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     A Division of Commodity Futures & Options Service, Inc.
  
FOREX BROKER  /  COMMODITY FUTURES BROKER  /  OTC METALS BROKER
    Investment Opportunities in Global Commodity Markets Since 1988


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We broker commodity futures, broker forex spot, broker forex options and broker OTC metals. For all of your online forex broker, online forex options broker, online OTC spot gold broker, online OTC spot silver broker and online commodity futures broker needs you only need one broker - CFOS/FX.  All of the professional brokers at CFOS/FX are licensed by the National Futures Association and are qualified to provide you with the following services: forex broker, forex options broker, commodity futures broker, commodity options on futures broker, OTC spot metals broker, OTC spot metals options broker and forex and futures consulting.  Commodity Futures and Options Service, Inc. is located in Houston, Texas. CFOS/FX provides both online and telephone brokerage services to retail and commercial clients.  Customer satisfaction is our top priority and we look forward to having you as our client.

 

 

PIP & PROFIT/LOSS CALCULATION

 

Understanding how to calculate pip value and profit/loss requires a basic knowledge of currency pairs and crosses.  Please click on the appropriate link below for more information:

USD as Base Currency  (ex. USD/CAD and USD/CHF whereby the U.S. Dollar is the first currency)

 

USD as Quote Currency  (ex. EUR/USD and GBP/USD whereby the U.S. Dollar is the second currency)

 

Cross-Rates  (ex. EUR/GBP and GBP/JPY whereby the U.S. Dollar is not involved)  

 

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

*THE EXAMPLES BELOW ARE HYPOTHETICAL AND ARE FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY

 

USD AS BASE CURRENCY.  Most currencies are traded directly against the U.S. Dollar (USD), and these pairs are referred to as direct rates.  An example is the USD/CAD (Canadian Dollar).  The USD is the "base currency," the CAD is the "quote currency" and the rate quote is expressed as units per USD.  An example of a direct rate is as follows: USD/CAD trading at 1.1500 means that 1 USD = 1.1500 CAD. 

 

Calculating Pip Value.  Pip stands for "price interest point" and refers to the smallest incremental price move of a currency.  Tick size is the smallest possible change in price.  Pip value is calculated according to the following formula:

 

     pip  =  lot size  x  tick size  /  current rate 

 

     Example for 100,000 USD/JPY contract currently trading at 120.50:   

 

          1 pip  =  100,000 (lot size)  x  .01 (tick size)  /  120.50 (current rate)  =  USD $8.30

 

Calculating P/L (Profit/Loss).  P/L is calculated as follows:

 

     selling price  -  purchase price  =  P/L

 

     Example for 100,000 USD/JPY contract initially bought at 120.50 then sold (closed) at 120.30:

 

          120.30 (selling price)  -  120.50 (purchase price)  =  -.20 negative pip difference  =  20 pip loss

 

     To further convert the above P/L to USD, use the above "Calculating Pip Value" as follows:

 

          1 pip  =  100,000 (lot size)  x  .01 (tick size)  /  120.30  (current rate)  =  USD $8.31

 

          Therefore:  USD $8.31 (pip value)  x  20 (pip loss)  =  USD $166.20 loss

 

 

 

 

USD AS QUOTE CURRENCY.  Currency pairs where the USD is the quote currency are sometimes referred to as "inverse".  This holds true for such currencies as the EUR (Eurodollar), GBP (Great British Pound aka Pound Sterling or Cable), NZD (New Zealand Dollar) and the AUD (Australian Dollar aka Aussie Dollar).  *Please note that the EUR/USD is referred to as the "Eurodollar" but should not be confused with Eurodollar futures contracts which are completely different.  An example of an indirect rate is as follows:  EUR/USD trading at 1.1700 means that 1 EUR = 1.17 USD.

