Forex calculators have become such an important part of forex trading that it is almost impossible to trade the market without it; at least in the case of professional traders. How did it become such a vital part of trading the forex market? Ordinarily, a calculator helps is solving mathematical problems in lesser time and with such precision. The forex calculator is used to make calculations in lesser time and with precision too.

WHAT IS THE FUNCTION OF A FOREX CALCULATOR?

The function of a forex calculator is to help a trader calculate the level of profit or loss in a trade. It is applied before entering a trade to enable the trader better manage the risks that will be encountered in the course of the trade. In other words, the forex calculator can be used by traders, not only to calculate the level of profits and losses in trades, but to manage risks.

FOREX CALCULATORS AND PIPS:

Talking about profits and losses in the forex market is directly correlated with pips. As a matter of fact, the values entered and processed in a forex calculator is known as the pips. Knowing what a pip is and how to calculate it is required information for all forex traders as there is no how a trader can trade the forex market profitable without a good knowledge of pip values and how to use them in calculating profits and losses.

WHAT IS A PIP?

A pip is a unit of measurement in the forex market used in expressing the change in value between two currencies. Change in value usually occur as result of increase or decrease in exchange rate of a currencies. No matter how little this change is, it is always captured in the pip quotation of the currency pair. If the value of the EUR USD moves from 1.1098 to 1.1099, the EUR USD is said to have risen by one pip; that is 0.0001. As a standard, and from the EUR USD instance above, the pip is usually the last decimal place of a quotation, mostly to 4 decimal places.

CALCULATING PIP VALUE USING A FOREX CALCULATOR

The value of a pip is calculated with regards to the currency pair in question as each currency has its own relative value. To use the forex calculator to calculate the pip of a currency pair, the following are needed

• The currency the trader’s account in denominated in

• The currency pair of interest

• The position size

• The exchange rate

There are provisions made to enter the values of the above items in the forex pip calculator. Once they are all entered, the trader can go ahead to calculate and get the pi value of the pair.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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