Formulas

    The calculations of trading, clear and with examples.

    Size and value

    Trade volume

    The real size of your position in units.

    Volume=Lots×Contract size
    Lots:
    Your volume. 1 standard lot.
    Contract size:
    Units per lot. Depends on the instrument.
    Example · EUR/USD · 1 lot
    1 × 100,000 = 100,000 units
    see Reference

    Pip value

    How much you gain or lose per pip of movement.

    Pip value=Lots×Contract size×Pip size
    Lots:
    Your volume. 1 standard lot.
    Contract size:
    Units per lot. Depends on the instrument.
    Pip size:
    The instrument's minimum price move.
    Example · EUR/USD · 1 lot
    1 × 100,000 × 0.0001 = $10 per pip
    see Reference
    Costs

    Spread

    The difference between buy and sell, in pips. It's an implicit cost.

    Spread=(Ask−Bid)/Pip size
    Ask:
    Buy price.
    Bid:
    Sell price.
    Pip size:
    The instrument's minimum price move.
    Example · EUR/USD · Ask 1.08542 · Bid 1.08540
    (1.08542 − 1.08540) / 0.0001 = 0.2 pips
    see Reference

    Spread cost

    What the spread costs you in money when you open.

    Spread cost=Spread×Pip value
    Spread:
    The difference, in pips.
    Pip value:
    How much each pip is worth (formula above).
    Example · 0.2 pips · pip value $10
    0.2 × 10 = $2

    Swap

    The interest for holding the position open overnight.

    Swap=Swap rate×Days×Pip value
    Swap rate:
    The instrument's daily rate (long or short).
    Days:
    Nights you hold the position.
    Pip value:
    How much each pip is worth (formula above).
    Example · −0.15/day · 3 days · pip value $10
    −0.15 × 3 × 10 = −$4.50
    Margin and leverage

    Required margin

    The capital the broker holds as collateral.

    Margin=(Lots×Contract size)/Leverage
    Lots:
    Your volume. 1 standard lot.
    Contract size:
    Units per lot. Depends on the instrument.
    Leverage:
    Your leverage (e.g. 200 for 1:200).

    Margin is calculated in the base currency and held in your account currency; the conversion depends on the pair and instrument.

    Example · EUR/USD · 1 lot · 1:200
    100,000 / 200 = $500
    see Reference

    Free margin

    The capital you have left to open more.

    Free margin=Equity−Margin
    Equity:
    Your capital including floating P&L.
    Margin:
    The margin used (formula above).
    Example · Equity $2,000 · margin $500
    2,000 − 500 = $1,500

    Margin level

    Your account's health. Below 100% the risk begins.

    Margin level=(Equity/Margin)×100
    Equity:
    Your capital including floating P&L.
    Margin:
    The margin used (formula above).
    Example · Equity $2,000 · margin $500
    (2,000 / 500) × 100 = 400%
    Result

    Profit / Loss

    Your result. On a buy you open at Ask and close at Bid; on a sell, the reverse.

    Profit / Loss=Change in pips×Pip value
    Change in pips:
    The move for or against you, in pips.
    Pip value:
    How much each pip is worth (formula above).

    The pip change depends on the side: a buy is (closing BID − opening ASK) / pip; a sell, (opening BID − closing ASK) / pip. You always open on the expensive side and close on the cheap one.

    Example · Buy EUR/USD 1.0850 → 1.0870
    20 pips × $10 = +$200

    Take Profit / Stop Loss

    The price where you close. You add (buy TP) or subtract by side.

    TP / SL=Open price±Change in price
    Open price:
    The price you opened at.
    Change in price:
    The change converted to price.
    Example · Open 1.0850 · +20 pips
    1.0850 + 0.0020 = 1.0870