DislikedThanks for your input, I will chew more on this.
I don't think I worded my question very well, but I guess what I am getting at is what is the resultant value per pip currency after calculating the lot size? Most example calculations show the value per pip e.g. for a standard lot to be $10 USD but can that be EUR or GBP etc depending on the currency pairs? Or is it always calculated to reflect the value per pip in USD? What if my broker account is held in GBP etc?
Thanks in advance to all contributorsIgnored
you are back to the euro -> dollar -> token, token -> dollar -> euro example i gave. mt4's tick value it reports via mql code is in the accounts denomination.
from the mql help - " MODE_TICKVALUE Tick value in the deposit currency".
the reason all examples you read online refer to USD this and that and whatever is because all the examples are surely on US websites and written by US residents, therefore their entire perspective is from a US stance with USD accounts... so any example they give where they talk about xxx/usd is going to be only half the story compared to anyone who doesn't have an account in USD. they don't need to do any further conversions.
they say when you trade currencies you are buying one currency and selling another.... this is where your answer lies. when you are going long on EURUSD you are buying euros and selling US Dollars. but, if you already own US dollars then it's really just a case of selling US Dollars FOR euro's. it's not so much you are doing 2 things, buying a currency and selling another, it's more a case of you are just buying one currency WITH your own currency just like when you buy anything else. keep this in mind as you read on.
if you have 1 USD and the rate is EUR/USD 1.0000 then when you go long and price moves up to EUR/USD 2.0000 and you sell your euro for USD $2 you are now left with USD $2. you can draw that $2 straight out of your trading account, stick it in your pocket or bank, and then when ready buy something with it.... as long as you are in the US where you can use this USD $2. you bought some number of euro's with your USD and then sold them later in return for USD's.
similarly if you had gone long at EUR/USD 2.0000 and price went up to EUR/USD 3.0000 and you sold your euro you would be left holding USD $3, but keeping in mind that it cost you USD $2 at the start to buy one euro, so the movement of one dollar again only nets you a profit of $1.
this is what pip_seeker's linked article is about. they are from the US with USD accounts talking about USD pairs. note how the article mentions that this only works when the account currency = the quote currency (i.e. xxx/USD). this is also different to what i previously said in recent posts and where i had things quite inside-out due to my own stupid confusion over different things.
anyway, that's all fine and dandy for anyone living in the US trading xxx/USD pairs, since it is just like using their own money in their pocket to buy xxx, then at some point selling the xxx back into their own currency without any further considerations needed. it is just like buying any type of investment (house, car, boat) and then later selling it. you know that as the sell price goes up or down it is equal to your profit and loss.
as for your question re accounts not being in USD when trading a xxx/USD pair for example then it is a case of doing an initial exchange from your currency into USD, then the USD to xxx conversion can take place. since your account currency has it's own rate floating against the USD (unless it IS USD's) then your per pip value changes. if you have GBP's and want to trade the EUR/USD then your per pip value is going to be affected by the floating GBP/USD rate since you consider the process to be a case of converting your GBP's to USD, then using those USD's to buy EURO's... and then back again in reverse. this means the per pip value changes as the gbpusd rate changes and your profit and loss changes, even without the eur/usd rate changing. however, the granularity of the changes is generally going to be so small as to be unnecessary to even consider (since the gbp/usd rate is only changing $0.0001 per tick). what it does mean, however, is that over time as the rates change the per pip value will change to some small degree.
now, take that idea and consider the case where your account currency is not the quote currency, but IS the base currency. well just invert the rate and use that as your xxx/Quote rate and consider like previously. for example USD/JPY $n is the same as JPY/USD 1/$n.
bottom line is this (if i'm finally correct)... if your account currency is not the quote currency (base/quote) then you first need to do a conversion from your account currency into the quote currency at the current exchange rate, and then you can proceed with the rest of the actual quote to base then base to quote conversion, and then convert back from the quote to your account currency at the current exchange rate.
ok, my brain is fried and i'm done. hopefully what i have said is finally factual and relevant. i'll be glad for anyone to come along and completely destroy what i have said if / when they find errors. sorry about the previous post/s. i know what i was thinking and why i was wrong and how i arrived where i got... so my bad. hopefully this time is the winner.
Congratulations ScalaFX for coming out of the closet!
