Calculating the Point Value and Profit/Loss Calculation | BR Trading

Calculating the Point Value and Profit/Loss Calculation

Prices in the forex market fluctuate based on changes in supply and demand. After opening a buy or sell position, you will notice the point counter in the trading platform moving up and down. If you entered a buy position, an increase in prices results in a profit, while a decrease results in a loss, and vice versa for a sell position. In a sell trade, an increase in prices results in a loss, while a decrease results in a profit.


To calculate profit or loss, you must first calculate the point value. Simply put, the point value depends on the contract size and the currency pair you are trading.


Let’s assume you are trading a standard lot size, the point value will be 10 USD for any pair where the US dollar is the quote currency, such as:


EUR/USD


GBP/USD


AUD/USD


NZD/USD


For other currency pairs, the point value varies depending on the exchange rate of the pair, and it’s usually close to ten dollars, either a bit less or more, depending on the exchange rate.


Note that trading platforms automatically calculate the point value, so you don't need to do it manually. Since the point value also depends on the contract size, it will decrease or increase as the contract size rises or falls.


Based on the previous example, the point value is 1 USD for a mini lot and 0.10 USD for a micro lot.


As for the formula for calculating profit and loss, it is as follows:


Profit or Loss = Contract Size x Number of Points Gained or Lost x Point Value


Example: Let’s say you bought two standard lots of EUR/USD at a price of 1.1130 and then closed the position at 1.1160. This means you gained thirty points from the market.


To calculate your profit in dollars, apply the formula: Multiply the two standard lots by thirty points and by the point value of 10 USD, which equals a profit of 600 USD.



The Arabic Trader website provides a point value calculator where you can calculate the point value for any currency pair.


Stay tuned for the next lesson to learn more about the forex market.