A Guide to Calculating the Profit Margin on Your Currency Trades

A Forex what? Yes, the same Forex that trades at an enormous $5.3 trillion per day. And yes, you can calculate your Forex profit margins with a simple web-based calculator.

Keeping tabs on your profits becomes increasingly important as your Forex trading increases. And when the numbers become larger, calculators help ensure you’re on top of your finances.

So today, we’re bringing you our guide to using a Forex profit calculator to monitor your profit margin and your currency.

Margin Explained

We need to talk about margins before we talk about how to use a Forex calculator. While profit margins measure how much money you’ve made compared to how much you’ve spent, Forex margins are different.

When we’re talking about profit margins you should also understand Forex margins, as they’re all tied together.

Forex Margins

Forex margins refer to how much money you’re setting aside for your broker to “control” different positions. Essentially, how much money you give to your broker. And the entire point of margins is to calculate leverages.

A hypothetical situation makes it easier to understand. We’ll say you have $10,000 in your Forex account. You give the broker $1,000 to secure a position (Forex trade). That $1,000 is your Forex margin.

You can then calculate your leverage. Securing a $100,000 position with $1,000 gives you a 100:1 margin. In other words, you have a high potential for turning a profit.

Profit Margins

Profit margins are the traditional way people think of margins. How much money you make versus how much money you’re spending. And it holds true for Forex trading. How much money are you risking versus how much money can you make?

But calculating your profit margins becomes extremely complex when you’re trading fluctuating currency values and dealing with leverages. And that’s why we use a Forex profit calculator.

How to Use a Forex Profit Calculator

Using a Forex calculator isn’t difficult once you understand where to find your values. After all, calculating your profits after the fact doesn’t do much good. The trades are made and you either made or lost money.

Instead, get your trading price, number of units, currency, closing prices, etc. from historical data. Seeing what did create profit is a good indication of which trades could make a profit in the future.

You can also use hypothetical data based on currency fluctuations. You’ll get a good idea of your profit potential by running numbers based on varying closing prices. While trading is always a gamble, the calculator helps hedge your bets.

Choosing a Forex Calculator

To pick the best Forex profit calculator you need to ask the Forex experts. Luckily, we’re here to help. Not every calculator uses the same algorithm. Using the wrong tool can lead to serious financial losses.