Any beginner trying to step into the forex market would get intimidated with the vast amount of knowledge that they are required to learn for becoming a forex trader. This includes many fundamental concepts, technical terms and some basic yet complex calculations.
Calculations are a must for getting the desired outcome in any task. When it comes to forex trading, calculations are crucial as they will determine your trading results in the end. You can do these calculations manually using a regular calculator but that will surely take a lot of time and effort. But a trading calculator can perform these calculations with greater ease and in no time.
What is a Trading Calculator?
A trading calculator is used for performing various calculations that are essential for forex trading. Previously, traders had to perform these calculations manually on their own. And for someone who is not experienced enough in trading, doing all these calculations before every trade can be a tiring task. Also for experienced traders, the chances of errors will increase when there are large figures involved in calculation for fast paced trading. So, keeping these things in mind many brokers started to provide a built-in forex trading calculator on their online platform for users. These online forex calculators are free to use and are a part of the trader’s toolkit as well. This tool can be used to save the time and effort that would be required for doing these calculations manually.
How Does a Forex Trading Calculator Work?
A forex trading calculator works by using and applying the same basic mathematical functions but combining them with the technicalities of forex so that a trader gets the results that can be directly applied to his/her trading activity. A trading calculator will be often divided into different calculators to perform specific functions as and when needed. So, when you check the trading tools on your broker’s platform, you will see a bunch of different forex calculators with a brief description about its usage.
This includes position size calculator, lot size calculator, pip calculator, profit calculator , margin calculator and more. Using them is quite simple once you are well-versed with the technical terms. You just need to enter the values and specify the details in the calculator and it will be returning you accurate results instantly.
What Are the Advantages of Forex Trading Calculators?
The first and foremost thing that one has to do for profitable trading is coming up with a well-defined trading plan or strategy. But just planning or devising the perfect strategy is not enough to get the desired results. You will have to pay utmost attention to the execution part, in order to make sure the strategy you chose for trading is being followed with every step you take. Deviating from a strategy or trading plan will also lead to deviation in trading results.
The role of a trading calculator is simple yet crucial here. Because the price at which you enter a trade, your exit plan, margin levels and many such details can have a huge impact on your end results. You will be risking your trading capital in the process of trading. Hence, even a small mistake may cost you a lot when it comes to forex trading. As mentioned earlier, manual calculations have greater possibility of errors and such errors can have a negative impact on your trading performance as a whole.
Thus, using a trading calculator one can make sure that they don’t make any mistakes in the calculation part of trading. They can leave the calculation process to the online forex trading calculators and focus on other aspects of trading instead.Read More
Types of Trading Calculators
- Position size calculator/ Lot size calculator
A first time trader in the forex market may find the concept of position sizing confusing at first. Calculation of position sizes can seem like a lot of work for a total beginner. But, position sizing is an important aspect of trading. Determining the optimal position size is also a part of risk management in forex. The trade position you take up will decide how much money you are risking in a trade. So, a trader has to pay a lot of attention into deciding the ideal position size for each trade.And a position size calculator can perform this calculation in no time. It is also referred to as a lot size calculator as the position size in forex will be specified in lots. You can just specify the risk percentage you are comfortable with for a single trade, the type of position, stop loss level and account balance in the position size calculator. And then it will tell you the perfect position size based on the risk level specified by you. Usually the trading calculator returns the value in standard lot number so that you can easily apply it on your trades.
- Pip calculator
Just as the name implies, a pip calculator is used for calculating the pip value of the currency that you wish to trade with in forex. Pip is the unit of measurement for the smallest exchange rate change that can happen in a currency pair. Traders also plan their trades using the number of pips to specify the profit earned in a trade. Pips play a major role in determining the end result of a trade and hence a pip calculator is an essential part of the trading calculator. You just have to specify the base currency and previously calculated position size in the pip calculator and it will calculate the value of a pip in the currency.
- Profit calculator
The function of a profit calculator is quite simple. It calculates the trading results in terms of profits or losses.You can calculate this by specifying the entry price and exit price for the trade positions. This will be useful in planning your trades based on the risk of loss and possibility of profit.
- Margin calculator
Before opening a trade position, you need to make sure that there is sufficient margin in your account to keep that trade running. This is especially important when a trader avails leverage from their broker. If the margin levels are not met the broker will send a margin call notification to deposit more funds to meet the margin level requirement. And your positions will get automatically closed if you fail to do so.
Other Key Functions of a Trading Calculator
Besides the above functions, the online forex calculator or trading calculators also have some other basic functions that are useful for trading with ease. This includes the following.
- Exchange rate calculations – Exchange rate differences between currencies are the base for forex trading. Hence, calculating the conversion rate of currencies is a basic but important function that can be seen in most online trading calculators.
- Fibonacci calculator– A fibonacci calculator may not be there in every trading calculator but some brokers do provide them for helping traders to use fibonacci retracement levels for planning their trades. So, traders can use this fibonacci calculator to use the fibonacci indicator for trading.
- Pivot calculator– This is another additional function and not all trading calculators come with a pivot calculator. However, they are useful for calculating entry prices, exit prices, stop loss and take profits levels in trades.
Is an Online Forex Trading Calculator Free to Use?
Yes, they are free as most brokers provide these trading calculators as part of the trader’s toolkit on their platform. These online trading calculators are free to use and convenient as well.
Which is the Best Trading Calculator for Beginners?
All trading calculators are beginner friendly and anyone can learn to use them without much effort. Just make sure the broker you choose provides all essential functions in the trading
calculator and you are good to go.
How Do You Calculate Profit in Trading?
You can use the forex profit calculator for calculating the trading results. You can find it in most trading calculators offered by brokers online.
How Do You Use a Forex Calculator?
Using a forex calculator is quite easy once you have a trading plan to follow. You can just specify the values in the forex calculator and it will return accurate results in no time.
Why Do We Use a Trading Calculator?
A trading calculator is convenient and easy for traders to get done with some essential calculations that are required before entering a trade.