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Trading rules2019-06-30T09:18:08+00:00

Trading Examples for Forex

The MetaTrader 4 trading software which is used at Icm Capital includes a full back office function that make it easy for the trader to realize the value of open positions as well as the profit and loss of closed trades. However, it is important that traders understand how a trade works and how to calculate profits and losses manually.

The Foreign Exchange Market (FX) is the arena in which one nation’s currency is exchanged for that of another at a mutually agreed rate. There are over 150 currency pairs that can be traded but the most liquid with the highest turn-over are the “majors”.

                             MAJOR CURRENCY PAIRS

EUR/USD (Euro vs. US Dollar)
GBP/USD        (UK Pound vs. US Dollar)
USD/JPY             (US Dollar vs. Japanese Yen)
USD/CHF          (US Dollar vs. Swiss Franc)
USD/CAD                (US Dollar vs. Canadian Dollar)
AUD/USD                (Australian Dollar vs. US Dollar)

Primary (base) vs. Secondary Currencies

The primary currency, or the base currency, is the reference that defines the contract size. The profit and loss calculation however is always on the secondary currency. All currencies are traded in pairs, with the ‘base’ currency being the first currency of the pair and the ‘quote’ or ‘term’ currency being the second currency in the pair.

Profit and Loss Calculation Examples

Buy 5 EUR/USD at 1.3450 | Sell 5 EUR/USD at 1.3490

1.3450 (open price) x 5 (lots traded) x 100,000 (contract size) = 672,500
1.3490 (close price) x 5 (lots traded) x 100,000 (contract size) = 674,500
$ 2,000 (Profit)

Buy 5 EUR/USD at 1.3156 | Sell 5 EUR/USD at 1.3124

1.3156 (open price) x 5 (lots traded) x 100,000 (contract size) = 657,800
1.3124 (close price) x 5 (lots traded) x 100,000 (contract size) = 656,200
$ 1,600 (Loss)

Sell 3 USD/CHF at 0.8982 | Buy 3 USD/CHF at 0.8924

0.8982 (open price) x 3 (lots traded) x 100,000 (contract size) = 269,460
0.8924 (close price) x 3 (lots traded) x 100,000 (contract size) = 267,720
CHF 1,740 (Profit)

Sell 3 USD/CHF at 0.9141 | Buy 3 USD/CHF at 0.9191

0.9141 (open price) x 3 (lots traded) x 100,000 (contract size) = 274,230
0.9191 (close price) x 3 (lots traded) x 100,000 (contract size) = 275,730
CHF 1,500 (Loss)

In order to obtain USD value, the CHF Profit amount must be divided by the Closed Price CHF 1,740 ÷ 0.8924 (closed price) = $1,949.79.