What is a Forex calculator?
Many beginners continually question how much money they can earn through Forex trading. For all interested people, this is a really good question but the only eloquent response is the one you find out yourself. Well, you need to start off and it depends on the number of pips that you persistently get in your Forex account.
Let’s begin by analyzing some possible numbers. Another important aspect is how much capital do you require initially? Interestingly, you can start Forex trading with any amount of money that you think would be sufficient as you select a lot size in Forex trading. This means the smallest available size of the trade that you can place for Forex trading.
Usually, Forex brokers explain lot size with increments of 1000. One thing to bear in mind is that the size of the lot will directly influence your risk management. In this regard, you can make use of good Forex trading calculators or risk management calculators. If you enter your anticipated outcome, you can easily calculate your lot size with respect to the size of your current accounts.
It is recommended to practice first as you will be able to find the desired amount you want to risk while Forex trading.
Another thing that can impact your account is market move. Your lot size is directly affected by how much market fluctuation or change impact your account. For instance, consider a small trade. A 100 pip move there would not have a huge impact but the same amount on a huge trade size would definitely impact your account.
We offer definitions of different lot sizes to help you understand how to calculate Forex lot size.
1- Micro Lots: the supermini size of any lot tradable on Forex market, it is actually a lot of 1000 units of your funded capital or currency. If your account’s currency is US dollars, your micro lot would be worth $1000 of your tradable base currency.
If a dollar-based pair is traded, 1 pip would mean 10 cents. For a beginner, it is suitable to start Forex trading with micro lots as you begin to use a Forex calculator and don’t want to take much stress while trading.
2- Mini lots: the name seems smaller in size than micro lots, it is actually a lot of 10,000 units. If a dollar-based pair is traded, 1 pip would mean $1. As a beginner, it is also suitable to start Forex trading with mini lots as you begin to use a Forex calculator. But your account should be well capitalized.
3- Standard lots: unlike micro and mini lots, standard lot size is much bigger, it is actually a lot of 100,000 units. In terms of currency, it would be 100,000 dollars, euros or pounds; whichever the currency you are trading is.
An average pip size will be $10 per pip meaning if you are down 10 pips, that’s a $100 loss. Typically traders start with $25,000 for trading with standard lots.
How to use Forex trading calculators?
With the help of good Forex trading calculators, you can trade with ease. For instance, the trading and margin calculator will be very helpful. These tools are very important ones for trading Forex and optimizing your performance on Forex market.
A Forex calculator allows traders to use more effective trading strategies that better fit their personality and goals. In this article, we will explain all the key concepts on how to start trading and adopt the right strategies.
Our very first tip: Always have Forex trading calculators near you when you log in to your trading platform. It is a great tool for beginners.
Now, how can you calculate Forex size position?
The Forex position calculator spontaneously computes the coverage of your trading account on Forex market. As we have explained the different types of lots earlier in this article, the size of your position will be calculated according to the number of lots.
Forex lots is a term used in Forex trading to label a contract on financial markets. This term also means the size of the trade. You can calculate Forex position as follows: 1.00 denotes 1 standard lot or 100,000 units of currency of your account. This is the same for 2, 3, 4….. Standard lots.
Similarly, for 1 mini lot or 10,000 units of the base currency, it would be 0.10. Likewise, 1 micro lot or 1000 units would be 0.01 according to Forex position calculation.
To calculate Forex position size, you just need to use a Forex lot calculator and determine the worth of Forex lot.
Forex trading calculators are an indispensable tool for your trading and easy to use. Here is an example that will allow you to automatically calculate forex lot size.
For instance: select a Forex pair (currency) you wish to trade (GBP / USD), then enter lot number and then click on “Calculate”.
You can also calculate Forex leverage. By definition, leverage means the ratio of the transaction’s nominal value with respect to the required margin (for execution).
For instance, a leverage of 1:200 means that the contract of GBP 200,000 would have a required of GBP 1000.
Understanding what is pip and how to find its value
Pip simply means “Price interest point”, you calculate your profit or loss in pips. If you take a look at most Forex currency pairs, these are indicated with 4 to 5 digits after the decimal point. The fourth decimal relates to pip.
Each variation of currency pair causes variation of the pip. If the GBP/ USD pair increases from 2.5437 to 2.5443, that pair has increased by 6 pips.
You can also calculate the critical margin with the help of the margin calculator. It helps you to open and maintain a new order.
These were the few fundamental Forex trading calculators tips to help you manage your account and adjust your position accordingly.