👋Hello traders!
Have you ever looked at a chart, placed a trade, and wondered, "Exactly how much will I make (or lose) if the price moves?"
Don't worry -- today I'm going to share with you a simple, easy-to-understand formula. This formula is short, easy to remember, and applies to any currency pair.
🔑 First: The Profit Calculation Formula
👉 Pip x Lot x 10 = Profit (USD)
Pip: The number of pips the price moves.
Lot: The size of your trade (0.1, 0.5, 1.0, etc.).
10: A fixed value in USD for standard currency pairs.
This small equation will immediately tell you how much you will gain or lose.
💡 Example
Let's say you buy EUR/USD with a 1 lot position.
The price moves 50 pips in your favor.
Using the formula: 50 (pips) x 1 (lot) x 10 = Profit of $500.
Another example: You trade 0.5 lot on XAU/USD, and the price moves 30 pips.
30 x 0.5 x 10 = Profit of $150.
See how simple that is?
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From the formula Pip x Lot x 10 = Profit, we can "reverse" it to calculate the appropriate Lot size based on your capital and acceptable risk level. This is the standard money management approach that professional traders always apply.
🔑 Lot Size Calculation Formula
👉 Lot = (Capital x % Risk Allowed) / (Stop Loss Pips x 10)
Capital: Your current account balance (e.g., $1,000).
% Risk: Typically 1-2% of the account per trade.
Stop Loss Pips: The distance from entry to the stop-loss point.
10: A fixed value (pip value for 1 standard lot).
💡 Illustrative Example
Capital: $1,000
Risk: 2% = $20
Stop Loss: 50 pips
Using the formula:
Lot = (1,000 x 0.02) / (50 x 10)
--> Lot = 0.04
👉 So, you should enter with a 0.04 lot size
Remember: Trading isn't about luck, it's about capital management and discipline. By applying these two formulas, you'll see a big difference in your trading results.
So, next time you trade, remember this magical formula:
✅ Pip x Lot x 10 = Profit
✅ Lot = (Capital x % Risk Allowed) / (Stop Loss Pips x 10)
Have you memorized it? Hit like if you've remembered everything and are looking forward to more useful posts from me🚀!
Good luck!