Need some Maths help in FX trading

Discussion in 'Forex' started by mfhboy, Jun 3, 2006.

  1. mfhboy


    If I trade any USD base currency pair like USD/CHF and USD/JPY, the pipe value is based on the right hand side of the pair.

    No matter USD/XXX goes up or down. The value per pipe is different to my entry level. I would like to know how to calculate my P&L correctly at my target level.

    Say my account is USD based and I go long with USD/CHF at 1.2100. If the rate go up 10% to 1.3300, then CHF/USD will go down from 0.8264 to 0.7513.

    Is that my P&L is just that simple to time the change of pipes to CHF/USD at the moment I exit my position?

    So if I do go long with USD/XXX , I earn slower but loss faster. Then what's the advantage to trade that over XXX/USD position?
  2. don't forget the interest rate differential...according to your direction...
  3. mfhboy


    Thanks, yes the interest cost on selling EUR is higher than selling CHF but both have positive interest flow from buying USD

    My main concern is whether my P&L calculation correct or not.:p
  4. btud


    if you have a pair MainCCY/MoneyCCY:

    to get 1unit of MoneyCCY per pip, you need spot * 10000 units of MoneyCCY.

    to get 1unit of MainCCY per pip, you need spot * 10000 units of MainCCY

    This in case the number of significant digits of the pair is 4. For USDJPY you have to multiply the spot only by 100. The idea is you multiply by 10 for each significant digit in the spot rate.


    EURUSD spot rate is 1.2920

    need 10000 EUR, or 12920 USD to have 1 USD/pip
    need 12920 EUR, or 16692.64 USD to have 1 EUR/pip

    USDJPY spot rate is 111.72

    need 100 USD or 11172 JPY to have 1 JPY/pip
    need 11172 USD or 1,248,125.84 JPY to have 1 USD/pip

    Hope it helps...
  5. Notice the convexity when you think about your p&l in terms of pips for pairs defined as USD/XXX. If USD/JPY goes up x pips, you make more dollars than you would have lost if the USD/JPY went down by the same number of pips.

    e.g. If you buy a yard of yen when the USD/JPY rate is at 111.7, it costs you $8,952,551. If the rate goes to 112.7, you now have $8,873,114 -- a loss of $79,437. But if the yen had gotten stronger and the rate moved to 110.7, you would have $9,033,424 -- a gain of $80,872.