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Quick Question regarding this "Forex"

  • #1
  • First Post: Nov 2, 2013 9:19pm Nov 2, 2013 9:19pm
Can someone who is good at explaining stuff tell me how lot size, leverage, "volume" and your invested capital affect profits or losses in trading?

It's a bit musky.
uphill battle
  • #2
  • Nov 2, 2013 10:34pm Nov 2, 2013 10:34pm
Here is my take: lot size is the size of the block of money being traded. Leverage is the amount of margin used to control the block of money. Volume is amount of money that is exchanged in a particular time period.. Since we are talking about Forex, the volume is not true volume but is the number price ticks that occur in a give candle.. it has nothing to do with how much you will profit or loss unless using it to help time entries and exit based on volatility.. Your broker determines what amount of leverage or margin that you can hold in against your account size at any one time.. the lot size will give you a factor of leverage based on the accounts total value includes opened trades.. So basically the larger the lot size / leverage the greater the effect of profits or losses in a trade..

Hope that helps.
Cheers
  • #3
  • Nov 2, 2013 10:52pm Nov 2, 2013 10:52pm
Quoting javapro
Here is my take: lot size is the size of the block of money being traded. Leverage is the amount of margin used to control the block of money. Volume is amount of money that is exchanged in a particular time period.. Since we are talking about Forex, the volume is not true volume but is the number price ticks that occur in a given candle.. it has nothing to do with how much you will profit or loss unless using it to help time entries and exit based on volatility.. Your broker determines what amount of leverage or margin that you can hold in against...

I see - thanks much - is there a specific way to calculate what a pip (either negatively or positively) would value against a specific lot size and leverage?
uphill battle
  • #4
  • Nov 3, 2013 12:54am Nov 3, 2013 12:54am
Quoting Gizmosis350k
{quote} I see - thanks much - is there a specific way to calculate what a pip (either negatively or positively) would value against a specific lot size and leverage?
You have several approaches to calculating pip values..

You can use the symbols properties in MT4 as shown here:
http://en.tradimo.com/learn/metatrad...ing-pip-value/

Use one of many pip calculators tools on Forex Sites:
http://www.babypips.com/tools/forex-...s/pipvalue.php
&
http://www.earnforex.com/pip-value-calculator

Also - determine position size:
http://www.babypips.com/tools/forex-...sitionsize.php
&
http://www.earnforex.com/position-size-calculator

Lastly you might have a 'pips values' indicator or EA that is available through your broker... IBFX has this and I am sure others do also.

Hope that helps.

Cheers.
  • #5
  • Nov 4, 2013 7:04am Nov 4, 2013 7:04am
I also have questions regarding forex. I've been using the trading platform MT4 for several weeks now, and I've recently began winning all my trades. (1) I'm still having trouble calculating what my actual cash value would be if I was using real money and not a demo account. (2) When I set my stop loss/take profit, the software doesn't recognize the request, I believe I'm doing it correctly. (3) Why do we need to go LONG or SHORT? Why can't we just buy/sell, wait till the candle reaches our desired number and take profit? Instead of waiting 10, 20, 30mins or hours? Thanks for your answers to my questions.
  • #6
  • Nov 4, 2013 10:06am Nov 4, 2013 10:06am
Quoting Gizmosis350k
{quote} I see - thanks much - is there a specific way to calculate what a pip (either negatively or positively) would value against a specific lot size and leverage?
Musky..LOL, would have gone with something else..
Getting back to your query, most brokers offer a calculator to calculate the pip value...
  • #7
  • Nov 4, 2013 12:35pm Nov 4, 2013 12:35pm
Quoting howyalivin
I also have questions regarding forex. I've been using the trading platform MT4 for several weeks now, and I've recently began winning all my trades. (1) I'm still having trouble calculating what my actual cash value would be if I was using real money and not a demo account. (2) When I set my stop loss/take profit, the software doesn't recognize the request, I believe I'm doing it correctly. (3) Why do we need to go LONG or SHORT? Why can't we just buy/sell, wait till the candle reaches our desired number and take profit? Instead of waiting 10,...
(1) If you have "Trade" tab selected in the MT4 terminal right click on any of you open trades and select profit -> check deposit currency: this will list open trades in actual amounts that is being won or lost. Also under the "Account History" previous trades can listed.. scroll to the bottom it shows total winning or losses based on filter setting in the account history.. example (all) is all trades.. (Last Week) the current week... (Last Month) the current month...

