Forex specifications incorporate the individual contract details and the conditions under which they can be traded.
Margins – the amount of your equity required to open a trading position.
Spreads – the difference between the bid and ask price for a currency pair.
Swaps – the interest rate calculation representing the cost or reward of holding open positions overnight.
A pip is the value of the fourth decimal in the exchange rate of a currency pair; this does not apply to JPY and HUF currency pairs (for these pairs a pip is the value of the second decimal). At ActivTrades, the smallest incremental movement equals to 0.1 pip.
Majors, Minors and Exotics
Majors are currency pairs that are primarily traded in the Forex market. Often they are quoted against the USD as is market convention; in these terms, the USD is the base currency. Liquidity is deep and spreads are tight, giving excellent short-, medium- and long-term trading opportunities. The trading volume of majors exceeds two thirds of the total estimated volume in Forex.
Minors are less frequently traded or secondary currency pairs. Generally these instruments have less liquidity but are still traded heavily in the financial markets. They will also include crosses, a term for currency pairs that include major traded currencies against each other but without the USD as the base.
Exotics are currency pairs that are not widely traded or are derived from emerging markets. Exotics still provide trading opportunity, but spreads are often wider and therefore less attractive to high-frequency intraday traders. Interest rate differentials can be greater and will often attract trading based around favourable swaps.
Calculating Profit and Loss
MetaTrader will calculate your profit or loss and display it for each open and closed trade reflected in the currency in which you hold your account. It is important to be able to work out your own projected profit and loss which can be relatively easy to do, even without a calculator using the table on this page.
Buy 1 Lot EURUSD at 1.4723
Buy (+) €100,000 Sell (-) $147,230
Sell 1 Lot EURUSD at 1.4796
Sell (-) €100,000 Buy (+) $147,960
Buy (+) €100,000 Sell (-) $147,230 + Sell (-) €100,000 Buy (+) $147,960
In this case the trade was profitable $730, the same calculation can be made in pip terms.
1 Lot EURUSD pip value = $10
Buy at rate 1.4723
Sell at rate 1.4796
73 pips profit at $10 per pip
= + $730