FOREX is truly a numbers game with pips, dollars, lot size, stop-loss, takeprofit, leverage, margin, profit and loss, transaction costs, and more to know. Separately they are not difficult to understand but the interrelationships involving various mathematical formulas, ratios, decimals, and fractions can be difficult to master. For example, the pip amount of your take-profit divided by the pip amount of your stop-loss is the profit-to-loss ratio. It, in turn, is closely related to the ratio of winners to losers over a fixed number of trades. The new trader has a big plate, as is, even before considering these myriad mathematical mechanizations.
All of the mechanics are important and worth knowing. But I have found over years of mentoring new traders that they are best learned by practice. Your broker’s trading platform and/or tools on their web site should allow you to calculate most of these values. Simply using your demo account diligently can, over time, make most of these clear to you. As you calculate the values make an effort to see the relationship between each of the numbers, essentially reverseengineering them.
TIP: All calculations involve two or more factors. Change only one of them at a time, up and down, and see how they affect the others. Excellent calculation tools are available on www.goforex.net, www.forexcalc.com, and www.oanda.com.
For those who have a penchant for math, I have included most of the key calculations with examples in Appendix G. For those who do not, I offer Trading Tables. These are the key calculations and ratios you should know for getting started. Most of them are related to converting pips to dollars, profit and loss, and money management. In Chapter 16, “Money Management Simplified,” you learn how to put these tables to good use. You can use these computer-side as you trade. All of them are available for download from the Getting Started section of www.goodmanworks.com.
For the Trading Tables, pip values have been rounded off slightly in some cases to make them easier for the student to use.
All of the mechanics are important and worth knowing. But I have found over years of mentoring new traders that they are best learned by practice. Your broker’s trading platform and/or tools on their web site should allow you to calculate most of these values. Simply using your demo account diligently can, over time, make most of these clear to you. As you calculate the values make an effort to see the relationship between each of the numbers, essentially reverseengineering them.
TIP: All calculations involve two or more factors. Change only one of them at a time, up and down, and see how they affect the others. Excellent calculation tools are available on www.goforex.net, www.forexcalc.com, and www.oanda.com.
For those who have a penchant for math, I have included most of the key calculations with examples in Appendix G. For those who do not, I offer Trading Tables. These are the key calculations and ratios you should know for getting started. Most of them are related to converting pips to dollars, profit and loss, and money management. In Chapter 16, “Money Management Simplified,” you learn how to put these tables to good use. You can use these computer-side as you trade. All of them are available for download from the Getting Started section of www.goodmanworks.com.
For the Trading Tables, pip values have been rounded off slightly in some cases to make them easier for the student to use.
