In the past, spot foreign exchange transactions conducted at a specific amount were called lots. The standard level of 1 lot is 100,000 units. Of course, there are mini-hands, micro-hands, and nano-hands, whose sizes are 10,000 units, 1,000 units, and 100 units, respectively.
The value of a standard contract in foreign exchange transactions-Yuhui International
You already know that currency is measured in points, which is the smallest unit of currency.
Suppose we need to use 100,000 units (1 standard lot) of currency. In this case, we will calculate the monetary value represented by 1 point.
- The USD / JPY exchange rate is at 119.80
(0.01 / 119.80) * 100,000 = 8.34 USD / point
- The USD / CHF exchange rate is at 1.4555
(0.0001 / 1.4555) * 100,000 = 6.87 USD / point
In the case where the USD is not the first quote currency, the formula is slightly different:
- The euro / dollar exchange rate is at 1.1930
(0.0001 / 1.1930) * 100,000 = 8.38 USD / point
8.38 USD / point * 1.1930 = 9.99734 USD / point
9.99734 rounded to about 10 USD / point
- The GBP / USD exchange rate is at 1.8040
(0.0001 / 1.8040) * 100,000 = 5.54 USD / point
$ 5.54 / point * 1.8040 = $ 9.99415 / point
9.99415 rounded to about 10 USD / point
For the calculation of the point value, your broker may have different conversion methods, but no matter which conversion method, they can tell you the value of a currency pair at 1 point at a specific time. As the market develops, the point value of a currency pair will also change as the exchange rate of the currency pair you trade changes.