Today there are a large number of auxiliary tools available for trading in the foreign exchange market. One of the most popular is the online trader calculator. Its functionality makes it possible to calculate key indicators and determine the feasibility of opening/closing a transaction. Next we will talk in more detail about what a trader’s calculator is.
Forex trader calculator: in simple words
Many newcomers to the foreign exchange market do not know that you can use a pip calculator and its capabilities. In simple terms, this is a calculator – a tool that allows you to assess the profitability of an order and potential risks.
Carrying out this kind of calculations is a prerequisite for applying 90% of money management strategies.
The Forex trader’s calculator allows you to solve several very important problems:
- assessment of profit/loss of a specific trade transaction;
- comparison of the results obtained with opening/closing indicators;
- determining the optimal collateral amount for the selected position.
Another important function is the calculation of the cost of one point.
How does the trader’s calculator work?
Users who have installed the corresponding application often wonder how the trader’s calculator works. As practice shows, the best way to get an answer is to study a real example of using this auxiliary tool.
The trader’s calculator calculates the optimal position size using the algorithm presented below:
- Launching the application (or going to a website that opens access to an online calculator).
- Indication of the amount of deposit made to the trading account.
- Setting a stop loss level (it is advisable to use four-digit quotes).
- Indication of the acceptable risk threshold (as a percentage or monetary equivalent).
- Selecting the currency instrument of interest (the Forex trader’s calculator suggests choosing one of the available currency pairs).
- Entering the current market value of the investment asset.
- Clicking on the “Calculate” button and processing the results.
There are several types of Forex calculators available on the Internet:
- CFD trader calculator – allows you to determine the profitability of a transaction involving the use of contracts for difference;
- trader’s calculator for futures – allows you to calculate the optimal price level and delivery time for a certain investment asset;
- margin calculator – allows you to determine the potential margin of a trade transaction on the foreign exchange market.
It is worth noting that the trader’s income calculator can be useful for both beginners and professionals.
For what purpose do traders use Forex calculators?
As we said above, a trader’s profit calculator is one of the most popular auxiliary tools for trading on the Forex market. Using it, a currency player can determine several very important indicators: the price of one pip (usually indicated in the currency of the trading account), the minimum margin required to open a trade, the potential price of the swap and spread, and the potential profit/loss of the trade.