The calculations in FOREX can be confusing, although they are not inherently difficult. Study will get you only so far; practice is the key. Use an online FOREX calculator to see how the various calculations work, then practice with a demo account from one of the brokers we highlight in Chapter 7. More on calculations used in FOREX is provided in Chapter 2 on money management.
You’ll eventually need to be able to make these calculations instantaneously; the FOREX markets move quickly, real-time, and you’ll need to concentrate on trading, not calculations. But don’t worry if they don’t come to you right away.
Most broker trading platforms have FOREX calculators you can use to become familiar with how the various values and units interact.
Remember that a currency transaction is between two currencies, not a single currency and a product as is true in stocks and commodity futures. You may either buy or sell a currency, profiting if it goes up or down. If you buy a currency, you are said to be long and an offsetting transaction is to sell. If you sell a currency, you are said to be short and an offsetting transaction is to buy.
EUR/USD is the symbol for the euro-to-U.S. dollar currency pair. If you buy, you are going long the front or base currency and effectively short the back or counter currency. If you sell, you are going short the base currency and effectively long the counter currency.
The basic calculations you will want to learn are the following: