transactions in ‘first currency’ in the pair

‘Contract sizes’ in ‘first currency’ in the pair

Standard  is the following:

EURUSD: GBPUSD; USDJPY; USDCHF; AUDUSD; NZDUSD; USDCAD; GBPJPY; GBPCHF; EURGBP; EURJPY; EURCHF; CHFJPY

Customer:  Buy always @Ask, Sell always @Bid 

Calculations for  ‘Direct’ currencies (GBP; EUR; AUD; NZD)

P/L calc.:

(Sell Price – Buy Price) x ‘lot size’ x # of lots

Example1.

GBPUSD

‘Lot’ in GBP.  Ex.: GBP100,000

Customer Buy GBP @Ask,  Sell @Bid

Quote: 1.4410/20

Customer Buy GBP @20, Sell @10

 

Example 1.1:

Quote 1.4410/20. Open buy cable at 20. 1 lot. Hoping to go ^.

Quote 1.4430/40. Liquidation: Close sell cable at 30. Gain 10 pips.

Profit: (1.4430 – 1.4420) x GBP100, 000 x 1 lot.

1.4430 > 1.4420, so we are in profit.

Result is in dollars, as you see.

 

Calculations for  ‘Indirect’ currencies (CHF; JPY; CAD)

P/L calc.:

(Sell Price – Buy Price) x ‘lot size’ x # of lots : Closing price*

* Closing of this particular transaction = Liquidation price; NOT Close day rate

Example 2

USDCHF

‘Lot’ in USD.  Ex.: USD 100,000

Customer Buy USD @Ask,  Sell @Bid

Quote: 1.6510/20

Customer Buy USD @20, Sell @10

 

Example 2.1:

Quote 1.6510/20. Open buy USD at 20. 1 lot. Hoping to go ^.

Quote 1.6530/40. Liquidation: Close sell USD at 30. Gain 10 pips.

Profit: (1.6530 – 1.6520) x USD100, 000 x 1 lot.

1.6530 > 1.6520, so we are in profit.

BUT result is in CHF. Need to convert into USD. Using Liquidation rate for conversion.

Profit: (1.6530 – 1.6520) x USD100, 000 x 1 lot : 1.6530

Result is in dollars.

 

 

Crosses:

Similar to ‘Indirect’ currencies:

 Transactions in ‘first currency’ in the pair

‘Contract sizes’ in ‘first currency’ in the pair

Results in  ‘second currency’ in the pair

Need to convert into USD.

 

If ‘Second currency’ is ‘ Direct currency’

Using ‘Second currency’/ USD BID rate at time of liquidation* for conversion.

 

If ‘Second currency’ is ‘ Indirect currency’

Using USD/ ‘Second currency’ BID rate at time of liquidation* for conversion.

*Closing of this particular transaction = Liquidation price; NOT Close day rate

 

Calculations for  Crosses:

P/L calc.:

If ‘Second currency’ is ‘ Direct currency’

[(Sell Price – Buy Price) x ‘lot size’ x # of lots] x ‘Second currency’/ USD BID  rate at time of liquidation

[(Sell Price – Buy Price) x ‘lot size’ x # of lots] : USD/ ‘Second currency’ BID  rate at time of liquidation

 

Example 3

EUDGBP

‘Lot’ in EUR.  Ex.: EUR 100,000

Customer Buy EUR @Ask,  Sell @Bid

Quote: 0.6110/20

Customer Buy EUR @20, Sell @10

 

Example 3.1:

Quote 0.6110/20. Open buy EUR at 20. 1 lot. Hoping to go ^.

Quote 0.6130/40. Liquidation: Close sell EUR at 30. Gain 10 pips.

Profit: (0.6130 – 0.6120) x EUR100, 000 x 1 lot.

0.6130 > 0.6120, so we are in profit.

BUT result is in GBP (Gbp is ‘Direct”). Need to convert into USD. Using Liquidation BID rate for conversion.

At time of liquidation ( when EURGBP rate was 0.6130/40), GBPUSD rate is 1.4410/20

Bid rate 1.4410

Profit: (0.6130 – 0.6120) x EUR100, 000 x 1 lot  x 1.4410

Result is in dollars.

 

 

 

 

 

 

Example 4

EUDCHF

‘Lot’ in EUR.  Ex.: EUR 100,000

Customer Buy EUR @Ask,  Sell @Bid

Quote: 1.4610/20

Customer Buy EUR @20, Sell @10

 

Example 4.1:

Quote 1.4610/20. Open buy EUR at 20. 1 lot. Hoping to go ^.

Quote 1.4630/40. Liquidation: Close sell EUR at 30. Gain 10 pips.

Profit: (1.4630 – 1.4620) x EUR100, 000 x 1 lot.

1.4630 > 1.4620, so we are in profit.

BUT result is in CHF (CHF  is ‘Inirect”). Need to convert into USD. Using Liquidation BID rate for conversion.

At time of liquidation ( when EURCHF rate was 1.4630/40), USDCHF rate is 1.6510/20

Bid rate 1.6510

Profit: (1.4630 – 1.4620) x EUR100, 000 x 1 lot  : 1.6510

Result is in dollars.