1. Calculating the Point Value for Direct Currency Pairs: The formula is Point Value = Trading Lot Size x Number of Base Points (Tick Size). For example, for a standard lot size of 100,000 GBP/USD contracts, 1 point value = 100,000 (lot size) x 0.0001 (tick size) = $10 USD. Use this formula to calculate profit or loss (P/L) for direct currency pairs.
2. Calculating the Point Value for Indirect Currency Pairs: The formula is Point Value = Trading Lot Size x Tick Size / Current Exchange Rate. For example, if you buy 100,000 USD/JPY contracts at 120.50, 1 point value = 100,000 (lot size) x 0.01 (tick size) / 120.50 (current rate) = $8.30 USD.
3. Calculating the Point Value for Cross-Currency Pairs: The formula is Point Value = Lot Size x Tick Size x Current Rate of Base Currency / Current Rate of Cross Currency. For example, if you buy 100,000 EUR/GBP contracts at 0.6750 with the EUR/USD exchange rate at 1.1840, 1 point value = 100,000 (lot size) x 0.0001 (tick size) x 1.1840 (EUR/USD rate) / 0.6750 (EUR/GBP rate) = $17.54 USD.
Additional information on trading methods:
1. Spot Forex Trading: An agreement between parties to settle a foreign currency transaction within two business days.
2. Forward Forex Trading: An agreement to settle a foreign currency transaction at a later date, as specified in the contract.
3. Arbitrage Trading: Taking advantage of the price differences between currencies in different markets to make a profit.
4. Carry Trade: Profiting from interest rate differences between two currencies.
5. Swap Trading: Combining two or more foreign exchange transactions with different delivery days, but using the same currency.
6. Forex Futures: A futures contract based on the exchange rate of a currency.
7. Forex Option Trading: An agreement giving the buyer the right, but not the obligation, to exchange currencies at a predetermined price and date.
8. In the future, there may be forex trading platforms jointly operated by banks and internet investment companies, which would reduce costs for individual investors.
Source: Baidu Baike "Foreign Exchange Trading".
