18.03.08
AKFOREX Announces Launch of New Website
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| CALCULATING PROFIT-LOSS |
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| For ease of use, most online forex trading platforms automatically calculate
the P&L of a traders' open positions. However, it is useful to understand how
this calculation is derived.
To illustrate a typical FX trade, consider the following example
The current bid/ask price for USD/CHF is 1.2122/1.2127, meaning you can
buy $1 US for 1.2127 Swiss Francs or sell $1 US for 1.2122.
Suppose you decide that the US Dollar (USD) is undervalued against the
Swiss Franc (CHF). To execute this strategy, you would buy Dollars
(simultaneously selling Francs), and then wait for the exchange rate to rise.
So you make the trade: purchasing US$100,000 and selling 121,270 Francs.
(Remember, at 1% margin, your initial margin deposit would be $1,000.)
As you expected, USD/CHF rises to 1.2170/75. You can now sell $1 US for
1.2170 Francs or buy $1 US for 1.2175 Francs.
Since you're long dollars (and are short francs), you must now sell dollars
and buy back the francs to realize any profit.
You sell US$100,000 at the current USD/CHF rate of 1.2170, and receive
121,700 CHF. Since you originally sold (paid) 121,270 CHF, your profit is 430
CHF.
To calculate your P&L in terms of US dollars, simply divide 440 by the current
USD/CHF rate of 1.2170.
Total profit = US $353.32*
However, if the market had moved the same number of pips in the opposite
direction, you would have lost the same amount of money.
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| HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT
LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO
REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS
LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN
FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN
HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS
SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
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| ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS
IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF
HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE
FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL
TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR
ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING
LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT
ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS
RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION
OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY
ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT
ACTUAL TRADING RESULTS.
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| *Forex trading involves a substantial risk of loss. |
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