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How do I calculate Profit

Discussion in 'Beginners Bootcamp' started by knightal, Apr 8, 2010.

  1. knightal

    knightal Private, 1st Class

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    Hi
    I'm new to FX and on a steep learning curve so hopefully someone can help with my problem.

    Below is a section taken from my demo account on the MT4 platform.

    I am testing an EA and am wondering if any one can tell me where my calculations are wrong.

    If (T/P) minus (price) = pips then in this case
    33310 - 33239 = 71 pips @.10 = $7.10.

    So how do I get $7.66 as shown below.

    Ticket:23224373
    OpenTime:2010.04.08 03:17
    Type:buy
    Size:0.10
    Item:eurusd
    Price:1.33239
    S/L:1.32240
    T/P:1.33310
    CloseTime:2010.04.08 04:19
    Price:1.33310
    Commission:0.00
    Taxes:0.00
    Swap:0.00
    Profit:7.66

    I know I'm missing something here. Maybe my maths are crap, but if you can show me the error of my ways I will be greatfull
    Thanks
    Regards
    Allan
     
  2. Stony

    Stony Sergeant

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    Well, you didn´t make 71 Pips, but just 8. Pips are calculated on the basis of the 4th digit only: 1,331 - 1,3323 = 8

    By the way: I don´t understand what 5 digits are good for, too.

    Happy trading!
     
  3. knightal

    knightal Private, 1st Class

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    Thanks Stony
    I use MT4 as supplied by FXCM Australia and they use 5 digits. Likewise I'm not yet sure why this is so. The sales pitch says it is something to get tighter spreads.

    ***Warning dumb question following***

    So if I made only 8 pips, how do I get a profit of $7.66 when I.m trading at 0.10 should this not equal .80 cents.
     
  4. knightal

    knightal Private, 1st Class

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    Hmmmm.... I just went and searched on google for calculation profit and found a profit calulator which gave my result as $7.65 using the formular below.

    (Closing Rate - Opening Rate) * (Closing {quote}/{home currency}) * Units

    I just knew it would be more involved than I thought. :embarrassed:

    We once had a Prime Minister who said "Life was not meant to be easy"
    I guess he was right.
    ;)
     
  5. Stony

    Stony Sergeant

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    Not a dumb question...! Maybe they have some special way to calculate the pips. ;) Ask their support!
     
  6. Tyrion

    Tyrion Private

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    no it's not dumb at all, thank you!
     
  7. RahmanSL

    RahmanSL Major

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    Gulp! You mean we are supposed to calculate our profits kah?...Oh, I see!...hmmmm, all along I thought the MT4 platform does that “automatically” for us!

    Knightal, you are much smarter and conscientious for details than…ehhh…a lot of us here (including a whole bunch of seasoned Traders). So, “Bravo” for bringing this up!....now, what’s the value of “pi” again?...hmmmm!!
     
  8. cowmadagan

    cowmadagan Sergeant

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    I see that your deal was EUR/USD, but for newbies, you should know 1 pip isn't necessarily 1 USD. In non-US cross pairs it varies. In EUR/GBP it's over a dollar per pip.
    That also means if your account balance is in EUR or something, you'll get other magic happening.
    It might also be slippage in your favor.
     
  9. Pharaoh

    Pharaoh Colonel

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    Slippage wouldn't cover it. That would be reflected in the closing price.

    Unless your account isn't in USD, this definitely is something you should have a chat with the broker about. Make them show you the math.
     
  10. knightal

    knightal Private, 1st Class

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    LOL Yeah I was the kid who pulled the alarm clock appart to see how it worked. but hey I also had to put it back to-gether again.

    Thanks you guys for the info and the humor ;)
     

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