Before discussing how you can calculate profit for FX rates you should understand the example being given here with the DKK/SGD. The DKK is pegged to the Euro, which means it will be influenced by Euro movements and economic discussions. The SGD or Singapore dollar is also pegged, but no one knows for sure what basket of currencies they are partnered with. It can make it difficult to assess the movements of the SGD. There is little threat that the SGD would be pegged with the Danish Krone given the two exotic currencies and no trading relationship these countries have. The SGD is thought to be pegged against countries they trade with regularly.
FX Rates Favour SGD
The Singapore dollar tends to have the better rate against several of the exotic currencies. The current DKK/SGD FX rates have been near .23. This means 1 DKK is about .23 SGD. The rate has moved between .15 and .30 in the last year for this pairing.
Before you can even trade this pair you have to find a broker willing to offer it to you. Exotic currencies are not something all brokers will deal in. There are several reasons for this that should also be explored. First, brokers are there to offer a service and make money. They want to make money from your willingness to trade. If you get into exotic pairs in which the profit and loss is near impossible to calculate due to sudden and very volatile market movements, then you may stop trading all together. The fear of most brokers is that they will offer FX rates you do not care to trade or will lose so much that you stop trading. Yet, there are at least two online brokers that will offer most of the exotic currencies.
FX Rates Profit and Loss Talks for DKK/SGD
Since the main thing you want is profit from your trades, you have to understand the calculation. Your broker will calculate the profits for you, but this is only if you have a position open. If you have no open position then you need to calculate when to get in and out of the market to gain a certain profit on the moving FX rates.
The simplest calculation is to take your lot size and multiply it by the pip movement in tick size. In other words if you see .23 and a move to .53 it is a .30 move. If you have a position of 10,000 you would gain a profit of $3,000 SGD. To convert this to DKK you have to take the current FX rates you see for the DKK/SGD thus the .53 and divide the SGD profit by it. You would get 3,000 divided by .52 equals 5660.38 DKK. Remember the DKK is of a lower value in currency than the SGD because you have a number below 1 for the rate. This is why you have a larger number for DKK profit. If the DKK was at a better value the number would be lower.