Among the various tools for successful Forex trading, the Trader Calculator is one of the most important. Regardless of whether a novice or an experienced trader will use it, FOREX Calculator allows for solving several problems and questions about the appropriateness of opening a particular trading position. This tool was created to assess the profitability of a trading position, possible risks and margin requirements for the chosen asset. These parameters are important for compliance with money management rules for the trading account. In addition, factors such as leverage, swap, spread and other commissions can lead to a significant change in potential profit from a trading position. Therefore, Forex traders should pre-calculate the possible outcome and choose the optimal trading volume in order to fulfill the requirements for an acceptable profit/loss ratio.
How to use a Trader Calculator?
Before choosing a trading position, traders should decide on the key parameters of their trading account. The most important parameter is leverage, as it affects margin requirements. In other words, depending on the leverage, a trader can choose a reasonable trading volume. The rules for managing funds indicate a certain maximum value of simultaneously open positions, as well as the minimum acceptable value of free margin on a trading account.
The currency of the trading account is also important, since when trading in currency pairs, for example, the Forex Calculator will convert profit or loss into this currency, which carries additional fees.
Other data, such as the spread (the difference between the buy and sell price of the asset) and the swap (commission for rolling the position overnight), are automatically determined by Online Trader Calculator depending on the Specifications of the contracts and Trading conditions.
What data needs to be entered into the Trader Calculator?
Now you need to select an asset to calculate the profitability of the position. This can be a currency pair, commodity, single company shares, stock indexes or cryptocurrencies.
The trader also independently enters into the Forex Calculator the estimated prices for a potential transaction - the opening (entry) price and the closing (exit) price, and also choose the direction of the trade - buy or sell. Also, you have to enter the volume of the trading position in standard lots. More detailed information on the standard lot volumes for each trading instrument can also be found in the Contract Specifications.
What is the result?
- The cost of one pip shown in the currency of the account - it depends on the volume of the trading position and affects the total profitability;
- Minimum free margin required to open a position - affects risk management decisions;
- Spread and swap cost - the final commission depends on the period in which it is planned to close the position. The swap can be positive for the trader, while the spread can vary depending on market conditions.
- Total potential profit/loss in account currency and pips.
The Trader Calculator is one of the most important tools for preliminary calculation of the potential profit of a trading position in the Forex market. Besides, the use of the calculator allows you to evaluate the transaction in terms of risk management rules, as well as determine the trading volume for this position.