You would have to do a percentage calculation if you were going to compare it to a what a real account would return of a different deposit value. Example.. 20% gain on demo would also be 20% gain on real with the same trades.. just different amounts.. (Divide winnings / total deposit = percent as decimal) x 100 = standard ratio of 100.. like 20% -> or move decimal to place to the left.

(2) Setting stop loss / take profit must be in the correct format per the broker and be far enough away from price to be outside spread.

(3) Long and Short is buying and selling.. In pair trading you doing two things at the same time when you make a trade.. borrowing from one currency to buy another currency.. so if you go short on usd/cad you theoretically borrow US dollar to buy Canadian dollars expecting the value of the US dollar to drop compared to the Canadian dollar. For the second part of this question refer to (2).

Checkout BabyPips: School of Pipsology
http://www.babypips.com/school/

This should help you a lot in this area.. for basic understanding of the Forex Market.
  • #8
  • Nov 4, 2013 2:51pm Nov 4, 2013 2:51pm
Thanks Java for your insight, very helpful info. You were able to resolve all my questions except the last regarding my point (3), so allow me to clarify. I notice price fluctuates very rapidly when I place an order. In a matter of seconds I can go from having -18 pips to 50 pips. My question is, using only price action, can't I just wait for the profit to hit 50pips then take profit? Ive done this several times, I just want to make sure it works the same in a Live account.
  • #9
  • Nov 4, 2013 3:53pm Nov 4, 2013 3:53pm
Quoting howyalivin
....
of course you can. but in real accounts you fight against slippage as well. Btw I think you are talking about pipettes .

Pip = a change of 0.001 on EURUSD
pipette = a change of 0.0001
  • #10
  • Nov 4, 2013 4:09pm Nov 4, 2013 4:09pm
Yes, it seems you are correct. Slippage would be a major issue. Also, how do I setup mt4 to show profit for PIP and not PIPETTES? It seems all my trades were calculated in pipettes,
  • #11
  • Nov 4, 2013 11:23pm Nov 4, 2013 11:23pm
Quoting howyalivin
Yes, it seems you are correct. Slippage would be a major issue. Also, how do I setup mt4 to show profit for PIP and not PIPETTES? It seems all my trades were calculated in pipettes,
You cannot, its all or nothing with brokers... pipettes can also be called points... just don't count the last digit unless you really care about the ten points between pips.. I don't mind.. you see a change in value for every point unless you have a really small position.. It is just the minimum that price has to change for the broker to reflect its value.. As the position you trade increases you may want to pay more attention to the points.. say when it a dollar a point or ten dollars a point... maybe more. Since spread can be anywhere from 1.8 to 5 pips in your case or upward of 10 to 30 pips during major news releases, it's always good to be aware of what the spread is before you place a trade and is what you give up on every entry or exit depending on which direction you are trading. (Short or Long).. Short entries you pay the spread when the trade is closed. In long entries you pay the spread up front..

And yes you were probably looking at the pipettes or points as Kilian19 said.
  • #12
  • Nov 5, 2013 7:57am Nov 5, 2013 7:57am
Now I get it. Forex is a lot more complicated then I originally expected. Its no wonder so many ppl lose in this industry. There is no such thing as "Simple Forex", lol.
  • #13
  • Nov 6, 2013 6:05pm Nov 6, 2013 6:05pm
There never was an easy answer..but that didn't deter the snake oil pitches from doing the rounds..
  • #14
  • Nov 12, 2013 9:00am Nov 12, 2013 9:00am
Quoting Forexnuts
There never was an easy answer..but that didn't deter the snake oil pitches from doing the rounds..
lol... ikr - I just hope I'm on the straight and narrow here. xD
uphill battle
  • #15
  • Last Post: Nov 12, 2013 4:25pm Nov 12, 2013 4:25pm
Lol it was not at you or anyone specific - frankly each time I see the terms "EA", it is getting hard to think of anything else..
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