Forex trading is a complex and dynamic field that requires a deep understanding of the various terms and concepts that are used in the industry. One such term is the “round turn,” which is often used by traders to measure their profits or losses in a trade.
In simple terms, a round turn refers to the opening and closing of a single trade. When a trader buys a currency pair, they are said to have opened a long position. Conversely, when they sell a currency pair, they are said to have opened a short position. A round turn occurs when the trader takes both of these actions – opening and closing a position – within a single trading session.
For example, let’s say a trader buys 10,000 units of the EUR/USD currency pair at a price of 1.1200. If the price of the pair rises to 1.1300, the trader may decide to close their position and take their profits. This would result in a round turn, as the trader opened and closed a position within the same trading session.
The calculation of a round turn is important for traders, as it helps them to determine their overall profit or loss in a trade. To calculate the profit or loss from a round turn, traders must take into account the spread – the difference between the bid and ask price of a currency pair.
For example, let’s say the spread for the EUR/USD currency pair is 1 pip (0.0001) and the trader’s broker charges a commission of $5 per round turn. If the trader buys 10,000 units of the EUR/USD currency pair at a price of 1.1200 and sells it at a price of 1.1300, their profit would be calculated as follows:
Profit = (1.1300 – 1.1200 – 0.0001) x 10,000 – $5
Profit = $99.90 – $5
Profit = $94.90
In this example, the trader’s profit from the round turn is $94.90, taking into account the spread and commission charged by their broker.
It’s important to note that not all brokers charge the same commission for round turns. Some may charge a flat fee per lot, while others may offer commission-free trading but have wider spreads. Traders should carefully consider their broker’s fees and charges before opening a trading account.
Round turns are also used to calculate a trader’s trading volume or turnover. Trading volume refers to the total value of trades that a trader has made over a specific period of time. Brokers may use trading volume as a basis for offering rebates or other incentives to their clients.
In conclusion, a round turn is a term used in forex trading to refer to the opening and closing of a single trade within a single trading session. It is an important concept for traders to understand, as it helps them to calculate their profits or losses and determine their trading volume. Traders should carefully consider the fees and charges associated with round turns when choosing a broker and managing their trades.
