What is a Trader's Calculator?
One of the pillars of successful trading is money management or money management. Finding the right entry point is not enough. It is also necessary to determine what the volume of the position should be, what risk can be allowed in the transaction and how to calculate it correctly.
The forex commission calculator can help with all this, allowing you to automate calculations and speed up the process before opening a deal.
Why do you Need a Calculator?
The whole money management, or money management system in Forex trading, comes down to the ability to calculate several important indicators. The Forex Trader's Calculator is a tool for automating these calculations. The first aspect of risk management is the risk/reward ratio of a trade.
According to the classics, it should be 1:3 and is calculated based on the mathematical expectation of the trading strategy. However, sometimes 1:2 is allowed to make the system profitable.
The amount of risk is measured by the size of the stop loss embedded in the transaction. It is calculated in points. After that, you need to determine how much this will amount to in money. To do this, you need to multiply the point size for the currency pair by the number of points.
Knowing the money risk per position, it is easy to calculate what percentage of the deposit this amount will be. At the same time, the trader sets the maximum allowable risk per trade according to his risk profile. It is recommended not to exceed 1-3%, and the lower the indicator, the better.
Leverage and margin: How can a Trader's Calculator Help?
In trading training, beginners will learn not only what Japanese candlesticks are and how to buy Apple stock, but also what leverage is. Having the opportunity to use not only own funds for trading but also borrowed funds, it is important to understand that this is not only an opportunity to increase profits but also a potential increase in risks.
The margin can be easily calculated in advance using the online trader's calculator, just by setting the parameters of the trading instrument, lot size and leverage. After that, it will become clear what amount will be reserved on the account at the time of opening a position, as well as what gap will remain to ensure this position in the form of free funds.
How to use the Trader's Calculator?
To calculate money management parameters using their trading strategy, traders used to create their calculators in an Excel spreadsheet. Now the need for this has disappeared since you can download a ready-made trader's calculator or use it online. As a rule, many large brokers have such a calculator on their websites. They put a lot of emphasis on risk management, and more.
In the calculator, you can calculate how much one point costs for the desired currency pair, and calculate the risk, and the margin. Conveniently, this calculator allows you to calculate the amount of risk in a trade in a few seconds without drawing up proportions and manual calculations for given parameters of the stop loss size, trading lot and amount on the trading account.
A separate section of the calculator allows you to calculate the margin, and percentage of profit and loss, taking into account the type of account that the trader has chosen in the brokerage company. This automatically takes into account several parameters, depriving the trader of the need to spend extra time on calculations, and also removes the influence of the human factor.
There is no unequivocal answer to the question of what is better - to download the Forex trader's calculator or use it online. It all depends on personal preferences and options that this or the development of this tool provides.
The Trader's Calculator was created to help the stock speculator calculate the most important parameters when trading on the financial exchange.
The program allows you to calculate:
- risk level;
- point value;
- level of income and losses;
- the scope of the contract;
- margin values;
- stop loss level.
Of course, all these calculations can be done manually, without software, but it will take much more time and effort than using the program.
The advantages of the calculator are obvious:
- high mathematical accuracy;
- calculation speed, which is important in the process of exchange trading, since the situation on the market is constantly changing and the decision to open or close a position often has to be made promptly;
- the investor can always quickly see the degree of risk before opening a transaction and assess its justification.
Although the Trader's Calculator is a useful tool to facilitate the work of a stock trader, the data obtained using this program is for informational purposes only.
The program provides traders with accurate information on inputs at a particular point in time. The financial market is a volatile environment and the situation here can change at any second.
It is necessary to compare the received data with the latest news, the opinion of analysts and the results of independent technical analysis. This is the only way to get a high chance of concluding a successful transaction.
Some brokers have a trader's profitability calculator on their websites that allows the investor to calculate the potential profit that the manager will bring to him if he agrees with him.
A calculator for a computer is a separate program installed on a PC or other device that works offline. You can do the following with the assistance of the programme:
- predict the drain of the deposit;
- calculate stop loss and take profit levels;
- compare currency pairs by collateral and price of one pip;
- predict the growth of the deposit.
All versions of Windows are supported by the programme.
There are also special extensions for the younger version of the popular MT5 trading terminal – MetaTrader 4, installed in the terminal through the MQL4 catalogue. Using the extension, you can calculate the level of free margin before the start of the transaction, the number of points of the largest level of floating losses, the size of the swap, the margin level of the selected position, and the possible profit and loss.
As you can see, this is a great tool for trading and potential earnings.
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