There are a couple of calculations you might want to keep in mind as you learn about forex live trading. It is not enough to have strategies and tools available to you. Tools are wonderful, but they can also come with limits. You may be able to find a calculator that can convert profit, loss, and pip value for the G7 pairs, even some of the G20 currency pairs, but something like the DKK/ZAR is rarely found in the calculator because most brokers do not feel you would want to trade these pairs.
Trading Forex Live on DKK/ZAR
The DKK/ZAR is just one of many exotic currency pairs you might find through a forex broker. Not all brokers provide massive amounts of pairs, but there are a few like GFT.com that will offer over 100 different currency pairs and other trade options like ETFs. When you are trading on forex live rates it is always a good plan or strategy to have your entry and exit planned. It takes understanding the pip value for potential profit to determine where you need to set your stop loss orders. As you go through other forex lessons remember that tight stops can be just as dangerous to your position as not having one at all.
The calculations you will need for an example include the following:
· Pip value= tick size/ current rate, then multiplied by lot size
· To convert pip value to the quote currency take the pip value times the current rate
· Profit= lot size multiplied by current rate, then minus your open position value or you can take closing rate minus opening rate then multiply that number by the lot size
For this example, the DKK/ZAR will be a rate of 4.25, so 1 DKK is equal to 4.25 ZAR. The assumption will be a lot size of 100,000. In forex live you always have .0001 as the tick size because 1 pip is equal to .0001. When you take the above equations you will put .0001/4.25 x 100,000 to get the answer. In this instance it is 2.35 meaning for every pip movement you earn 2.35 DKK.
Forex Live Examples of Profit
Above you saw one way to calculate pip value and then determine the profit for the currency pair. Now this forex live detail will examine the profit without using the pip value. Instead you will take the open rate of 4.00 and see the rate went to 4.25 giving you 25 pips change. You convert this to the decimal of .25 to get 25,000 profit. Of course there is a further calculation you need to do since the profit is in the quote currency. You need to convert it to profit in DKK. This means you take 25,000 by the closing rate. You would take 25,000 divided by 4.25 to get a profit of 5882.35 DKK.
You can do further calculations to determine how much this translates into a major currency since most forex live accounts are in major currencies like AUD.