1 pip is:

• for currency pairs with 5 places after the decimal point - the minimum change in the 4th place after the decimal point (0.0001);
• for currency pairs with 3 places after the decimal point - the minimum change in the 2nd place after the decimal point (0.01).

How do you calculate the value of one pip and the size of profit/loss for the Forex market and for spot metals?

Important:

• 1. To easily calculate the value of one pip, we recommend using the Trader's Calculator.
• 2. For Forex instruments with five places shown after the decimal point (0.00001) and with three places after the decimal point (0.001), the value of one pip is equal to the change in the fourth (0.0001) and second (0.01) place after the decimal point, respectively.

Let’s calculate the value of one pip for example 1.43 lot on the currency pair GBPCHF. Suppose that we open a Buy position of 1.43 lot at 2.35330 and close the opened position at 2.35340 (1 pip = 2.35340 - 2.35330 = 0.00010).

Let’s consider the formula to calculate the value of one pip:
OnePipValue = (Contract * (Price + OnePip)) - (Contract * Price), where:

• OnePipValue – the value of one pip in the quote currency
• Contract – the contract size in the base currency
• Price – the price of the currency pair
• OnePip – the smallest price increment for a currency (one pip)

The quote currency is the second currency in the quotation, for example:

• EURUSD – the quote currency is USD
• GBPCHF – the quote currency is CHF
• EURGBP – the quote currency is GBP

• Read Close 1

  Example 1: Calculating the value of one pip in GBPCHF on a trading account with USD as the deposit currency:

  Lot = 1.43;
  Trading Instrument (Currency Pair) – GBPCHF;
  GBPCHF Rate = 2.3533;
  Contract = 143,000 GBP
  USDCHF Rate = 1.1659 (necessary for converting the value of one pip into the deposit currency)

  Calculation:

  • 1. OnePipValue = (143,000 * (2.3533 + 0.0001)) - (143,000 * 2.3533) = 336,536.2 – 336,521.9 = 14.3 CHF
  • 2. Now we convert the value of one pip into the deposit currency (USD). If USD is the first currency in the pair under consideration, the pip value should be divided by the rate, otherwise it should be multiplied:
    OnePipValue = 14.3 CHF / 1.1659 = 12.27 USD
    OnePipValue = 14.3 CHF / 1.1659 = 12.27 USD

  The value of one pip in GBPCHF is equal to 12.27 USD.

  To find out the value of one pip for spot metals, which is fixed, please refer to the Contract Specifications and click on the instrument you are interested in. The value of one pip for the instruments mentioned above and for other currency pairs on the Forex market is calculated in the same way.

Now let’s consider calculating profit/loss.

The formula is as follows:
For a Buy position:
Profit/Loss = (Contract * ClosePrice) - (Contract * OpenPrice)
For a Sell position:
Profit/Loss = (Contract * OpenPrice) - (Contract * ClosePrice), where:

• Profit/Loss – profit/loss in the quote currency
• Contract – the contract size in the base currency
• ClosePrice – the closing price of the currency pair
• OpenPrice – the opening price of the currency pair

• Read Close 2

  Example 2: Calculating profit/loss for a Sell position in EURGBP on a trading account with USD as the deposit currency:

  Lot = 0.19;
  Trading Instrument (Currency Pair) – EURGBP
  OpenPrice EURGBP = 0.6983
  ClosePrice EURGBP = 0.6883 (100 pips = 0.6983 - 0.6883 = 0.0100)
  Contract = 19,000 EUR
  GBPUSD Rate = 2.0256 (necessary for converting the profit/loss into the deposit currency)

  Calculation:

  • 1. Profit/Loss = (19,000 * 0.6983) - (19,000 * 0.6883) = 13,267.7 – 13,077.7 = 190 GBP
  • 2. Now we convert the profit/loss into USD. If USD is the first currency in the pair under consideration, the profit/loss should be divided by the rate, otherwise it should be multiplied:
    Profit/Loss = 190 GBP * 2.0256 = 384.86 USD

  Profit/loss for Gold (spot), Share СFDs, Futures and other currency pairs is calculated in the same way.

I can’t open a position, the terminal shows "Not enough money". How do I calculate the sum of available funds required to open a position?.

Note: To easily calculate margin requirements, we recommend using the Trader’s Calculator. Below the actual calculator is a description of how to calculate margin requirements for the Forex market.

Before calculating the margin requirements to open a position, you must consider the type of the trading account on which the transaction is made.
On micro.mt4 and classic.mt4 accounts, the leverage is 1:500.
On pamm.mt4 accounts, the leverage is 1:100.

Let’s look at the margin calculation formula in the base currency:
Margin = Contract / Leverage, where:

• Margin – the collateral
• Base currency – the first currency in the currency pair, for example:
  • EURUSD – the base currency is EUR
  • USDJPY – the base currency is USD
  • GBPJPY – the base currency is GBP
• Contract – the contract size in the base currency. The size of 1 lot is always 100,000 units of the base currency. Respectively, 0.1 lot = 100,000 * 0.1 = 10,000 units of the base currency, and 0.01 lot = 100,000 * 0.01 = 1,000 units of the base currency
• Leverage – leverage, for example:
  • leverage 1:500 – 500
  • leverage 1:100 – 100

After calculating the margin in the base currency, you must convert it into the deposit currency (at the rate when the position is opened), e.g. USD, EUR.

