Calculating percent change in forex is an essential skill for traders, as it helps them identify the degree of change in a currency pair’s value over time. Percent change is calculated by comparing the current rate of a currency pair with its previous rate, and then expressing the difference as a percentage. This article will provide a step-by-step guide on how to calculate percent change in forex.
Step 1: Determine the Base Rate
The first step in calculating percent change in forex is to determine the base rate, which is the starting rate for the currency pair being analyzed. This can be a previous day’s closing rate, the opening rate for the current day, or any other rate that represents the starting point for the currency pair’s value.
Step 2: Determine the New Rate
The second step is to determine the new rate, which represents the currency pair’s current value. This can be the current market rate, the closing rate for the day, or any other rate that represents the currency pair’s current value.
Step 3: Calculate the Difference
The third step is to calculate the difference between the base rate and the new rate. This is done by subtracting the base rate from the new rate. For example, if the base rate is 1.2500 and the new rate is 1.3000, the difference would be 0.0500.
Step 4: Divide the Difference by the Base Rate
The fourth step is to divide the difference by the base rate. This will give you the decimal value of the percent change. In our example, the decimal value would be 0.0400 (0.0500 divided by 1.2500).
Step 5: Multiply by 100
The final step is to multiply the decimal value by 100 to get the percentage change. In our example, the percentage change would be 4.00% (0.0400 multiplied by 100).
An Example of Calculating Percent Change in Forex
Let’s take a practical example to illustrate how to calculate percent change in forex. Assume that the EUR/USD currency pair had a base rate of 1.1200 and a new rate of 1.1500. Here are the steps to calculate the percent change:
Step 1: Determine the base rate: 1.1200
Step 2: Determine the new rate: 1.1500
Step 3: Calculate the difference: 1.1500 – 1.1200 = 0.0300
Step 4: Divide the difference by the base rate: 0.0300 / 1.1200 = 0.0268
Step 5: Multiply by 100: 0.0268 x 100 = 2.68%
Therefore, the percent change in the EUR/USD currency pair is 2.68%.
Conclusion
Calculating percent change in forex is an essential skill for traders, as it helps them identify the degree of change in a currency pair’s value over time. To calculate percent change, traders need to determine the base rate, the new rate, calculate the difference, divide the difference by the base rate, and multiply by 100. By mastering this skill, traders can gain a deeper understanding of the currency markets and make more informed trading decisions.