 

Calculating Pip Value.  Pip stands for "price interest point" and refers to the smallest incremental price move of a currency.  Tick size is the smallest possible change in price.  Pip value is calculated according to the following formula:

    

     pip  =  lot size  x  tick size 

 

     Example for 100,000 GBP/USD contract:   

 

          1 pip  =  100,000 (lot size)  x  .0001 (tick size)  =  $10.00 USD

 

Calculating P/L (Profit/Loss).  P/L is calculated as follows:

    

     selling price  -  purchase price  =  P/L

 

     Example for 200,000 GBP/USD contract initially bought at 1.7505 then sold (closed) at 1.7540:

 

          1.7540 (selling price)  -  1.7505 (purchase price)  =  .0035 positive pip difference  =  35 pip profit

 

     To further convert the above P/L to USD, use the following calculation:

 

          pip profit (loss)  x  lot size  x  tick size  =  USD profit (loss)

 

          35 (pip profit)  x  200,000 (lot size)  x  .0001 (tick size)  =  USD $700 profit

 

 

 

 

CROSS RATES.  Currency pairs that do not involve the USD are referred to as cross rates.  Even though the USD is not represented in the quote, the USD rate is usually used in the quote calculation.  An example of a cross rate is the EUR/GBP.  Again, the EUR is the base currency and the GBP is the quote currency.

 

Calculating Cross Rate Pip Value.  Pip stands for "price interest point" and refers to the smallest incremental price move of a currency.  Tick size is the smallest possible change in price.  The base quote is the current base pair quote.  Pip value for cross rates are calculated according to the following formula:

 

     pip  =  lot size  x  tick size  x  base quote  /  current rate 

 

     Example for 100,000 EUR/GBP contract currently trading at .6750, and EUR/USD currently trading at 1.1840:

         

          1 pip  =  100,000 (lot size)  x  .0001 (tick size)  x  1.1840 (EUR/USD base quote)  /  .6750 (current rate)  =  USD $17.54

 

Calculating Cross Rate P/L (Profit/Loss).  Calculating P/L for cross rates is calculated as follows:

 

     selling price  -  purchase price  =  P/L

 

     Example for 100,000 EUR/GBP contract initially sold at .6760 then bought (closed) at .6750:

 

          .6760 (selling price)  -  .6750 (purchase price)  =  .0010 positive pip difference  =  10 pip profit

 

     To further convert the above P/L to USD, use the above "Calculating Cross Rate Pip Value" as follows:

 

          1 pip  =  100,000 (lot size)  x  .0001 (tick size)  x  1.1840 (EUR/USD base quote)  /  .6750 (current rate)  =  USD $17.54

 

          Therefore:  USD $17.54 (pip value)  x  10 (pip profit)  =  USD $170.54 profit

 

 

 

 

 

 

 

 

 

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*Disclaimer: Foreign exchange trading, foreign exchange investments and commodity futures trading and investments are not suitable for everyone.  Forex trading and commodity futures trading carry a high level of risk and the possibility exists that you could sustain a loss of all or more of your currency trading or commodity futures trading investment.  Before you decide to trade foreign currency options, trade foreign currency spot markets or trade commodity futures you should be aware of all risks associated with currency trading and futures trading.  If you would like more information about the risks of forex trading, commodity futures trading and of online forex trading and online futures trading, please contact a CFOS/FX futures and forex broker to discuss online foreign currency trading risks and/or commodity futures trading risks in detail. 

 

CFOS/FX is a futures and forex broker offering online forex trading platforms in both spot forex and forex option trading markets as wells as OTC spot gold, OTC spot silver and commodity futures.  The professionals at CFOS/FX broker forex spot contracts and broker forex option trading for both individual and commercial futures and forex clientele.  CFOS/FX, as an entity, acts only as a futures and forex brokerage and does not actively manage futures or foreign currency trading accounts for clients.  Regarding forex markets, CFOS/FX is a forex option broker and a spot forex broker acting an the Introducing Broker; CFOS/FX does not act as counter-party for client forex trading or forex option trading.  

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