Market prices can move quickly, especially during volatile periods. It is important to know how to calculate your potential profit and loss so you can react faster to moving market prices.
Take a look at the following examples showing how you can calculate profit and loss on your trades when you take a position with OANDA. These examples are based on holding a default trading account where the base currency is USD, though you may have accounts in other available base currencies.
Let's say the current rate for EUR/USD is 0.9521/0.9522, where 0.9521 is the sell price and 0.9522 is the buy price (our spread is as low as 1 pip in this example – but it could go even lower), and then you decide to sell 10,000 EUR at 0.9521.
This means you sold 10,000 EUR and bought 9,521.00 USD (10,000 EUR * 0.9521 = 9,521.00 USD). After you trade, the market rate of EUR/USD decreases to 0.9500/0.9505. You decide to buy back 10,000 EUR at 0.9505 (10,000 EUR * 0.9505 = 9,505.00 USD).
Briefly, you sold 10,000 EUR for 9,521.00 USD and bought back 10,000 EUR for 9,505 USD. Your profit is therefore 16 USD (9,521.00–9,505.00).
Example trades are for illustrative purposes only and are not intended to be advice or a recommendation.
Imagine you see the current rate for USD/JPY is 115.04/115.05, where 115.04 is the sell price and 115.05 is the buy price (our spread is as low as 1 pip in this example - but it could go even lower). Then you decide to buy 10,000 USD at 115.05.
This means you bought 10,000 USD and sold 1,150,500 JPY (10,000 USD * 115.05 = 1,150,500 JPY). The market rate of USD/JPY falls to 114.45/114.50, and you decide to sell back 10,000 USD at 114.45 (10,000 USD * 114.45 = 1,144,500 JPY).
Briefly, you bought 10,000 USD for 1,150,500 JPY and sold 10,000 USD back for 1,144,500 JPY. Your loss is calculated as follows: 1,150,500 - 1,144,500 = 6,000 JPY.
Note that your loss is in JPY and must be converted back to dollars. To calculate this amount in USD: 6,000 JPY / 114.45 = $52.42 USD or 6,000 JPY *1/114.45 = $52.42 USD.
Example trades are for illustrative purposes only and are not intended to be advice or a recommendation.
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