Beginner question

Beginner Questions
1

Hey,

I’m a little bit confused about something that is in the school section of the site.

On this page (I can’t post a url because this is my first post) it defines a Quote Currency as

Quote Currency - The quote currency is the second currency in any currency pair. This is frequently called the pip currency and [B]any unrealized profit or loss is expressed in this currency[/B]

So any profit is expressed in the quote currency. BUT this is not the case in one of the examples on the previous page

Let’s buy U.S. dollars and Sell Swiss francs.

  1. The rate you are quoted is 1.4525 / 1.4530. Because you are buying U.S. dollars you will be working on the “ask” price of 1.4530, or the rate at which traders are prepared to sell.
  2. So you [B]buy 1 standard lot[/B] (100,000 units) [B]at 1.4530[/B].
  3. A few hours later, the price moves to 1.4550 and you decide to close your trade.
  4. The new quote for USD/CHF is [B]1.4550[/B] / 1.4555. Since you’re closing your trade and you initially bought to enter the trade, you now sell in order to close the trade so you must take the “bid” price of 1.4550. The price traders are prepared to buy at.
  5. The difference between 1.4530 and 1.4550 is .0020 or [B]20 pips[/B].
  6. Using our formula from before, we now have B x 100,000 = $6.87[/B] per pip x 20 pips = $137.40

Here we are dealing with USD/CHF. USD is the base currency and CHF is the quote currency. The profit in the example is expressed in the USD (base currency) which contradicts what is said in the definition; that the profit is expressed in the quote currency.

Can anyone clear this up for me? Is it an error on the page or am I not understanding something?

Thanks

2

Its simple. The profit is converted to USD again because your balance is in USD.

3

The profit [I]in pips[/I] is expressed in the quote currency. As darksorrow says, though, your broker converts that to your account currency terms.