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The calculation of Forex profit and loss in currency trading is essential
Retail transactions in forex are closed by entering into an equal but opposite transaction with the dealer. For example, if you bought Euros with U.S. dollars, you would close out the deal by selling Euros for U.S. dollars. This is referred to as the offsetting or liquidating transaction.
Most retail forex transactions have a settlement date – date when the said currencies are due to be delivered. If you want to keep your position open even after the settlement date, the position must be rolled over to the next settlement date.
When you close out a trade, profits and losses can be calculated as follows –
Price when selling the base currency minus price when buying the base currency * transaction size = profit or loss.
If you buy Euros (EUR/USD) at 1.4707 and sell Euros at 1.4717 and the transaction size is 100,000 Euros, you will have a $100 profit.CALCULATION of Forex profits / losses is a vital area of Forex trading systems as it indicates the current state of your account.
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