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Gbp/jpy = Gbp/usd X Usd/jpy ??

  • Post #1
  • Quote
  • First Post: Jan 16, 2008 1:25pm Jan 16, 2008 1:25pm
IBFX spread on GJ is 9 pips. On the other hane , on GU they have 4 pips and UJ 3 pips, total 7 pips spread. So, why not make two orders , one on GU and other on UJ and save 2 pips?

Is this true? If I make this equation using IBFX Bid prices I don't get exact GJ bid price if I multiply GU bid price with UJ bid price.

I have also opened GJ order to compare to GU and UJ ordes. I have thought that the profit of GJ order should be sum of GU and UJ orders, but it isn't so.

What am I missing there?

Thanx foe your expalnation

Piksy
One of the reasons why the spread is wider on GBP/JPY is because their daily range is higher than the other listed currency pairs. Yes, your spread is a little more but your movement on the charts is more too.

I found this on another forex site:

Daily average range:

GBP/JPY = 268.14
GBP/CHF = 177.03
GBP/USD = 137.15
USD/JPY =107.24
EUR/USD = 91.39
USD/CHF = 88.77

I hope that this helps
Thank you for your answer. OK, I can understand the spread issue.

But I don't understand why I don't get the same result (excl spread) if I trade 1 lot GBP/JPY comparing it to the sum of 1 lot GBP/USD + 1 lot USD/JPY trades.

Also, when I have followed the orders on line, the difference between G/J trade and sum of G/U+U/J trades has been changing a lot, from being equal to difference of various pips.

To me , it doesn't make sense.
Quoting piksy
IBFX spread on GJ is 9 pips. On the other hane , on GU they have 4 pips and UJ 3 pips, total 7 pips spread. So, why not make two orders , one on GU and other on UJ and save 2 pips?

Is this true? If I make this equation using IBFX Bid prices I don't get exact GJ bid price if I multiply GU bid price with UJ bid price.

I have also opened GJ order to compare to GU and UJ ordes. I have thought that the profit of GJ order should be sum of GU and UJ orders, but it isn't so.

What am I missing there?

Thanx foe your expalnation

Piksy
Hi Pisky..
I am a system analysis and developer in forex company..
i can give you the answer through my experince in profit calculation analysis;
iam not good in explaination but i will try;

you have to take in your consideration that your account currency in USD:
if you open an order on gbpjpy then every pip you win or loss is converted to usdjpy price then you have the result.
if you open an order on usdjpy then every pip you win or loss is converted to usdjpy price then you have the result.
if you open an order on gbpusd then every pip you win or loss its equal to 1 usd which is you account currency.

EX1: if current usdjpy = 110.00
if you have a profit of one pip on usdjpy then your profit = 1 * 1000 * 0.1 / 110.00 = 0.909 = 0.91 usd.
if you have a profit of one pip on gbpjpy then your profit = 1 * 1000 * 0.1 / 110.00 = 0.909 = 0.91 usd.
Try the previouse example when usdjpy = 120.00 you will find that your pip value is less than 0.91 and its = 0.83; this because the value of jpy in usd less than when its 110.
I will give you her example to explain that when they gave you 9 pip on gbpjpy its will be in your profit; you will not save 2 pips.

assume that the current prices are the following
gbpusd = 2.0000
usdjpy = 110.00
gbpjpy = 220.00

and you will go buy one lot on each pair...

(A) on the end of the week the new prices are the following:
gbpusd = 2.0000
usdjpy = 120.00
gbpjpy = 240.00

your profit in will be the following:
gbpusd = 0 usd
usdjpy = 1000 jpy => 1000 * 1000 * 1.0 lot / 120.00 = 8,333.33 usd
gbpjpy = 2000 jpy => 2000 * 1000 * 1.0 lot / 120.00 = 16,666.66 usd

then the profit and loss of 1 lot on gbpjpy bigger the sum of 2 lots on each of the other pair..
conclusion: so what we can find here that when gbpusd = 2.0000 then each 1 pip move in usdjpy will make 2 move in the same direction on gbpjpy....(1)

THE SECOND CASE:
(B) on the end of the week the new prices are the following:
gbpusd = 2.1000
usdjpy = 110.00
gbpjpy = 231.00

your profit in will be the following:
gbpusd = 10,000 usd
usdjpy = 0 jpy = 0 usd
gbpjpy = 1100 jpy => 1100 * 1000 * 1.0 lot / 110.00 = 10,000 usd

then the profit and loss of 1 lot on gbpjpy equal to the sum of 2 lots on each of the other pair..(Special case that usdjpy without move).
conclusion: so what we can find here that when usdjpy = 110.00 then each 1 pip move in gbpusd will make 1.1 move in the same direction on gbpjpy..(2)


so if your broker offer 9 on g/j and 4 g/u and 3 on u/j
from conclusion 1 we find that 4 pip on g/u will equal to 8 pip on g/j
from conclusion 1 we find that 3 pip on u/j will equal to 3.3 pip on g/j
thae total pip spraed equal 8 + 3.3 = 11.3
you think that when you open eash order separated you will save 2 pip but sorry you are loosing 11.3 - 9 = 2.3 pip; so open your order on gbpjpy directly if you want to save pipsssssss.

i hope so that every thing is clear now;....
  • Post #6
  • Quote
  • Last Post: Jan 18, 2008 7:30am Jan 18, 2008 7:30am
Thank you for your ECELLENT explanation. It's much clearer now.
Piksy


Quoting mohshr001
I will give you her example to explain that when they gave you 9 pip on gbpjpy its will be in your profit; you will not save 2 pips.

assume that the current prices are the following
gbpusd = 2.0000
usdjpy = 110.00
gbpjpy = 220.00

and you will go buy one lot on each pair...

(A) on the end of the week the new prices are the following:
gbpusd = 2.0000
usdjpy = 120.00
gbpjpy = 240.00

your profit in will be the following:
gbpusd = 0 usd
usdjpy = 1000 jpy => 1000 * 1000 * 1.0 lot / 120.00 = 8,333.33 usd
gbpjpy = 2000 jpy => 2000 * 1000 * 1.0 lot / 120.00 = 16,666.66 usd

then the profit and loss of 1 lot on gbpjpy bigger the sum of 2 lots on each of the other pair..
conclusion: so what we can find here that when gbpusd = 2.0000 then each 1 pip move in usdjpy will make 2 move in the same direction on gbpjpy....(1)

THE SECOND CASE:
(B) on the end of the week the new prices are the following:
gbpusd = 2.1000
usdjpy = 110.00
gbpjpy = 231.00

your profit in will be the following:
gbpusd = 10,000 usd
usdjpy = 0 jpy = 0 usd
gbpjpy = 1100 jpy => 1100 * 1000 * 1.0 lot / 110.00 = 10,000 usd

then the profit and loss of 1 lot on gbpjpy equal to the sum of 2 lots on each of the other pair..(Special case that usdjpy without move).
conclusion: so what we can find here that when usdjpy = 110.00 then each 1 pip move in gbpusd will make 1.1 move in the same direction on gbpjpy..(2)


so if your broker offer 9 on g/j and 4 g/u and 3 on u/j
from conclusion 1 we find that 4 pip on g/u will equal to 8 pip on g/j
from conclusion 1 we find that 3 pip on u/j will equal to 3.3 pip on g/j
thae total pip spraed equal 8 + 3.3 = 11.3
you think that when you open eash order separated you will save 2 pip but sorry you are loosing 11.3 - 9 = 2.3 pip; so open your order on gbpjpy directly if you want to save pipsssssss.

i hope so that every thing is clear now;....
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