How to calculate profit/loss on long vs short?

Beginner Questions
1

Hello, this question is a sanity check to make sure I am understanding how to figure out my profit/loss on a long or short. Is my understanding of how this works correct in these made up examples?

Example 1 from EUR/USD prices.

At time of initial order:
BID: 1.189470 ASK: 1.189540

At time of exit order:
BID: 1.191010 ASK: 1.191130

If I long, then my profit/loss is = ExitBID - InitialASK

In this example, 1.191010 - 1.189540 = 0.00147. A gain of 14.7 pips.

If I short, then my profit/loss is = InitialBID - ExitASK

In this example, 1.189470 - 1.191130 = -0.00166. A loss of 16.6 pips.

Example 2, from USD/JPY prices.

At time of initial order:
BID: 110.4330 ASK: 110.4650

At time of exit order:
BID: 110.6600 ASK: 110.6690

If I long, then my profit/loss is = ExitBID - InitialASK

In this example, 110.6600 - 110.4650 = 0.195. A gain of 19.5 pips.

If I short, then my profit/loss is = InitialBID - ExitASK

In this example, 110.4330 - 110.6690 = -0.236. A loss of 23.6 pips.

Is this is how it works? Thanks.

2

That’s how it works. Congratulations on your mastery of the math.

However, your use of 7-digit pricing confused me, and I’m surprised it didn’t confuse you, as well.

What’s up with the 7-digit thingy?

Several years ago, we used 5-digit pricing exclusively. Then, 6 digit pricing (in which the 6th digit represents tenths of a pip) became standard.

Nobody prices currency pairs in hundredths of a pip.

So, why are you adding a zero (in the 6th decimal place) to all the prices?

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3

It didn’t throw me off too much because I wasn’t aware of the convention, sorry for the confusion. I’m still pretty new to this and haven’t even left the safe confines of my demo account.

Also, thanks for your reply. I have been reading your past posts in the beginner forum for the last few days and learned a lot from them.

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