i What this calculator does
Quick answer: Every forex position is two currency bets at once; adding them up by currency often shows that several trades are really one large bet on the US dollar. With the default inputs the calculator returns largest net exposure: Short USD.
Buying EUR/USD is two positions: long euros and short dollars. Sell USD/JPY and you are again short dollars, this time against yen. Open five trades on five pairs and you may believe you are diversified while holding one large short-dollar position that a single US data release can move against you all at once. This calculator splits every open position into its two currency legs, adds them up by currency and converts each total to US dollars, so the real shape of the book is visible.
It then estimates the risk of the combined book with typical volatilities and correlations between currencies, and returns a value-at-risk figure for one day or longer. Correlation between individual pairs is covered by the correlation calculator, and the background in how currency correlation works.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
Common results
What the calculator returns as the holding period (days) changes, with every other input at its default (account size 50000, units per lot 100000, value-at-risk confidence 95%).
| Holding period (days) | Value at risk | Largest net exposure | Net US dollar exposure |
|---|---|---|---|
| 1 days | $2 961 | Short USD | Short $398 500 |
| 2 days | $4 187 | Short USD | Short $398 500 |
| 5 days | $6 620 | Short USD | Short $398 500 |
| 10 days | $9 363 | Short USD | Short $398 500 |
| 20 days | $13 241 | Short USD | Short $398 500 |
How the legs add up
A long position in BASE/QUOTE adds the lot size in the base currency and subtracts the lot size times the price in the quote currency; a short does the reverse. Long EUR/USD and long GBP/USD therefore leave you short dollars twice, and long EUR/USD with short EUR/GBP leaves you long pounds and short dollars, with the euro cancelling. The table shows the net amount in each currency and its US dollar equivalent, which is the number that moves your account when that currency moves.
Value at risk, and what it leaves out
The calculator treats each currency against the US dollar as a risk factor, with a typical annual volatility (about 7% for the euro, 10% for the yen and 15% for the rand) and correlations driven by a common dollar factor. Value at risk is the loss that should be exceeded only on 5% of days at 95% confidence, scaled by the square root of the holding period. It is an estimate under normal conditions: in a crisis correlations rise and gaps happen, so treat it as a minimum, and size each trade from its stop with the position size calculator.
Using the result
If one currency dominates the risk column, the book is a single trade however many pairs it uses. Reducing that exposure, for example by closing the weakest of three short-dollar trades, usually cuts the value at risk far more than tightening stops. The portfolio heat calculator adds up risk from stops, and the dollar index calculator shows how the dollar itself is measured.
Spotted an outdated figure? If a rate, limit or formula in this calculator no longer matches its source, email us the page and the source. A material correction is dated on the Updates Log.
Frequently asked questions
What is net currency exposure?
The total amount you are long or short in each currency after adding up both legs of every open position. It shows which currencies your account actually depends on.
Why does buying EUR/USD make me short dollars?
A currency pair is an exchange. Buying EUR/USD means buying euros and paying with dollars, so you hold euros and owe dollars.
Are several forex trades on different pairs diversified?
Often not. Many major pairs share the US dollar as one leg, so trades on EUR/USD, GBP/USD and AUD/USD are largely the same dollar trade.
How accurate is the value at risk?
It is an estimate based on typical volatilities and correlations in normal markets. Real losses can be larger in volatile periods, when correlations rise and prices gap.
Do I need to enter prices?
Prices make the conversion exact. Without them the calculator uses default rates for common currencies, which is fine for a quick check.
Can I include gold and silver?
Yes. Enter XAUUSD or XAGUSD with a lot size that matches your broker, for example 100 ounces for a standard gold lot.
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