It is also one of the oldest stock market indices which has become a top choice of traders when it comes to the dynamic stock index asset class. Calculation of pips is one of the most common ways of assessing the profit prospects of a trading instrument. Today, you will learn about calculating profits in pips using a US30 calculator while trading with the US30 index.
What is the US30 Index?
Just as the name suggests, this index is made up of 30 most traded US company stocks listed in 2 major US exchanges which are NASDAQ and the New York exchange. These 30 stocks belong to the largest, blue chip companies which are the backbone of the US economy. If we look back into the history of this index, it was actually created by the Wall Street Journal editor Charles Dow as a means for measuring the performance of the US stock market as a whole. Eventually, the index became a standard trading instrument which moves as per the health of the US economy.
How to Count Pips on US30?
As you may already know, the concept of pips originated from the forex trading industry as a unit to measure the exchange rate fluctuations that happen in currency pairs. 1 pip is the smallest unit of price change that can happen in a trading instrument. Percentage Interest Point, popularly known as pips, quickly became a standard measure of price movements across a number of asset classes including stocks and indices. Traders started to use pips as a unit of measurement for profit calculation in various markets which made the calculation of profits by counting pips a part and parcel of the trading process.
Speaking of the Dow Jones Industrial Average, also known as, US30 index, one pip is stated as 0.1 difference in price. The value of a pip keeps changing based on the base currency of your trading account. The very purpose of pip value is to determine the number of currency units you would need for opening a particular trade position.
The general formula for pip calculation is as follows:
Pip value = Pip size / exchange rate * position size
Let’s understand the pip value calculator in the US30 index by using an example. Suppose you are trading with USD as your account base currency, and you choose to open a trade position with US30 index with position size of 1 lot, in this case the pip value will be calculated as following:
Pip value + 0.1 / current exchange rate of USD * 1 = $1.00
One thing that makes pip calculation easy while trading with USD as base currency is the fact that the pip value is constant when your account is funded with US Dollar. So, let’s take another example to get more clarity about pip calculation.
In this case, the account base currency is Euro and the lot size remains the same. But the pip value will change based on the current exchange rate of Euro. Let’s take another example with GBP as base currency, for instance if the exchange rate happens to be 1.393 for GBP and the pip calculation for US30 will be done like this:
Pip value= (0.0001/1.3935) * 100,000 (lot size in number of units)
This gives us the answer £7.18 which is the pip value for the US30 index while trading with GBP as base currency.
How to Use a Pip Calculator and Profit Calculator as a US30 Profit Calculator?
Pip and profit calculations can be a bit complicated and time consuming even for the most experienced trader out there. Because the exchange rates keep fluctuating and the change will be reflected in the pip value and potential profits/losses as well. So, we can use this simple tool called trading calculators as our U30 profit calculator to simplify and speed up the calculation process with a high level of accuracy. By doing so, you will get instant results with at most precision which will make it easier for you to plan your trades with the US30 index.
Using a forex pip calculator is pretty simple as you just need to follow the steps as given below.
- Find an online pip calculator which is mostly available for free on different broker and trading platforms.
- Choose indices in the asset class on the pip calculator
- Choose your account base currency
- Choose US30 as a trading instrumen
- Enter your trade size in lot
- Hit the calculate button
You will see the pip value displayed in the pip calculator once you follow the steps. Here the regular pip calculator will function as a US30 profit calculator as you will get to know how much profit you can earn in your base currency when the index moves by 1 pip.
But you need to use another simple yet powerful tool called profit & loss calculator in order to get more clarity about the potential profits/losses while trading with US30. This can be done in following steps:
- Open the profit calculator on your broker platform
- Choose indices as asset classes
- Specify your account base currency
- Specify US30 as a trading instrument
- Specify the type of position being opened (Buy/Sell
- Enter your entry price and exit price for the trade along with trade size in lots
- Click ‘calculate’ to get the possible trading results of your trade
Functions of US30 Profit Calculator
- Helps you in planning your trades better by displaying the possible outcomes of a trade in different scenarios based on the values that you enter
- Helps you in managing your exposure to market risk in a trade position
- Helps you determine the optimal lot size for a trade based on the expected results.
- Gives precise results within no time to speed up the process of trading.
Tips for Using US30 Profit Calculator
- Always double check the data that you enter to the calculator as wrong information will give wrong results which can affect your trades.
- You may need to manually calculate the difference that happens with spreads or slippage in live trading.
You can see how the complex calculation process is made simple and quick with the help of a basic trading calculator which is being used as a US30 profit calculator. Similar to this calculator, there is a dedicated calculator to calculate NASDAQ indices as well, which is known as NAS100 calculator.
Doing these calculations manually may take up a lot of time and the manual errors can lead to costly mistakes which stops you from reaching your profit potential. Hence, using an automated trading calculator set provided by your broker or trading platform would be ideal to calculate and plan your trades with minimal effort and time.
Such tools make trading easier than ever even for a complete beginner navigating the markets. So, make sure you take time to find such tools and use them well for making sound trading decisions.