Are you winning? Calculation of exchange gains and losses

Are you winning? Calculation of exchange gains and losses

When trading currency to deal with much smaller divisions than when dealing with real money. For example, the name of the smallest U.S. currency penny ($ 0.01), but the foreign exchange market can be traded up $ 0.0001. The smallest division that currency can be traded is known as a pip. A PIP is a short price interest point, this is sometimes referred to as points. Currencies are traded in very large and even very small change in value can create significant profit or loss. If you are trading $ 100,000 U.S. dollars a PIP is worth $ 10 and change of 60 pips or six tenths of one cent will generate a profit or a loss of $ 600 depending on the direction of movement.

When trading currencies very different sizes are common, but the 100,000 units is considered a standard lot. One unit is what ever name it as currency when trading a unit of Japanese currency is yen. Some trades are done in many of 10,000 of these are commonly called mini lot. Although many different sizes as the majority of the crafts include standard lot of 100,000 units.

The size of the PIP is based on the currency type, different types of currencies have different PIP sizes. For example, the yen is 00:01 PIP where the U.S. dollar at 0.0001 has PIP. The type of currency, and the size of the lot determines the actual value of the PIP. Using the U.S. dollar as a currency quote (second currency) such as CAD / USD then PIP is always equal to $ 10 for standard lot and $ 1 mini lot. For other currencies it is easiest to use PIP value calculator to determine PIP value.

In the foreign exchange market there are different types available for the purpose of making trades. You need to have a solid working knowledge of various kinds in order to be a successful Forex trader.

Market Order - This is just one goal in buying or selling at the current market price. Market orders can be used to enter or exit a position. Market orders can be dangerous in times of high market volatility. The price can change significantly between the time you enter your order and time when it is actually saved or executed. The amount the market changes between the time order is placed and when running is known as cancellation. Depending on market conditions decay may result in profit or loss over a few pips.

Limit Order - This is in order to buy or sell at a price. They are used to help you control your trades without having to constantly monitor the market. If you sell a restriction in place for a price higher than the current rate your order will be executed once the market rate rises to match your border. If you buy a place in order to purchase currency under the current market price of your order will be made to the current rate drops to fit your border.

Stop Work - They are used to limit your losses if the market moves in the opposite direction from what was expected. This will cause your currency to be sold below market price or purchased over the current price. Stop Loss is executed when the market turns threshold set by the merchant, when placing an order.

To be successful on the Forex market is essential to learn to figure out the profit and loss and use of different types of order to the limits.


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