Contract size that is used in lots, namely:
- Standard lot ($ 100,000)
- Mini lot ($ 10,000)
- Micro lots ($ 1,000)
Direct Rates for Pair
Direct exchange pair is the pair with the USD as a suffix (GBP / USD, EUR / USD, AUD / USD, and NZD / USD), the way the calculation,
Profit / loss = (Selling Price - Buying Price) x contract size x lot
example:
Buy 4 standard lots of EUR / USD 1.2500 and Sell 4 standard lots of EUR / USD 1.2570
Profit = (1.2570 - 1.2500) x 100,000 x 4
Profit = $ 2,800
Sell 1 standard lot of GBP / USD 2.0010, Buy 1 standard lot of GBP / USD 2.0000
Profit = (1.2010 - 1.2000) x 100,000 x 1
Profit = $ 100
There is a simple calculation for the pair ending in USD are:
gains 1 point for 1 standard lot (100,000) is $ 10.
gain 1 point to 1 mini lot (10,000) is $ 1
gains 1 point for 1 micro lot (1,000) is $ 0.1
Indirect Rates for Pair
Indirect exchange pair is the pair with the USD as a prefix (USD / JPY, USD / CHF, and USD / CAD), how to calculate profit / loss are as follows:
Profit / loss = (Selling Price - Buying Price) / Price Liquidation x contract size x lot
example:
Buy 1 standard lot of USD / JPY 110.00
Sell one standard lot of USD / JPY 110.05
Profit = (110.05 - 110.00) / 110.05 x 100.000 x 1 = $ 45.43
For Cross Currency Converter
Pair that do not involve USD (GBP / JPY, EUR / JPY, AUD / JPY, EUR / GBP and GBP / CHF) to calculate the profit / loss are as follows:
Profit = (Selling Price - Buying Price) x Rate Base Currency / Rate Pair x contract size x lot
example:
Sell 1 standard lot EUR / USD at 0.6760 price
(EUR / USD is the base currency of EUR / GBP, as the front of the EUR / USD is the Base Currency)
Buy 1 standard lot EUR / USD at 0.6750 price Rate EUR / USD: 1.1840
Profit = (0.6760 - 0.6750) x 1.1840 / 0.6750 x 100,000
Profit = $ 175.4
Margin and Leverage
The term margin leverage in forex margin trading means that if you want to trade for $ 10,000, you do not need to provide $ 10,000 but $ 100 is enough to provide meaningful leverage of 1: 100. As a guarantee fund to your broker. This leverage ratio varied typically in 1:50, 1: 100 and 1: 200
So like you have $ 1000 cash in the brokerage that has Leverage 1: 100. This means that you can trade with amount up to approximately $ 100,000 (or nearly 100 x folding your capital). It also means that the contract size of $ 100,000.
The advantage of the leverage is with a smaller capital you can trade with a contract size / lot the same as if you did not use leverage. Or we can say, with equal capital, you can use the contract size greater than did not use leverage. So with the same capital, you have the chance to get profit per pip greater
