Forex Trading: Calculating Profit And Loss In Foreign Currency Trading

The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes can occur at any time, and often result from economic and political events. Using a hypothetical Forex investment, this article shows you how to calculate profit and loss in Forex trading.

To understand how the exchange rate can affect the value of your Forex investment, you need to learn how to read a Forex quote. Forex quotes are always expressed in pairs. In the following example, your pair of currencies are the U.S. Dollar (USD) and the Canadian Dollar (CAD). The Forex quote, USD/CAD = 170.50, means that one U.S. Dollar is equal to 170.50 Canadian Dollars. The currency to the left of the "/" (USD in this example) is referred to as base currency and its value is always 1. The currency to the right of the "/" (CAD in this example) is referred to as the counter currency. In this example, one USD can buy 170.50 CAD, because it is the stronger of the two currencies. The U.S. Dollar is regarded as the central currency of the Forex market, and it is always treated as the base currency in any Forex quote where it is one of the pairs.

Let's go now to our hypothetical Forex investment to show how you can profit or come up short in Forex trading. In this example, your pair of currencies are the U.S. Dollar and the Euro. The Forex rate of EUR/USD on August 26, 2003 was 1.0857, which means that one U.S. Dollar was equal to 1.0857 Euros, and was the weaker of the two currencies. If you had bought 1,000 Euros on that date, you would have paid $1,085.70.

One year later, the Forex rate of EUR/USD was 1.2083, which means that the value of the Euro increased in relation to the USD. If you had sold the 1,000 Euros one year later, you would have received $1,208.30, which is $122.60 more than what you had started with one year earlier.

Conversely, if the Forex rate one year later had been EUR/USD = 1.0576, the value of the Euro would have weakened in relation to the U.S. Dollar. If you had sold the 1,000 Euros at this Forex rate, you would have received $1,057.60, which is $28.10 less than what you had started out with one year earlier.

As with stocks and mutual funds, there is risk in Forex trading. The risk results from fluctuations in the currency exchange market. Investments with a low level of risk (for example, long-term government bonds) often have a low return. Investments with a higher level of risk (for example, Forex trading) can have a higher return. To achieve your short-term and long-term financial goals, you need to balance security and risk to the comfort level that works best for you.

WSS95 EA Live

It's a bad result for WSS95 EA this week,total loss is -72 pips. Last week's result was +147 so for the month of Sept, WSS95 is still up by +75 pips. Hopefully next week is good for WSS95.

GBPCHF (Triangle pattern) 4H Chart

Didn't have much time to scout for patterns to trade but I managed to scalp this trade to end the week. Trade closed for 41 pips profit.

EURUSD (Channel Up) Pattern 1H Chart

Another successful trade with 50 pips profit.

WSS 9.5 EA Live

This week WSS95 has been performing quite well. I'm using the EA live in my FXDD account. Total pips profit for the week is +147. I'm using the EA with tp = 40 pips and sometimes I do closed the trade prematurely. The official result is +112 pips. The results can be view in the "WSS" official website.

Buy GBPCHF( Triangle Pattern Breakout) 4H Chart

End the week with a triangle breakout pattern on GBPCHF 4H chart. Trade closed for 60 pips profit.

AUDCAD (Falling Wedge Pattern Breakout) 4H

This is a falling wedge pattern.Buy on the breakout,trade closed for 50 pips profit.

Buy AUDJPY(Triangle pattern)

Found Triangle breakout pattern on AUDJPY 4H chart. Bought @ 84.30, trade had already closed for 50 pips profit.

Sell GBPCHF( Rising Wedge Pattern)4H

Found a rising wedge breakout on GBPCHF yesterday. Shorted @ 2.0060, results :tp @ 50 pips.

Emerging Patterns

I have found these emerging patterns for trading next week. They are all based on 4H charts as I feel that 4H charts tend to not have much whipsaws or false breakouts as compared to charts with lower time frame.

EURJPY, Channel down pattern









AUDJPY, Channel down pattern









CHFJPY, Channel down pattern









EURCAD, Channel down pattern









USDJPY, Triangle pattern

Buy GBPUSD(Channel Down) & Sell USDCHF(Rising Wedge)

Scalped GBPUSD for 30 pips and USDCHF for 20 pips. Small profits though but at least it is still green for me.

