Please tel me how to calculate pip value & profit…?
Please give some examples…
Your target for profit would really have to depend on your “system” in my opinion. I also believe that your system should tell you where your stop-loss should be. Taking this into account you can determine how many lots to buy based on where your stop-loss is set relative to your entry point. The amount of lots you would buy will also depend on how much you are willing to risk. So from this information we can determine that the “price per pip” isn’t really needed but more… the amount of lots we need to buy. From the information given we can derive this.
Let us take the following as an example:
Account Balance: $10,000.00
Risk per trade: 1%
Price at entry: 1.01966
Stop-loss: 1.01926
Take Profit: 1.02046
Spread: 2 pips
Lot size: 10k
NOTE: These numbers were not taken from anywhere specific but are used solely for the sake of an example.
With the information given let us now derive how many lots we need to buy. To do this we must remember to convert Pips to a quote price (Sp*.0001*P).
R = Risk per trade
A = Account balance
P = Price at entry
L = Lot size
S = Stop-loss
T = Take Profit
Sp = Spread
(AR)/((|P-S|+Sp.0001*P)/P)*L) = 16.5588 Lots
In the case we do not want to increase our risk more than 1% even slightly we should round this number down to 16 Lots. If you get less than 1 lot… then you need to get smaller lots. If you can not afford the amount of lots calculated… then your account margin/leverage allowed by your broker does not support the risk you are taking.
We can also derive the Risk:Reward ratio for this trade from the information given.
(|P-S|+Sp*.0001P)/(|P-T|-Sp.0001*P) = ~1 (or… ~1:1)
NOTE: Calculations assume the spread does not change during your trade… which may or may not be true.
IMHO, the price of a pip… isn’t really that important. Just a note… I am not an experienced trader at all so it would be nice for someone more experienced… to run me out of here or confirm what I have said ^^. Also, just a thing to note… depending on market conditions and your the terms of service you have with your broker you may not always get the price of exactly what your stop-loss is. This being the case, your R:R ratio may be slightly lower than calculated.
There are easier ways to calculate position size. Try this:
[B]Number of Lots = [(Account Balance, in dollars) x (Risk %)] / [(Stop Loss, in pips) x (Pip Value, in dollars)][/B]
301 Moved Permanently contains more on the subject of position size, including examples.
I think you have given [B]rkarthi[/B] a very long answer to a question he didn’t ask.
He didn’t ask how to calculate position size. Rather, he asked how to determine pip value and profit. Care to tackle that?
Hmmm… actually I gave the formula I did because I thought it would be more relevant since you can take all information given based on what information is easily available and get what would, in my opinion, be more important. Main reason being… my formula takes into account the pip price (which would be variable based on price and lot sizes)… hence my answer took the form it did… the R:R ratio was admittedly quite off the topic though. As for the pip price… yes it may have been better for me to answer the actual question.
([Current Price + .0001] / Current Price) * Lot size = Current Pip value per lot
NOTE: The .0001 that is used should actually be +1 in the fifth digit in the price rather than .0001. This is because some prices can be more like 12.1234 or 123.123. This should be easily adjustable for you.
This should be sufficient for pip price at a certain price though it is not exact for over a large range of movement as the pip value varies with price.
For profit:
[1 - ( Entry Price + |Exit Price - Entry Price| ) / Entry Price] * Lot Size * Number of lots bought = Profit
Sorry for not answering the question directly in the first place >.<. Also Clint or any other experienced traders… please do correct my math and such if any of it is wrong. I am actually coming up with these kinda on the fly… and would actually like to use them some… so it kinda hurts me too if they are wrong. ^^
EDIT: Spread is inherently accounted for by entry and exit prices so I removed it from calculation. Sorry for the mistake.
Here are some simple calculators in Excel, if you have Excel. It’s especially useful if you use Oanda since they use units of base currency rather than lots.
type numbers into the blue highlighted cells and the numbers in the yellow highlight will be calculated.
if you have trouble unzipping a file, then download the .txt file and change the extension to .xls
These are some simple calculators I came up with. The calculations in these previous posts are pretty simple too and would be easy to put into the excel, wouldn’t have to do it in your head then.
calculators.zip (3.34 KB)
rkarthi,
Please excuse the confusion which has been generated on this thread. You asked a simple, straight-forward question, and it deserves a simple, straight-forward answer — which you haven’t gotten yet.
To get the answers you want, you have to do three steps:
1. Calculate the pips earned on your trade. This is easy. It’s the difference between your exit price and your entry price.
