(Newswire.net — April 26, 2023) — Those who are into forex trading or trying to get into forex trading must be aware that trading involves many simple to complex calculations. These calculations are the basis for planning and executing your trades in the best possible manner. So, naturally, you will need to develop some mathematical or numerical skills to perform these calculations accurately. However, you don’t need to be a pro at Maths to become a skilled trader. Knowing some basic numerics will surely help, but learning to use automated tools like trading calculators would be a perfect solution for those who are not that good at Maths.
So, today we will be learning about the basics of trading calculators and why you should use them in your trading process.
Introduction to Trading Calculators
Trading calculators are basically algorithm-based forex tools that are used to automate calculations, making them more accurate, fast, and efficient. It is not just a single calculator that performs all functions but different types of calculators that are programmed to do different trade-related calculations. You just need to find a forex broker platform or forex trading platform that offers these free online calculators and choose the type of calculator that is needed at the moment. Then you enter the required values into the calculator, and it will return results instantly, making it an effortless process for traders.
Types of Trading Calculators
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Currency Converter– This one does not perform any mathematical function but will simply convert one currency into another, as currency conversion rates are the foundation of forex trading. You just specify the currencies you need to convert and the amount. This is especially useful when trading with different currency pairs and wanting to know their value in your account base currency.
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Pip Calculator – Pip is the basic unit used for measuring and tracking the exchange rate fluctuations or currency price movements that happen in the forex market. One pip is the smallest unit of fluctuation happening in the price of a currency pair. Also, the value of one pip will be different for different currency pairs. Traders tend to plan their trades based on how many pips they could gain or lose as they represent the potential price movements. To use a pip calculator, you just need to know the account base currency, currency pair chosen for trading, and trade size.
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Position Size Calculator – Your position size for a trade decides the amount of risk that you are taking for that trade. The position size is simply the amount of trading capital you use to place a trade. A larger position size results in more risk and a smaller position size will make the trade less risky. But each trader has a different risk profile and risk tolerance.
Hence, calculating the optimal position size can sometimes be confusing. So, you can use the position size calculator by entering the account balance, risk percentage for a trade, chosen currency pair, type of position, entry price, stop loss, trade size, and account base currency. Then, the calculator will tell you the correct position size for your trade-in lots.
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Profit Calculator – Another commonly used trading calculator is the forex profit calculator, which allows you to precisely determine the potential profits you can make in a particular trade after you input other important values. You just need to enter the details of your trade like currency pair, entry price, exit price, trade size, and account base currency. The calculator will tell you the amount of profit or loss based on the data entered.
Common Calculations Used in Forex Trading
As mentioned above, the most basic level calculation required for forex trading is converting one currency to another. We already discussed pip value, position size, and profit/loss calculations. Besides these, you must also calculate the trading cost that comes as spreads, commission, and rollover fees in forex.
Most forex brokers will provide commission and swap calculators allowing the traders to keep track of the trading cost for each trade. Also, traders who rely on technical analysis using pivot points and Fibonacci indicators will have to calculate some values for a clear-cut analysis. So, some brokers also offer additional calculators that can come in handy in these complex calculations.
Benefits of Using Trading Calculators for Beginners
- Precision – Beginners are more likely to make mistakes if they try to perform the calculations manually. But trading calculators will always get accurate results as long as they enter correct data and details into the calculator. So, one of the greatest benefits of trading calculators is the precision.
- Speed – If you try to perform any trade-related calculations manually, you will see that completing each calculation requires a lot of time. Especially when your calculations involve huge figures, since the trading calculators are algorithm-based, they can perform any type of calculation within seconds, giving you the benefit of speed, which again allows you to make quick trading decisions.
- Ease – When you start using trading calculators for each and every trade, you will notice that it adds a lot of ease to the trading process. You won’t get confused about the pip values or won’t spend a whole lot of time in determining the appropriate position size for every trade. You will get all the information you need by clicking a calculator button. This makes the tedious calculation and trading process easier for every beginner.
How to Use Trading Calculators for Risk Management?
Trading calculators are one of the best tools for risk management in forex trading. It starts with calculating pips using a pip calculator. It determines the price movement in a currency pair to determine the profits and losses in a trade. So, calculating pips will allow you to manage each trade’s risk better. Knowing the profits/losses of trade in advance is essential for risk management as that way, you can adjust the take profit and stop loss levels for the trade in order to get the best possible results.
Talking about the position size calculator can be referred to as the key tool for forex risk management. As we said before, the size of your position will be decisive for your profits and losses, reflecting on your account balance. So, proper position sizing is a crucial step that must be completed in risk management.
Should You Use Trading Calculators in Forex Trading?
Trading calculators are important tools that every trader uses, be it a beginner or an experienced trader, because they are designed to simplify the calculation process, which can often be a headache for many traders. That way, you won’t have to spend your time and energy doing these trade-related calculations and will get to focus on the actual trading process, which allows you to perform better.