Forex trading comes with a challenge with the beneficial chance for experienced traders. But, it can also be a high-risk stock market, so the investors should consistently stay responsive to their buy and sell positions. The achievements and losses of a forex trader are calculated concerning the losses as well as profits ( P&L ) on his or her positions. It is necessary for forex traders to keep a strong awareness of their Profit & Loss, as it straightly impacts the margin amounts the trading account have. When the market move against you, your current margin amounts decreases, therefore you will get a smaller amount of money accessible for buying and selling.
The exact measurement of loss or profit in Forex Trading is pretty simple. To determine the Profit &Loss of your open trade position, what it takes, is the position size as well as the number of pips the market price was moved. The exact loss and profit is going to be equivalent to the position size multiplied (x) by the pip movement.
Calculate P&L on Long and Short Position:
To Calculate the Profit and Loss in Forex Trading, You must have to know either it is a Long Position or a Short Position.
In case there is a long position you have opened, whenever the market prices get higher, it is going to be the profit, but if the market prices were going down it will likely be a loss. In a simple example, when the trading position is lengthy GBP/USD, it will be the US dollars of 150 profit. On the other hand, in case the market prices have going down from GBP/USD 1.6240 to 1.6220, it would be the US dollar of 200 loss ( 100,000 x -0.0020 ).
In the Short position of Forex Trading:, when the market prices get higher, it would be a loss, but when the market prices go down it would be the profit. In a similar example, when we have a shorter GBP/USD position along with the market prices moved up by 15 pips, it will be a losing of $150. When the market prices moved down by 20 pips, it will be a $200 profit.
I think I have cleared you everything about how to calculate profit and loss in forex trading. If you still have a problem, then please don’t hesitate to ask us on a comment section below.