A few questions

[pipgod]

I would like to know using mini lots. If you will please.

[rhodytrader]

Originally Posted by pipgod

I have a $10,000 demo and I want to risk 1% of my capital. The leverage is 100:1. I open a lot position short on the EUR/USD. If the EUR/USD moves 100 pips long what is my loss? If the EUR/USD moves 100 pips short what is my profit?

I have a $10,000 demo and the leverage is 200:1. I open a lot position short on the EUR/USD. If the EUR/USD moves 100 pips long what is my loss? If the EUR/USD moves 100 pips short what is my profit?

If you trade a 1 lot position, which is 100,000 EUR/USD, the pip value is $10, so a 100 pip move is $1000 ($1/pip and $100 respectively if you're talking mini lots) regardless of whether the market rises or falls by that amount and regardless of whether you are at 100:1 or 200:1 leverage.

The effective leverage you use (the ratio of the position size to your account balance) will determine your % return, but it won't change the actual profit or loss.

Am I answering the question you're asking?

[colin]

Not sure if there is some trick to your question or if I'm not quite understanding how you're stating it.

Originally Posted by pipgod

I have a $10,000 demo and I want to risk 1% of my capital.

The key phrase in here is 'risk 1% of your capital'. This means that you only want to risk losing 1% of your money if your stop loss is hit. Since you don't state what your stop loss level is it gets kind of tricky. As you'll see below, you'll lose a lot more than 1% of your money if you trade using one standard lot.

Originally Posted by pipgod

The leverage is 100:1. I open a lot position short on the EUR/USD. If the EUR/USD moves 100 pips long what is my loss? If the EUR/USD moves 100 pips short what is my profit?

Here you are opening a one lot position. Let's assume that you're talking about a standard 100,000 unit lot. This means that each pip movement will equate to a $10 gain or loss. Let's also assume that the EUR/USD is trading at 1.300 (and ignore spreads for now).

Note that opening a 100,000 unit position means that you have opened a position that is worth $130,000. This means your gearing is 13:1.

Your open position size has nothing to do with the leverage that is being offered by your broker, other than the fact that your the total gearing of all your open trades must not be greater than the leverage offered by your broker.

If you had a 100 pip loss, then you would lose $1000 (100 pips x $10 per pip). A 100 pip move in your favour nets you a profit of $1000.

Originally Posted by pipgod

I have a $10,000 demo and the leverage is 200:1.

If you performed the exact same trade when your leverage was 200:1 then there would absolutely no difference in the amount of money you would make or lose. Your gearing would be exactly the same and thus your profit or loss would be the same.

The extra leverage would allow you to borrow more money from your broker to put on a larger trade (i.e. increase your gearing) if you so desired, but it has no effect on a trade that is a fixed 1 lot entry.

[pipgod]

No stops and no limits.

Are you saying no difference if I only trade one lot for each demo?

[rhodytrader]

Originally Posted by pipgod

No stops and no limits.

Are you saying no difference if I only trade one lot for each demo?

If you have a fixed trade size, your pip values will always be the same regardless of the leverage involved or the size of your account - at least for non-USD base pairs like EUR/USD, GBP/USD, etc. For the USD base pairs like USD/CHF the pip values will change with the exchange rates.

[pipjunky]

Hi There

On my charts earlier today i got a serious spike in all YEN and all CHF pairs, eg. USDJPY dropped from the 116's right down to just below 65 (+-10:00am) did any1 else see this ? and if so what causes this huge spike?


Thanks

[colin]

Originally Posted by pipjunky

On my charts earlier today i got a serious spike in all YEN and all CHF pairs, eg. USDJPY dropped from the 116's right down to just below 65 (+-10:00am) did any1 else see this ? and if so what causes this huge spike?

Sounds like an error with the data feed you are using. Take a look at another data feed and you most likely notice that this supposed spike never actually happened.

You get these types of errors occasionally, especially from lower quality data sources.

[pipgod]

Originally Posted by hobbit

Well, here's the way I see it. The leverage has absolutely no bearing on your profit or loss. If you trade 1 mini lot your profit or loss is 1% ($100) of your $10,000 account value on a 100 pip move. However, in this example without a stop or limit you are not "risking" 1% of your account. In order to be risking 1% of your account you would have to have a 100 pip stop loss. Otherwise you are risking 100% of your account.

hobbit

Thanks!

I am loving this. I am trying to help the people of the world to understand something about leverage. The details keep getting in the way.

[pipgod]

I guess my next step is to open two demos and trade them, with the differences being leverage, and then post the results. I will do this quickly.

I am so thankful for every ones help.

[pipgod]

The details are as follows:


Demo one,
~Balance $10,000, one lot controls $10,000, Leverage 200:1, Used margin about $96.


Demo one,
~Balance $10,000, one lot controls $10,000, Leverage 400:1, Used margin about $48.


As soon as both trades were executed, both positions were -$5.00.