $ 1296 in this transaction.

Example 4

Let’s say you sold 4 lot of the franc at USD / CHF = 1.4356

Then I bought it at USD / CHF = 1.4500

Calculate your profit or loss

Answer:

We first calculate the difference of points from the franc equation

Difference Points = ((Selling Price – Purchase Price) * 10000) * -1

= ((1.4356 – 1.4500) * 10000) * -1 = 144 points profit

Because we sold the franc at a price higher than the purchase price, the franc is an indirect currency.

Now we calculate the actual profit

Profit or loss = number of contracts (lot) * point difference * point value.

= 4 * 144 * 6 = $ 3456

We won from our sale for 4 lott of LFR and then bought it at a lower price of $ 3456

Now you can know the profit or loss of a deal as long as you know the value of the point for each currency and the size of the contract you will trade, the information you will get from the brokerage firm you choose to work with, although the size of the points mentioned in the previous examples and the volume of contracts is the most common size between Brokerage companies in the currency market now.

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