So as I’m still relatively new to this whole FX thing, as part of my testing process, I want to make sure I calculate everything correctly. Could someone look at my calculations and let me know if I am calculating anything incorrectly?
Assumptions:
Trade Lot size = 100,000
Leverage = 50:1
Let’s say that NZDUSD is 0.78530 bid / 0.78500 ask (random values) and I decide to go long.
Sample trade: NZDUSD Long @ 0.78500 (ask value) for 0.1 lots
The value of the lot that I am purchasing is:
Lot Size * Number of Lots * Ask Value = 100000 * 0.1 * 0.78500 = $7,850.00
Margin value:
Lot Value / Leverage = 7850 / 50 = $157.00
Let’s say that I set Stop/Loss at 150 pips, and Take Profit at 450 pips
Stop/Loss position = 0.7850 - (150 * 0.0001) = 0.7700
Take Profit position = 0.7850 + (450 * 0.0001) = 0.8300
Risk / Reward = Take profit / Stop Loss = 450 / 150 = 3.00
Let’s say that I eventually decide to sell when bid price is 0.7923
Value of the lot when sold:
Lot Size * Number of Lots * Bid Value = 100000 * 0.1 * 0.7923 = $7,923
Profit/Loss = Sell price - Buy price = 7923 - 7850 = $73
Now, at this point, how do I calculate profit percent? Do I divide profit by purchase margin, or profit by purchased lot value?
By Margin = 73 / 157 = 46.5%
By Lot Value = 73 / 7850 = 0.93%
Many thanks for any answers/suggestions/corrections you might be able to provide.