HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

How to Calculate the Value of One Point in Forex


A point is a very important concept for calculating possible profit or loss in financial markets. When conducting transactions, you need to clearly understand how much one point costs and how your deposit will change if the price goes in one direction or another, for example, 50 or 100 points.  This affects not only the choice of a particular currency pair and trading strategy, but also the determining of the volume of the transaction, the permissible degree of risk, setting Stop Loss and Take Profit orders. It is necessary to know the point value in order to calculate the spread value, to understand how much you can earn or lose due to a swap, at what moment Margin Call and Stop Out can occur.

In general, a point is something without which money management is simply impossible.

What Is a Point in Forex

The standard and most common currency for a trader's deposit is the US dollar. And naturally, we need to know how much one point costs in USD. This is the only way we can understand how the fluctuation of quotes will affect the balance of our trading account. And while it is quite easy to calculate everything for Forex pairs such as EUR/USD, it will be more difficult to determine how much a spread or swap is worth in US dollars, for example, for NZD/CHF. Moreover, there are a number of nuances here.

As mentioned above, one point is 0.00010 for X.YYYYy format pairs. That is, if the quote of the EUR/USD pair has changed from 1.10000 to 1.10010, it is considered that it has passed 1 point. And if, for example, the quote has changed from 1.10750 to 1.11000, it means that it has risen by 25 points. The same is true for the reverse movement: if the quote has changed from 1.10000 to 1.09000, it means that the price has fallen by 100 points.

As for the XXX.YYy format, in this case 1 point is the value of 0.01. That is, if the quote has gone from, say, from 120.250 to 120.750, this means that the movement was 25 points.

How to Calculate the Value of One Point in Forex

What a Lot Is and What Base and Quote Currencies Are

In addition to the point, we will also need to use such a value as a lot in the calculations. A lot is a unit of trade volume that is always 100,000 units of the base currency. The base currency is the one that comes first in the pair. It is it that the trader sells or buys in exchange for the quote one. For example, a quote of 1.1020 for the EUR/USD pair means that the current value of 1 EUR (base currency) is equal to 1.1020 USD (quote currency). Thus, the cost of 1 lot (100,000 EUR) in this case will be 110,200 USD.

At first glance, it seems that a position of 1 lot is very large, but do not forget about the leverage. For example, at the NordFX brokerage company, it can reach the value of 1:1000 at the trader's request.

Thus, to open a position of 1 lot in the EUR/USD pair, with a leverage of 1:1000, you will need a deposit 1000 times less than the cost of the lot, that is, 1.102 USD. And you will need to have 11.02 USD to open the minimum possible trade of 0.01 lot. (This is in theory. In practice, in all cases, it is necessary to take into account the additional costs of the spread or commission, as well as the fact that the trade may go against the position you opened).  

Calculating the Point Value for Different Types of Pairs

So, how do you calculate the value of 1 point? (Recall that we are talking about "old" points - 0.0001. The price of 1 unit will be 10 times less for "new micropoints"). The calculation formula looks like this:

(Position Volume × Point) / Quote Currency Rate to USD = Point Value

Option 1. For pairs where the dollar is in the second position, that is, it is the quote currency itself (EUR/USD, GBP/USD, AUD/USD, etc.), the quote rate is 1. Therefore, in calculations, you simply need to multiply the position volume in lots by the point size. For example, you open a position with a size of 0.1 lot, that is, 0.1×100,000=10,000. Then we have:

(10,000 × 0.0001) / 1 = 1 USD

Option 2. For pairs where the dollar is in the first position in the pair, one more parameter is added: the current rate of the quote currency to 1 USD.  For example, we open a USD/CAD trade with a volume of 1 lot (100,000 USD) at the current rate of 1.2645. As a result, we have:

(100,000 × 0.0001) / 1.2645 = 7.91 USD

Option 3. For cross pairs that do not include the US dollar, a different procedure for calculating the value of a point applies:

(Position Volume × Point) x Base Currency to USD Rate / Current Pair Rate = Point Value

Let's make a calculation using the example of the GBP/NZD pair for a trade with a volume of 0.1 lot at the current rate of 1.9020 and the GBP/USD base currency rate of 1.3015:

(10,000 × 0.0001) × 1.3015 / 1.9020 = 0.68 USD.

