Noobie question

Discussion in 'Forex' started by drcha, May 23, 2009.

  1. drcha


    I'm reading some Web sites about trading currencies. I'm a total beginner here--I don't even know enough to paper trade yet.

    Here are two different examples from the same site ( They seem to contradict one another. Probably it's me, though. Could it be that one example is actually quoting the profit in the base currency rather than in USD? Please comment.

    Example 1. You are betting that USD will depreciate against Euro. Let’s say current EUR/USD rate is 1.305. If EUR/USD rate moves from 1.305 to 1.318 you will have a profit of $1,000.

    Example 2. You believe that the Australian Dollar will strengthen against the US Dollar. The AUD/USD rate is quoted at 0.7504. If the AUD/USD rate moves from 0.7504 to 0.7590 you will receive a profit of $860.
  2. The first example is wrong. Assume you buy one standard lot 100,000 units of eur/usd if it moves from 1.305 to 1.318 your profit will be .013*100,000=1300

    second one is correct
  3. I think Example 1 is actually stated in Euros. The answer to it is $1,300 (USD), and if you divide it by the rate of 1.3, you get the 1,000.

    Just use this, and you will get the value of each pip (depending on lot size) in whatever currency you want: