Profit Loss Calculation
There are three groups of currency pairs:
Direct rates: currency pairs at which USD is the counter currency (USD is located at the right side of currency pair), example: EUR/USD, GBP/USD, AUD/USD, etc.
Indirect rates: currency pairs at which USD is the base currency (USD is located at the left side of currency pair), example: USD/CAD, USD/JPY, USD/CHF, etc.
Cross rates: currency pairs which do not involve USD, example: EUR/JPY, AUD/CAD, GBP,CHF, etc.
Calculation of Profit (or Loss) of Direct rates
|0.0001 x contract size x lot = Pip value|
|0.0001 x 100,000 x 1 = Pip Value = $10/pip|
|If you buy EUR/USD 1 Lot at 1.12518, and close with Sell price at 1.12568, you earned $50.|
|1.12568 – 1.12518 = 0.0005(0) PIP = 5 PIP and $10/pip = $50|
Calculation of Profit (or Loss) of Indirect rates
|(0.0001 / current price) x contract size x lot = Pip Value|
|Let’s take USD/CAD at a rate 1.23133 for 100,000 (1 Lot) order as an example:|
|(0.0001 / 1.23133) x 100,000 x 1 = Pip Value = $8.12|
|If you buy USD/CAD 1 Lot at 1.23133, and close with sell price at 1.23233, the price moved 10 pips in your favor, you earner $81.2.|