2. Find the value of 1 pip for the pair you traded, and the type of lot you traded. Sometimes you know this value already — for instance, for the GBP/USD, you know that one pip is worth $1 per mini-lot. Sometimes you have to get this pip-value from your broker’s platform, or from a pip calculator on the internet. Or, you could calculate this pip-value yourself, using the formulas given in the table, below.
3. Finally, calculating your profit is easy: you take the results from 1 and 2, above, multiply them together, and then multiply by the number of lots you traded.
For accounts denominated in U.S. dollars, here is a table of pip-value formulas for the most commonly traded pairs:
Here is an example of how you would do these calculations:
Let’s say that you have a forex account which is denominated in U.S. dollars.
You sell 1 mini-lot of the GBP/JPY at 149.705 and you take profit at 148.388
Q. What is your profit in pips?
A. Profit, in pips = 149.705 - 148.388 = 131.7 pips
Q. How much is each pip worth in dollars? (For this example, we will do the calculation by hand.)
A. for mini-lots (from the table, above):
Pip-value = $100 / the price of the USD/JPY at the time the trade was closed
= $100 / 90.317 = $1.1072 per pip, per mini-lot
Q. How much profit did you earn, in dollars, on this trade? (using the results from above)
A. Profit, in dollars = 131.7 pips x $1.1072 per pip per mini-lot x 1 mini-lot = $145.82
Here is another example:
Your account is denominated in U.S. dollars.
You buy 7 micro-lots of the USD/CHF at 1.02275 and you take profit at 1.02593
Q. What is your profit in pips?
A. Profit, in pips = 1.02593 - 1.02275 = 31.8 pips
Q. How much is each pip worth in dollars? (Again, doing the calculation by hand)
A. for micro-lots (from the table, above):
Pip-value = $1 / the price of the USD/CHF at the time the trade was closed / 10
= $1 / 1.02593 / 10 = $0.0975 per pip per micro-lot
Q. How much profit did you earn, in dollars, on this trade?
A. Profit, in dollars = 31.8 pips x $0.0975 per pip per micro-lot x 7 micro-lots = $21.70
If your account is denominated in a currency other than U.S. dollars, then the pip-value formulas (given in the table)
will be different.
I hope this answers your questions.
Clint
1 Like
Actually, tried to see if I could send you a private message to respond to this rather than do it on a public forum but I don’t see where I can do that. Although… I did not give an example… I do not see why the formulas are not sufficient. Honestly, I think they are tons easier than looking up info on tables and going through 3 steps… when you could just plug the numbers into the formula and get your answer in one step.
Also, while you can go through all that to determine your profit… it is much easier to disregard your pips and whatnot… and just calculate the percentage of change. No need to go looking up anything in charts for that… just need your entry and exit price information. Which… is what I did in my formula by the way.
Between those and the spreadsheet shared (though I haven’t really looked at the spreadsheet). Your post seems to be shooting us down as erroneous. =/
Sorry. Didn’t mean to offend.
I haven’t been able to apply your equations to answer the questions first posed on this thread.
Maybe you could walk me through the process, using one of my examples, and your equations:
[U]From my post #6:[/U]
[B]Let’s say that you have a forex account which is denominated in U.S. dollars.
You sell 1 mini-lot of the GBP/JPY at 149.705 and you take profit at 148.388 [/B]
[U]From rkarthi’s post #1:[/U]
[B]
Please tel me how to calculate pip value & profit…? [/B]
[U]From your post #4:[/U]
[B]([Current Price + .0001] / Current Price) * Lot size = Current Pip value per lot
[1 - ( Entry Price + |Exit Price - Entry Price| ) / Entry Price] * Lot Size * Number of lots bought = Profit[/B]
Please use your equations to answer rkarthi’s questions. Thanks.
Clint
Why get so hung up on how to calculate a pip value or profit? In a USD based account its about $10 per pip, standard lot size. If you made a $100 profit, that’s equivalent to about 10 pips. Right?
No degree in math needed.
I see what I was doing incorrectly… I wasn’t converting from base currency to a quoted currency prior to getting percentage. Also, needs to be split for short and long trades. So this would probably end up being more complex. I would think doing it that way would be more exact than yours just because yours seems to assume that all pip values are equal throughout the movement. Anyways, I will not post anymore here as it is way off topic. If I do come up with anything that… is worth anything… I will let you know ^^.
Sorry for all this mess Clint. Kinda glad as far as my own perspective. Though… I seem to have really screwed this thread. Sorry rkarthi.
Close enough for an average trade;), if you were holding a trade for weeks going for a lot of pips you may want to be more precise.
1 Like