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What are the different types of forex calculators?

We’ve seen a huge rise in the number of part-time traders active in the forex market of late, which has caused a dramatic increase in daily trading volumes across the globe.

More specifically, the total amount traded daily on the global forex market was recorded at $5.1 trillion in 2016, with this number having increased to a whopping $6.6 trillion by the end of 2020.

One reason for this is the rise of multi-faceted, online trading platforms, such as MetaTrader 5, which offer users access to a wide range of indicators and analytical tools. These include a diverse selection of calendars, including the following types:

#1. Pip Calculators

Regardless of whether you’re a day trader or an investor who takes longer-term positions through swing trading, it’s important that you understand the concept of pip value.

A pip may also be referred to as a price interest point, and this measures each currency pair’s rate of fluctuation to four decimal places (0.0001). The only exception to this rule occurs in pairings that feature the Japanese yen, which are priced to two decimal places (0.01).

In instances where the second currency in a pairing (the quote currency) is the same as the currency that defines your account, pip values are completely standardised.

More specifically, a micro lot (1,000 units) represents 0.10 USD per pip movement, while a mini lot (10,000 units) equals 1.00 USD per pip.

Finally, a standard lot (100,000 units) is equivalent to 10.00 USD per pip, so there are significant variances that need to be accounted for by traders.

Fortunately, calculating pip value is relatively straightforward with a user-friendly forex calculator, which can be found through most brokerage sites available online. In most cases, you simply have to confirm your account currency before entering the trade size and your chosen currency pair, at which point the tool will automatically calculate the pip value on your behalf.

#2. Margin Calculator

Margin and leverage are two interconnected concepts that are integral to the forex market, although it’s fair to say that they’re often misunderstood and mistakenly used interchangeably.

In simple terms, margin refers to the deposit required for a forex broker to initiate trade, while leverage describes the multiple of exposure to your account equity.

It’s not uncommon for reputable brokers to offer leverage at a ratio of up to 200:1, so your margin will have a direct impact on the size of individual trading positions and how much capital each one controls.

This can be a delicate balance to strike, as while highly leveraged positions can deliver significant returns, they can also incur disproportionate losses that may be difficult to cope with.

With these points in mind, it’s important that you calculate and utilise margin carefully, and a so-called “margin calculator” can help in this respect.

Once again, most forex brokers offer this type of calculator to traders, in which you’re required to enter your chosen account currency, the pair traded, your desired account leverage and the overall trade size.

The calculator will then display the exact margin that’s required to trade the position in question, with this information presented in real-time and the relevant account currency.

#3. Profit / Loss Calculator

We’ll close with the profit/loss calculator, which is incredibly straightforward and can highlight the underlying risk-reward ratio associated with each individual trade.

As the name suggests, this calculator works out the profit and loss in a specific trade, while it requires the input of trade size, relevant open and closing prices, swap long and short values and the period of time that the position was open.

Depending on price movement and action, this tool will immediately calculate the profit or loss incurred from any one position, with this information helping you to understand your success (or failure) as a trader and accurately estimate your overall financial performance.

By recording the profit and loss information associated with each individual trade, you can also create a log of your performance and create a highly informative trading journal over time.

 

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