Calculating Profit (Loss) and Pip Value

Calculating Profit (Loss) and Pip Value
As we have specified in earlier page, in order to calculate the pip value or how much is one pip, you have to know some additional information such as: contract size, leverage used, and the actual rate of the pair for which you want to calculate the pip value

There are 3 groups of Currency Pair :

Direct Rates
Durrency Pairs at which USD operating as counter currency (USD is located at the right side of currency pair), example : GBP/USD, EUR/USD, AUD/USD, NZD/USD

Indirect Rates
Currency Pairs at which USD operating as base currency (USD is located at the left side of currency pair), example : USD/JPY, USD/CHF, USD/CAD

Cross Rates
Currency Pairs which do not involve USD, example : GBP/JPY, EUR/JPY, AUD/JPY, EUR/GBP, GBP/CHF

How to Calculate Profit and Loss of Direct Rates (GBP/USD, EUR/USD, AUD/USD, and NZD/USD):

0.0001 x contract size x lot = Pip Value

Example : 0.0001 x 100.000 x 1 = Pip Value = $10/pip

(Selling Price – Buying Price) x contract size x lot = Profit or Loss

Example :

1. Buy 3 standard lots EUR/USD at 1.2000
Sell (liquid) 3 lot EUR/USD at 1.2010

Profit = (1.2010 - 1.2000) x 100.000 x 3 = $300

2. Sell 1 standard lot GBP/USD at 2.0001
Buy (liquid) 1 lot GBP/USD at 2.0000

Profit = (1.2001 - 1.2000) x 100.000 x 1 = $10

Simple method :
As you can see from example number 2, for every standard lot (100K) the profit is $10/pip. This also means for every mini lot (10K) the profit is $1/pip

How to Calculate Profit and Loss of Indirect Rates (USD/JPY, USD/CHF, dan USD/CAD):

(0.01 / current price) x contract size x lot = Pip Value

Example : (0.01 / 120.50) x 100.000 x 1 = Pip Value = $8.3/pip

(Selling Price – Buying Price) / Liquidating Price ] x contract size x lot = Profit or Loss

Example :

1. Buy 1 standard lot USD/JPY at 110.00
Sell (liquid) 1 lot USD/JPY at 110.01

Profit = [ (110.01 - 110.00) / 110.01 ] x 100.000 x 1 = $9.09

How to Calculate Profit and Loss of Cross Rates (GBP/JPY, EUR/JPY, AUD/JPY, EUR/GBP,and GBP/CHF):

(Base Currency Price x contract size x lot) / Current Cross Rate = Pip Value

Example :
EUR/GBP Rate : 0.6750, EUR/USD Rate: 1.1840 (EUR/USD is the basic currency of EUR/GBP, as the left side of EUR/GBP Pair is Base Currency) (1.1840 x 100.000 x 1) / 0.6750 = $17,54/pip

{[(Selling Price – Buying Price) x Current Base Currency Price] / Current Price of Cross Pair} x contract size x lot = Profit or Loss

Example :

1. Sell EUR/GBP 1 Lot at 0.6760
Buy (Liquid) EUR/GBP at 0.6750
EUR/USD Rate: 1.1840

Profit = {[(0.6760 – 0.6750) x 1.1840] / 0.6750} x 100.000 = $175,4

Please note :
If you open a Buy position (going Long), you will open with offer price, and will have to use bid price while selling it back (liqudating, closing, stop loss, and taking profit)

If you open a Sell position (going Short), you will open with bid price, and will have to use offer price while selling it back (liqudating, closing, stop loss, and taking profit)