• Read Close 1

  Margin Calculation on a pamm.mt4 account

  Margin calculation on a pamm.mt4 account with USD as the deposit currency:
  Trading Instrument (Currency Pair) – EURUSD;
  Base Currency – EUR;
  Lot = 0.1
  Contract = 10,000 EUR (100,000 * 0.1 lot)
  Leverage = 1:100 (100)
  EURUSD Rate at Position Opening = 1.3540
  Deposit Currency – USD

  Calculation:

  • 1. Margin = Contract / Leverage = 10,000 EUR / 100 = 100 EUR
  • 2. We then convert the margin into the deposit currency (USD). If USD is the first currency in the pair under consideration, the margin should be divided by the rate; otherwise multiplied:
    Margin= 100 EUR * 1.3540 = 135.40 USD
    Margin equals 135.40 USD

I trade Forex. What happens to my positions in the FOREX markets overnight?

Market swaps are used to roll over open positions overnight in the Forex markets. They can be either positive or negative depending on the difference between interest rates. The sum, credited/debited as pay for rolling over a position is called Storage. The final swap amount is dependent on many factors, such as current interest rates in different countries, movement of the pair under scrutiny, forward market conditions, dealers expectations and swap-points of the broker's counteragent. We provide a theoretical basis for market swap calculations below.

Important: To simplify swap calculation, we recommend using the Trader's Calculator.

Suppose that the interest rate of the European Central Bank (ECB) is 4.25%, and the FED interest rate is 3.5% per annum. Let's assume that you have a short position (Sell) on EURUSD per 1.0 lot. Respectively, you sell 100,000 EUR. In other words, you borrow them at a rate of 4.25%. By selling the Euro, you buy US Dollars, which are deposited at a rate of 3.5%. If the interest rate of the country whose currency you bought (USD – 3.5%) is more than the interest rate of the country whose currency you sold (EUR – 4.25%), the swap will be credited to the trading account in the deposit currency, otherwise it will be debited. It is also worth mentioning that swap also includes the broker's commission for rollover.

In total, your cost for this transaction is 1% per annum (the difference between the interest rates "InterestRateDifferential" = 4.25% - 3.5% = 0.75%), plus the broker's commission for transferring your position to the next day (0.25%). It is then necessary to convert the swap value, expressed per annum, into the deposit currency.

• Read Close 1

  Example 1. Rollover of Short positions (Sell) in the Forex market:

  If you buy a currency with a lower interest rate (USD – 3.5%) than the one you sell (EUR – 4.25%), the swap will be debited from the trading account.

  Let's consider the formula:
  SWAP = (Contract * (InterestRateDifferential + Markup) / 100) * Рrice / DaysPerYear, where

  • Contract = 100,000 EUR (1 lot)
  • Рrice = 1.3500 – current market price of the currency pair (EURUSD)
  • InterestRateDifferential = 0.75% – the difference between the countries' interest rates
  • Markup = 0.25% – broker's commission
  • DaysPerYear = 365 – number of days in a year

  Calculation:

  • 1. SWAP = (100 000 * (0.75 + 0.25) / 100) * 1.3500 / 365 = 3.70 USD

  This means that when the open short position on EURUSD is transferred to the next day, 3.70 USD will be debited from your trading account for each lot.

• Read Close 2

  Example 2. Rollover of Long positions (Buy) in the Forex market:

  If you have a long position (EURUSD), swap will be credited to your trading account, as you have bought a currency with a higher interest rate (EUR – 4.25%) than the one you sold (USD – 3.5%).

  Formula to calculate swap:
  SWAP = (Contract * (InterestRateDifferential - Markup) / 100) * Рrice / DaysPerYear

  Calculation:

  • 1. SWAP = (100,000 * (0.75 - 0.25) / 100) * 1.3500 / 365 = 1.85 USD

  This means that when the open long position on EURUSD is transferred to the next day, 1.85 USD will be credited to your trading account for each lot.

Sometimes the difference between interest rates does not exceed the broker's commission. In this case, swap is debited from a trading account for both long (Buy) and short (Sell) positions.

There is a table on swaps available on our website in the Contract Specifications. In the table, swaps are expressed in points. In order to convert points into the deposit currency, the swap value from the Specification should be multiplied by the value of 1 pip value for the currency you need.

Note: Storage for rolling over your position from Wednesday to Thursday is credited/debited threefold, since the value date for a position opened on Wednesday is Friday. When a position is carried overnight from Wednesday to Thursday, the value date becomes Monday (3 days away). This is why storage for positions carried over from Wednesday to Thursday is three times as much.

Rollover of open positions on Gold (Spot).

Note: Storage for rolling over your position on Gold (spot) from Wednesday to Thursday is credited/debited threefold, since the value date for a position opened on Wednesday is Friday. When a position is carried overnight from Wednesday to Thursday, the value date becomes Monday (3 days away). This is why storage for positions carried over from Wednesday to Thursday is three times as much.