Hi, i’ve been racking my brain over this for 2 days and have given up.I really hope someone here can help.
My question is fairly simple:
How do you make $1000 (clear) dollars out of 15 pips (150 points) ? With the spread being .8 and the commission rate being $7 per lot or .70cents a point.
Let me show you how i started to work this out (to make a clear $1000) before hitting a stumbling block.
To make $1000 out of 150 points you firstly have to deduct the spread as the broker gets that amount.The spread amount is .8 so 150 - 8 = 142 points. So now you only have 142 points to make the $1000.
Therefore $1000 / 142 = 7.05 You have to make 7.05 a point or $70.5 a pip.
But you will not make a clear $1000 as the broker will take out the commission.So now we have to increase the lot size to get back the commission
The commission with my broker is $7 a lot or .70 a point therefore 70.5 x .70 = $49.35 commission.
So we have to make $1049.35. to try and clear $1000. Therefore $1049.35 / 142 = 7.39 or the lot size has to be 7.39 to make $1049.35 to leave $1000 after paying the commission.
But here is the lays the dilemma and the breaking down of the arithmetic. When you increase the lot size to make to $1049 you will not clear $1000 as you’ll then be paying commission on $1049 and not $1000.
Each time you increase the lot size to make up for the commission you then have to pay more commission and so on and so on, you can never catch up therefore never make a clear $1000
Am i doing something wrong ? Should the commission be incorporated into the spread ? I’m really confused.
Look forward to hearing from anybody who may have the answer.
Regards
Greg