HOW TO CALCULATE PROFITS AND LOSSES OF FOREX TRADING

Trading in the Forex market is done by investors mainly in the hope of making a profit. Profits and losses are calculated over a length of time and if you have more transactions in which you have been successful than those in which you have failed

then you are deemed to be profitable. It is useful to know how to calculate profits and losses of Forex trading. There are two basic methods in which this can be done.

They are:

     1. When the quote currency is the US dollar, you are able to calculate profit or loss of the transaction in US dollars. This is done by multiplying the pips by 10 USD for a standard lot size of 100,000. In the case of a mini account the calculation will be by 1 USD.

Example: EURO/USD

EURO/USD    1.3444    1.3449

The pip value here is 5

Profit/loss in USD: 0.0005 x 100, 000 = 50 USD or 5 pips x 10 USD = 50 USD.

  

     2. Where the quote currency is not the USD, profits or losses are calculated by dividing the amount of pips by the exchange rate and then multiplying that by the size of the lot.

Example: USD/CHF

USD/CHF    1.2758      1.2773

Profit/loss = 1.2758 – 1.2773 = 0.0015 or 15 pips

Profit/loss in USD terms = 0.0015/1.2773 x100, 000=117.43 USD

Calculating in the Forex trades is two sided. You can calculate from the currency you bought or the one you sold as both these take place simultaneously in the same transaction. For the purposes you can always do it from the currency that you bought.

Another important factor that has to be taken into consideration is leverage. This can be anything from 50:1 and upwards according to the size of the account and the leverage offered by the Forex broker. Profits and losses are calculated in accordance with the leverage. The profits will be augmented by leverage and in the same way losses will also be bigger. This is the reason why losses are minimized by placing stop loss orders when trading Forex and especially when trading with leverage.

HOW TO USE FOREX AND OPTIONS ROBOTS

Forex and Options robots should be used as a back up or confirmation of a trader’s manual trading plan.

Introduction:

Forex and Options Robots are mechanized programs used equally by newbie and practiced foreign

exchange and binary options traders. There are many Forex and Options robots to select from on the market and it is imperative for a trader to decide on the right one to fit his needs. Using forex and options robots should augment a trader’s total profit and accelerate the execution of a traders trading plan.

How to Use a Forex Robot:

When choosing a Forex or an Options robot, make sure that it is one that can be installed easily particularly on a remote web server so that you can use your accounts wherever you are in the world. This is important because there will be times when you are away from home or your laptop and you need to check your trading account.

 Always remember that however efficient a Forex or Options robot is, the final decision on what it can and cannot do rests solely with you. The best way to use a Forex and Options robot is to keep it as back up or confirmation of your manual trading plan for a few months before you use it on a live account. When purchasing a Forex robot don’t rely on the track record which is displayed. These track records are not always constructed from live data but from simulated data so they invariable present an unrealistic picture. Checking the robot in real time will give you a much better picture of its capabilities.

You can and should use the robot to confirm your own decisions and also use it to analyse numbers. Although the final decision should always be yours you can use it to advise you when to trade in the market. There are times when the robot can be usefully used when you are away from your computer however you should be make sure that the trading algorithms are what you want so that when the robot is turned on you don’t lose any money.

The robot you choose should be compatible with both the currency pairs that you prefer to trade in as well as the broker whose trading platform you use. It is preferable that this is checked out before you purchase the robot.The robot you choose should permit you to change the trading settings whenever you need to. Although trading is easier when using a robot it is not infallible and you should not give it your complete trust. It is wise to make sure that the robot you buy comes with a money back guarantee in case it doesn’t work in the way that it should.

Finally don’t buy older robots as they won’t be programmed with the current economic conditions. Only purchase those robots which have been released in the past one or two years and would therefore have the latest economic conditions programmed into them. 

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SELECTED FOREX AND OPTIONS ROBOTS ON THE MARKET

Below is a list of typical Forex and Options Robots and trade signal tools and their respective download links that can greatly enhance your trading success and profit.

 BINARY OPTIONS TRADING SIGNALS LIVE

Binary options trading signals is the premier signal service for binary options as you watch a live trader with over 10 years of experience

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 MILLION DOLLAR PIPS

Million dollar pips is the first real million dollar forex robot, which uses a unique scalping strategy to bring in quick pips with literally less than 5 pip stop loss!

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 TRADE-MINER

Trade-miner, through artificial intelligence & brute force mathematics, identifies high probability trading opportunities in stocks, futures & forex.

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FOREX TRENDY

Never seen before, real solution forex traders want. The smart and easy to use software, helping forex traders increase their profitability with any system.

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FOREX MEGADROID

Forex Megadroid's Pipjet is the #1 forex robot in the world for 3 years now. Double your sales figures with pipjet, the new and very profitable forex robot.

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 FOREX MENTOR PRO

Is a New Forex Mentoring Service and Professional Forex Systems, Daily Video Updates And A Growing Education Area. Customers Buy Once And You Get Ongoing Monthly Payments With Almost None Existent Refund Rate.

