# How forex calculate profit?

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0 Forex, also known as foreign exchange or FX, is the decentralized market where currencies are traded. It is the largest financial market in the world, with an estimated \$5.3 trillion worth of currencies being traded every day. One of the key aspects of forex trading is profit, which is the amount of money a trader makes from a trade. In this article, we will explain how forex calculates profit.

Forex profit is calculated using a simple formula: Profit = (Closing Price – Opening Price) x Units Traded x Exchange Rate. Let us break this formula down to understand it better.

Closing Price: The closing price is the price at which a currency pair is sold. It is the price at which a trader exits a trade. This can be either a profit or a loss, depending on whether the closing price is higher or lower than the opening price.

Opening Price: The opening price is the price at which a currency pair is bought. It is the price at which a trader enters a trade. This is usually determined by the trader’s analysis of the market and the factors that affect the currency pair.

Units Traded: The number of units traded is the amount of currency that a trader buys or sells. It is usually measured in lots, with one lot equal to 100,000 units of the base currency.

Exchange Rate: The exchange rate is the value of one currency in relation to another currency. It determines the price at which a currency pair is traded. For example, if the exchange rate between the US dollar and the euro is 1.20, it means that one euro is worth \$1.20.

Now that we understand the basic components of the profit formula, let us look at an example to illustrate how it works.

Suppose a trader buys one lot of the EUR/USD currency pair at an opening price of 1.2000. The trader holds the position for a few hours and then sells it at a closing price of 1.2050. The exchange rate at the time of the trade is 1.2000. How much profit did the trader make?