How Trader's Calculator and MetaTrader-4 Can Help

In conclusion, we want to remind you of such a convenient option as the Trader's calculator, which is located in the Tools section on the official NordFX website. You can use it to instantly calculate the cost of one point, find out the size of the spread and swap, as well as the margin requirements for each account type. In just a few seconds, you will not only learn all of these parameters important for trading, but also calculate the size of the expected profit (or loss) for several positions at once. At the same time, the risk of error is reduced to zero, since all the account parameters are already included in the calculator. You will find a detailed description of how to do all this on the same website page.

As for the status of the transaction you have already opened, you can follow the current profit or loss in the MetaTrader-4 trading terminal.

#source


RELATED

Currency Strength Meter: Complete Guide

Any trader needs to define the direction of the currency pair. It is also important to remember that the market movement is defined by the strength and weakness...

How to take your Forex trading to the next level

The Forex market is one of the most volatile and lucrative markets in the trading landscape. Worth an absolutely unfathomable $6.5+ trillion a day, it dwarfs...

The Double Top Pattern: An In-Depth Guide to Mastering a Timeless Reversal Signal

While it's often claimed that markets are unpredictable, there's a method to the madness. Certain price chart patterns like the double top pattern offer a systematic way to read market movements, acting as historical footprints that signal future trends...

T4Trade: Technical Analysis Techniques

Technical analysis techniques are vital for making informed trading decisions and to reduce the risk of large capital losses. In this article, we explore some of the most popular techniques and tools used by traders worldwide...

Leverage and Margin in Forex

Leverage and margin are the terms each trader starts with. The concept is simple, so even a beginner trader will catch on fast. However, there are pitfalls that may affect traders...

Do you follow the Trend Lines?

Looking for ways to boost your technical analysis skills? Keep reading to see if trend lines are part of your trading strategy!

Technical Analysis Tools

Read on to find out about some of the most popular technical analysis tools that traders can use, such as Bollinger Bands, MACD, and RSI...

Best Trading Indicators: A Guide to the 17 Most Popular Technical Analysis Tools

In the intricate world of financial trading, one can easily get overwhelmed by the enormous amounts of data flooding the markets daily. Technical analysis offers a structured approach...

The US Dollar Index Chart. What is it, and how do you use it?

Many traders use indices in their trading. The stock market offers a huge variety of indices such as the S&P 500, NASDAQ, Dow Jones, etc. They provide a picture...

Bullish and Bearish Divergence: How to Catch a Signal

In analytics, there is a chance you’ll come across the term divergence. Divergence is one of the well-known market conditions that provide reliable signals...

Technical Analysis: Directional Movement Index

Get ready for another instalment in our technical analysis educational series. After a multi-week hiatus, we’re back and ready to share even more knowledge

Trading Chart Patterns: The how-to guide

One helpful skill for traders is learning how to trade chart patterns. But what is chart pattern analysis and how reliable is it? Let’s explore the most common patterns recognized...

The Ascending Triangle Pattern in Trading

Investors tend to use different tools to define the market direction. Technical indicators, candlesticks and chart patterns are all key to successful trading...

A Comprehensive Guide to Technical Analysis: Definition, Tools & Examples

Technical Analysis is a systematized approach employed by traders to predict price movements and trends by examining market data, primarily price and volume...

What is Fundamental Analysis?

Understanding the core of an activity always makes it easier to do it regardless of how complicated it is. That is the case with fundamental analysis. While it may be done through...

Introduction to technical analysis in forex trading

Learn how traders use technical analysis to enhance their strategies and make informed trading decisions...

Mastering The 50-Day Moving Average And Its Applications in 2023

In the ever-evolving realm of financial markets, gaining a deep understanding of various tools and indicators is essential for deciphering price trends and making informed decisions...

Technical analysis: what separates the pros from the schmoes

In essence, technical analysis hinges on the study of past price movements and trends to predict future market developments. It first emerged as a tradition...

Stop Orders Demystified: A Comprehensive Examination

In the intricate tapestry of financial markets, an arsenal of tools and techniques awaits traders and investors. Among these, trading orders serve as the backbone of any robust trading strategy...

A matrix to understand the Gold market

US investment bank Morgan Stanley produced a research note yesterday detailing that they see a period where real US bond yields rise in the near-term...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.