Steinitz HAS MTF EA (Forex Robot Trader)

Steinitz EA had released it's new versions;
*Version 2.75 without hedging capabilities
*Version 3.19 without hedging capabilities

The results so far has been amazing,average +1,734 pips per month. Forward tests since DEC 2007 till now have achieved no losing months.
Forward tests results can be view on their website.

Forex Robot Trader, 100% No Loss!

Sell EURAUD (Triangle Pattern) 1H Chart

This morning, I shorted EURAUD @ 1.7470. I'm in a rush for work and so now I'm back home checking my comp and I realised that the trade was closed for 70 pips.

Buy AUDUSD (Channel Down Breakout) 4H Chart

Buy AUDUSD @ 0.8305, TP 60 pips, SL 100

Update : SL 100 pips. This month's result still up 200 pips

WSS95 EA

Winning Solution System release new EA called WSS95 EA.
Features of the new EA includes;
* Work on GBP/USD pair on 30 minutes Time frame
* Optimized for trending market
* Trades at UK session
* You must keep EA online from 0500 - 1700 GMT
* Best used for FXDD broker

View of the live results in WSS web but only for 4 months (all profit months) of data due to the fact that the EA is rather new.

August NFP - Consensus Estimate 60K to 75K Loss in Payroll Jobs

Due to the release of NFP today.I will try and close all my trades before the release. I would predict a bad result for US and buy on GBPUSD due to the following factors;

• Employment continued to fall in construction, manufacturing, and several service-providing industries, while health care and mining continued to add jobs

• Notable decreases were also seen in retail trade and wholesale trade—each down 17,000 for the latest month

• The decline of 51,000 in payrolls represents a 0.04% drop that is consistent with the recent trend of declines at about a 0.5% annual rate

• Hourly earnings rose by 6 cents, bouncing back to a 0.3% gain over the month

• Average weekly hours slipped to 33.6 hours in July from 33.7 hours in June

Sell AUDCAD (Channel Down Breakout) Pattern 4H Chart

Sell AUDCAD @ 0.8720, TP 50 pips.

Update: Trade closed @0.8670, profit 50 pips.

Sell EURCHF (Triangle Breakout) Pattern

Took a sell @ 1.6094 on 020908. Trade closed on 040908 for 100 pips.

Sell AUDUSD (Channel down breakout) 4H Chart

Short AUDUSD @ 0.8335, tp 50 pips........ good luck


Update : Trade closed for 50 pips

Sell NZDUSD (Triangle Pattern) 4H Chart

Short NZDUSD @ 0.6927, tp 100 pips.

Update: Trade closed for 100 pips

Up and Down Channels

This is a channel down pattern. The price action is controlled by two parallel trend lines. Price follows the path of least resistance in a descending channel, which is down. Upon reaching the lower trend line, the stock bounces until it reaches the upper trend line, which acts a resistance. Trading a descending channel in the most effective way is by waiting for an upside breakout to occur before entering.The stock will continue channeling downward until it is able to break either the upper or lower trend line. An upside break is bullish, while a downside break is bearish.
This is a channel up pattern. The price action is controlled by two parallel trend lines. Price follows the path of least resistance in an ascending channel, which is up. Upon reaching the lower trend line, the price bounces until it reaches the upper trend line, which acts as a resistance as well as a profit-taking zone. Trading an ascending channel in the most effective way is through buying dips to the lower trend line for short-term bounce plays, or by waiting for a downside breakout to occur before short selling. An upside breakout from an ascending channel indicates a higher intensity of buying, and is a technical buy signal. A downside breakout from an ascending channel indicates lower prices to come, and is a technical sell signal.

Rectangular Pattern

A rectangle pattern or box pattern is a trading range which forms as a consolidation phase following a trend, making it a continuation pattern in most cases. The parallel trend lines connecting multiple highs and lows during this extended period give the pattern its rectangle shape.
An upside breakout from a rectangle pattern following an uptrend is a continuation signal for higher prices and is a technical buy signal. A downside breakout from a rectangle pattern following a downtrend is a continuation signal for lower prices and is a technical sell signal.
A rectangle pattern breakout can be expected to achieve the equivalent of the height of the rectangle added to the breakout level.

Sell AUDJPY (Channel down breakout) 4H Chart

I have short AUDJPY @ 92.02, tp will be around 50 pips. Will update result.

Update(020908) trade closed for 50pips