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 FOREX INVEST BOT 

Forex Invest Bot is a real forex robot that is 100% automated and trades safely using advanced volatility strategy. No hedging, no grid, no martingale. It is based on a core that has survived every type of market condition.

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 WINNING TRADE SYSTEM:

A new trade system that gives you an edge in stocks and options trading for the DOW, NASDAQ, S&P 500, etc. Includes videos with step by step strategy to beat the market! You do not have to be an expert. It is well explained so you can make wise trades.

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 BINARY OPTIONS PRO SIGNALS

Binary options pro signals is the best way to trade markets! Customers love the product because of its ease of use. Profits can be made in as little as one hour. 

DOWNLOAD THE BINARY OPTIONS PRO SIGNALS HERE!

HANDLING A LIQUIDATING MARKET

A liquidating market is defined as a market that is experiencing a pattern of broad selling in the face of declining prices. It can take place in all kinds of market and is not just limited to the financial markets. Nevertheless, the issue of liquidating market is important for an online trader as it will affect his trading strategy. Lately, it is even more critically important as the recent financial meltdown that happened in the sub-prime mortgage market in the U.S. has caused the liquidating market to dominate the scene longer than usual.

Thus, in the face of this kind of volatile market that you might be facing, you need to be on your toes and be aware of exactly what kind of markets that you are trading in and adjust your trading strategy accordingly. Markets which are consolidating, ranging or trending all require different types of trading strategies to deal with them. Liquidating markets are especially difficult to deal with for day traders because the fluctuation of prices tends to move in ‘bursts’. One will see a sharp drop in prices when a large liquidating order comes into the market with limited follow through after that. Because a sharp drop in prices can trigger stops or break through an important technical level, these can and is likely to spark off another round of liquidation. When the above vicious cycle occurs, we often find false bottoms or tops.

Usually, the span of a liquidating market position is relatively short and stops will also get exhausted. The next phase of the market reaction after a liquidating run has flatten out is either to continue the trend as the next cycle or reverse the trend. On the other hand, the current market situation is far from ordinary. Since the beginning of 2008 and driven by a heighten level of risk aversion, the global financial market has been facing extreme volatility.

Just as when we thought the market is due for a correction and trend reversal, the liquidating market continues its vicious cycle. The unending waves of selling orders will put a strain for those traders who are used to trading in a typical market by looking for paltering bottoms or tops. The end result will cause everybody to be running for cover. Nevertheless, avoiding the temptation to go bottom fishing for profitable situations is not easy in a liquidating market. The illusion of the market bottoming out can really pull one into loss making spiral. This is where iron clad discipline in trading will pay off.

The herd like mentality that we all possess needs to be restrained. Financial experts have suggested the liquidating markets are driven by factors other than fundamental economic theories or technical analysis. Hence, relying on technical analysis for reliable forex signals can be extremely difficult for a liquidating market. Regardless, the best way to avoid getting sucked into a liquidating market is to have proper money management and discipline in controlling oneself from running after false bottoms or tops.

TRADING WITH LEVERAGE: HOW MUCH IS TOO MUCH?

Trading with leverage is a concept that can be seen in many markets. This takes a unique form when it

comes to the Forex market. The main reason for this is the way the market has evolved and how it has been required by the retail trading that started to proliferate since the advent of the Internet. Typically, the average price movement of a currency pair is extremely small. The change in prices are indicated by the fourth decimal place in a currency quote known as a pip and when calculated a hundred pips will equal one cent.

Historically, the Forex market was dominated by banks, financial institutions and governments with millions in investment. Although these big time players still operate in the market it has now become the retail traders’ monopoly due to easy access to trading currencies. However, the standard trading lot in the Forex market is $100,000. Since this is not the kind of money that most retail traders have at their disposal they turn to leverage.

Leverage offered generally depends on the Forex broker and the amount of the margin deposit made by the trader. The concept of leverage is to trade with borrowed money and this could be anywhere from 100:1 and go on upwards of 400:1 at times. If you make a margin deposit of $250 and are given leverage to the tune of 400:1 you will be able to trade with up to 400 times of your deposit which in this case is equal to $100,000 or one standard lot.

With leverage, you stand to gain profits that are calculated with leverage and this enables you to make substantial profits from successful trades. One drawback of the system is when you lose a trade that losses are also calculated according to the leverage that was extended to the trader. This means that you can make huge losses in the same way that large profits were possible.

Now the question arises how much leverage is too much? This is a vital point to ponder as you trade currencies in the Forex market. The Forex broker strives to ensure that you do not lose more money than you have in your account and will warn you by giving you a ‘margin call’. Whenever this situation arises the broker will ask you to increase your deposit so as to accommodate further losses if it occurs or to close the account altogether with immediate effect.  

So, as you can appreciate leverage can be loss making just as much as it is profit making. This is where you can use stop loss orders to make sure that you do not go beyond certain limits so that you can stay within the parameters set out.