Formula for Calculating Forex Point Value

2023-07-13
Summary:

Calculating the forex point value is crucial for understanding risk in forex trading. Learn the formula and key considerations for precise calculations.

Forex point value refers to the smallest unit of exchange rate change in trading. In the forex market, the exchange rate of a currency pair fluctuates continuously, with each fluctuation measured in points (pips). Point value indicates the impact of each point on the value of funds.

foreign exchange point value

Specifically, the forex point value refers to the change in the transaction value of a currency pair when the exchange rate changes by one unit (i.e., a point) within that currency pair. The size of the point value depends on the specific currency pair and the denomination of the transaction.


For example, suppose the exchange rate of a forex pair is 1.1000 and the transaction volume is 100,000 units. If the exchange rate rises by 10 points to 1.1010, the trading value of this forex pair will increase by 10 points.


The calculation formula for point values can be calculated by traders based on the information provided by the exchange. The size of the point value is very important for traders, as it determines the impact of each fluctuation on profits and losses.


In forex trading, point value is an important concept, and traders need to understand and calculate point value in order to evaluate risks and returns and develop appropriate trading strategies.


The Calculation Method for Point Values is as follows:

1. Calculate the point value of direct forex pairs:

Calculation formula: point value=number of trading hands (lot size) x number of basis points (tick size).

For example, a contract worth 100,000 pounds is a standard hand.

1 point value = 100000 (lot size) x 0.0001 (tick size) = $10 USD.

Calculate the profit and loss (P/L) of direct orders.


2. Calculation method for point values of non-straight disks:

Formula: Point value=number of transactions (lot size) x tick size/current rate.

For example, when purchasing a contract worth 100,000 US dollars against Japanese yen at 120.50,

1 point value = 100000 (lot size) x 0.01 (tick size)/120.50 (current rate) = $8.30.


3. Calculate the point value of cross-market forex pairs:

Formula: Point value=lot size x tick size x exchange rate between the base currency and the US dollar (base quote)/current rate of the forex.

For example, when buying a contract worth 100,000 euros to the pound at 0.6750, the exchange rate between Europe and the United States is 1.1840.

1 point value = 100000 (hands) x 0.0001 (basis points) x 1.1840 (Euro US exchange rate) or 0.6750 (Euro GBP exchange rate) = $17.54.

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Compliance Disclosure：The website can be accessed globally and is not specific to any entity. Your actual rights and obligations will be determined based on the entity and jurisdiction that you choose to be regulated.There may be local laws and regulations which prohibit or limit your rights to access, download, distribute, disseminate, share or otherwise use any or all of the documents and information published on this website.
Risk Warning: Trading Contracts for Difference (CFDs) are complex financial instruments and come with a high risk of losing money rapidly due to leverage. Trade on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade Forex and CFDs, you should carefully consider your trading objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial trading capital. We recommend that you seek independent advice and ensure you fully understand the risks involved before making any investment decision. Please read the relevant risk disclosure statements carefully before trading.
EBC Financial Group is a co-brand shared by a group of entities including:
EBC Financial Group (SVG) LLC is authorized by the St.Vincent and the Grenadines Financial Services Authority(SVGFSA),and the company registration number is 353 LLC 2020. with registered address at Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines.
Other Relevant Entities
EBC Financial Group (UK) Limited is authorised and regulated by the Financial Conduct Authority. Reference Number: 927552. Website: www.ebcfin.co.uk
EBC Financial Group (Australia) Pty Ltd (ACN: 619 073 237) is authorised and regulated by the Australian Securities and Investments Commission (Number: 500991). EBC Financial Group (Australia) Pty Ltd is a related entity of EBC Financial Group (SVG) LLC and are managed separately. EBC Financial Group (Australia) Pty Ltd provides general financial advise services in Australia.
EBC Financial Group (Cayman) Limited is licensed and regulated by the Cayman Islands Monetary Authority (Number: 2038223). Website: www.ebcgroup.ky
Business Address: The Leadenhall Building, 122 Leadenhall Street, London, United Kingdom, EC3V 4AB. Email Address : [email protected]. Telephone : +44 20 3376 9662
Disclaimer: EBC Financial Group explicitly does not participate in any cryptocurrency activities or offer Crypto Contracts for Difference (CFDs). Our financial services solely pertain to traditional instruments. Clients are advised that any references to crypto-related services using the EBC name are inaccurate and unauthorized. Any reference to past performance is not indicative of future performance. The information contained in this website is provided for reference only and does not constitute any investment advice.
Regional Restrictions: EBC does not offer any services to citizens and residents of certain jurisdictions including: Afghanistan, Belarus, Burma (Myanmar), Canada, Central African Republic, Congo, Cuba, Democratic Republic of the Congo, Eritrea, Haiti, Iran, Iraq, Lebanon, Libya, Malaysia, Mali, North Korea (Democratic People's Republic of Korea), Russia, Somalia, Sudan, South Sudan, Syria, Ukraine (including Crimea, Donetsk, and Luhansk Regions), the United States, Venezuela, and Yemen. For more information, please check out our FAQs.
Compliance Disclosure：The website can be accessed globally and is not specific to any entity. Your actual rights and obligations will be determined based on the entity and jurisdiction that you choose to be regulated.There may be local laws and regulations which prohibit or limit your rights to access, download, distribute, disseminate, share or otherwise use any or all of the documents and information published on this website.
Risk Warning: Trading Contracts for Difference (CFDs) are complex financial instruments and come with a high risk of losing money rapidly due to leverage. Trade on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade Forex and CFDs, you should carefully consider your trading objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial trading capital. We recommend that you seek independent advice and ensure you fully understand the risks involved before making any investment decision. Please read the relevant risk disclosure statements carefully before trading.
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