1. What is Forex P/L Calculation?

The Forex Profit/Loss calculation determines the monetary gain or loss from a currency trade based on price movement and position size. It's essential for risk management and trade evaluation in foreign exchange markets.

2. How Does the Calculator Work?

The calculator uses the Forex P/L formula:

Where:

• \( Exit\ Price \) — Price when closing the position
• \( Entry\ Price \) — Price when opening the position
• \( Lots \) — Trade size in standard lots (1 lot = 100,000 units)

Explanation: The formula calculates the profit or loss in the quote currency by multiplying the price difference by the position size (10000 per 0.1 lot).

3. Importance of P/L Calculation

Details: Accurate P/L calculation is crucial for evaluating trade performance, managing risk, and making informed trading decisions in the forex market.

4. Using the Calculator

Tips: Enter entry and exit prices with 5 decimal places (standard forex pricing), and lot size (1 = standard lot, 0.1 = mini lot). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why multiply by 10000?
A: For majors, 1 pip = 0.0001, so 10000 converts pips to currency value per standard lot (100,000 units).

Q2: Does this work for all currency pairs?
A: This formula works for majors quoted with 4 decimal places. For JPY pairs (2 decimal places), use 100 instead of 10000.

Q3: What's the difference between pips and profit?
A: Pips measure price movement, while profit converts that movement to monetary value based on position size.

Q4: How does leverage affect P/L?
A: Leverage doesn't directly affect P/L calculation but determines the margin required to open the position.

Q5: Can I use this for other instruments?
A: This specific formula is for forex. Other markets like stocks or futures have different calculation methods.