There are useful tools in trading that help investors conduct their business and calculate possible profits and losses. These include trading calculators, which, before opening a deal, allow you to estimate the possible outcomes of events, taking into account several important factors. About what it is, why it is really needed in trading, and what its pros and cons are, read below.
What Is a Trading Calculator?
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A trading calculator is a simple and practical instrument that both novice and experienced traders can use. It can be found here, on FBS, and allows you to carry out a preliminary analysis of order and plan further actions. These tools are of different kinds:
- All-in-one services. From the name, it is clear that they give results in many directions.
- Pip calculator. In this case, “pip” stands for “point in percentage.” This characteristic shows changes (up or down) of the last decimal in currency price.
- Margin calculator. With it, you can estimate the margin of an order. This tool is a must for trading forecasting.
- Profit and loss calculator. The name of this instrument speaks for itself. Using it, you can estimate the approximate profit and loss from the planned order.
- Swap calculator. It helps to calculate the interest rate (or rollover).
Depending on the selected type, you can quickly estimate an order’s outcome, taking into account the current market situation, the picked trading tool, currency pair, lot size, and so on. The most advanced services offer their clients the opportunity to make several calculations at once for different tools, currencies, prices, etc. So you can compare the results and choose your most favorable scenario, change the conditions in a more profitable direction, or even pause investing until the market situation improves.
How to Use Calculators?
By and large, you can make all the necessary calculations manually. There are many tutorials on the Internet on making a calculator yourself, for example, in an Excel spreadsheet. However, you will spend a lot of time on this process alongside searching for relevant information, and it is quite possible that you miss some critical data.
That is why it is worth using ready-made services. All of them are easy to use and understand even for beginners, so it won’t take you long to get the basic principles of work. However, if your broker offers a manual, please read it before using it. Perhaps, in it, you will find some pro recommendations and other information that will be useful in the future.
You can choose a narrowly targeted tool if you are only interested in pip or swap data or opt for a comprehensive calculator that estimates many parameters at once. While these instruments may differ slightly depending on the platform you choose, you generally need to specify the following parameters for calculations:
- trading tool (the asset you are trading);
- lot (number of units) size;
- leverage;
- currency;
- your account type;
- ask and bid prices.
Fill in all the fields of the calculator and click the “Calculate” button. Based on the data you entered, you will be offered the following information:
- contract size;
- swap long and short;
- spread;
- point value;
Based on this data, you can plan your further actions. Such calculations can (and should) be carried out for each trade.
Calculator Benefits
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Trading and money management is not easy. You should be fully aware of all the risks associated with investing money in any direction. Such calculators allow you to:
- roughly estimate possible consequences of your actions;
- quickly assess potential profit and loss from a transaction;
- compare results for several positions;
- find out the margin and point and pip value, and so on.
As it was said, you can do these calculations manually. However, specialized services consider all the factors that you might forget about and significantly speed up the workflow. If you have just started your trading career, you can use calculators to test your intuition and your own theories. Plus, you don’t have to search for up-to-date information yourself. The data used by calculators is updated automatically. It helps to avoid errors.
Calculator Disadvantages
Although calculators are really important and useful tools for analytics and money management, do not forget that the data obtained is informative. Unfortunately, no such service can provide a guarantee and full protection against unprofitable transactions. In any activity, calculators should serve as “helpers” that complement your existing knowledge and understanding of the fundamental trading processes.
In no case should you completely rely on the resulting calculations. Experienced investors know it, but newcomers to trading sometimes make this mistake. You should make an informed choice of investment direction based on knowledge and experience and just take into account potential consequences obtained when using a calculator.
Besides, it should be borne in mind that any system can fail. Be sure to follow the news and current events in the world. If it seems to you that the service you use gives a false picture, contact your broker for advice. They will help you understand the situation and tell you about the mechanism of this online tool.
Use Calculators Well
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Any automated helpers are effective only if you know how they work and, in general, have a good understanding of the basic principles of trading. Calculators are necessary elements of analytics that allow you to estimate the consequences of a transaction and, based on it, think over your further actions. Trust this tool for making forecasts, but never completely rely on it, keeping in mind their disadvantages.
Newbies who are just starting their way in trading should, first of all, improve their own knowledge. Attend training courses, seminars, and workshops where professionals share their experiences. Be sure to follow the market, political, economic, and social situations in the world. Do not forget to practice your own tactics on demo accounts and stick to the chosen strategy. If your knowledge is deep and extensive enough, then a trading calculator, economic calendar, and other modern analytical tools will be useful to you.
