friendly baby trader has a very basic stupid question...

[swisstrader]

First of all, let me introduce myself a bit I just learned about online Forex trading a few weeks ago and have been playing around a bit on a test account from Forex.com . So far so good, I started out with the usual 50k and am now up to 57k. Mainly checking the charts and buy at the lowest, then hoping it will go up high again. So far it has worked for me, but I could just as easily be down to 10k, I know that, so I'm not ready yet for a long time to place any real money on the table.

While I'm just 25, I do have the money available to open a full account. I can even afford to lose it all if something goes wrong, but I rather not so I'm determined to learn everything first before using real money.

So back to my very basic first question. Remember I said I'm on a Forex.com test account? Anyways, it is funded with 50k of play money. When I place an order for a 'Lot' I can select anywhere from 1 to 25 lots of 100,000 each. Say I place a bid of 1 Lot. How much money am I actually investing? If I understand right, the trade is 1 in 200, right? So if I place 1 bid of 100,000 then I am actually placing a bid of $500 ...is that correct?

Now when I finally start with a real account, I am nowhere ready to place that kind of money right away. I can afford to lose it, but I don't want to. So I'm looking to get started in the future with a $300 account. How will that work if I then place a trade bid of "1"? Would 1 Lot still equal $500 (and therefor more than my available balance) or..? Is there any way where I can define how much money I can actually place on a lot? Again, remember I'm on Forex.com ...is there any way that I could place a bid of say $50? Or 0.1 of a Lot?

Sorry for the very newbie question but it seems a bit confusing. I hope to learn everything before I get started and hopefully become a longtime member of this community

[LadyPip]

When you open an account some brokers will allow you to chose your leverage so that you can trade on a higher or smaller leverage. Some brokers have anywhere from 100:1 to 400:1. You can also get mini accounts where the lot sizes are only $10,000.

Something that I would suggest before you get too much further in your demo trading is going to school of pipsology. They have a full lesson on leverage and account sizes that will answer your quesiton fully.

[bvinicius]

You already started right: virtual money first real money after.
Like LadyPip say, star from the school of pipsology and then find what stile fits your own.
about lot size: you have a $300 account with a broker that offer 100:1 of leverage, for exemple, each $10 is a MICROlot (10 x 100 = 1,000) and $100 is a MINIlot (100 x 100 = 10,000). With a leverage of 100:1 you only need 1% of the lot to open the positon, margin aside.
In the case of you open a minilot each pip will worth $0.10 (1,000 x 0.0001 = 0.1).
If forex.com acepts microlots you can open a position with only $10, if the leverage is 100:1, or even less if it is higher. Also in your exemple you can use 5 microlots with $50.

[virtecs]

ok, you're a little confused on this whole thing. The other posts did a pretty good job of explaining it. I'll continue.

A lot is 100,000 units. No matter how many lots you have, you really aren't investing any money. You're determined loss or gain is dependent on pip value. 100k lot equals 10 bucks a pip. 10k = 1 buck, 1k = 10c

When you open an account, say with 300 bucks, you'll be limited to probably a Micro or Mini account. Micro = 1k, mini = 10k. so that's 10c or 1 buck a pip.

Now for the base of your question.

You don't really invest money, but you do have a specific margin you need to be able to cover before entering in a trade.

The margin is basically a predetermined amount of money you need to have in your account to be able to enter a trade. If a trade goes south and ends up depleting your margin, it'll automatically stop at your margin price.

Here's how you determine margin:
Margin Requirement = Current Price x Units Traded x Margin

You want to buy 100,000 Euros(1 lot) with a current price of 1.35 USD, and your broker requires a 1% margin (I believe 100:1, 50:1 margin would be 2%).

Required Margin = 100,000 x 1.35 x 0.01 = $1,350.00 USD.

So to enter that trade of 100k units of Euro you'd need to have an account balance of at least 1350. But mind you, if you lost money in that trade you might not be able to open another trade because your margin requirement would be higher than your amount of money.

There's a kinda unwritten rule that is if you have between 0 - 1k, use a micro account, 1k - 10k, use a Mini, and 10k+ use a standard...but I've seen people suggest that up to 25k use a mini.

It's all subjective. But anyway, that's how the trade is calculated.

[MakeMoneyorDIE]

Welcome....i opened by first LIVE account with $350.00 - 8 months ago.
and its lasted about 2 weeks, If i were you i would, try to get a more realistic demo account...($5000.00)...or ($1000.00) if they do that.

Then i suggest opening a LIVE account with at least 1000.00....and trade in 10 lot units.......

I know your probably excited to open LIVE,, which is great, but i would try to put a little more money in....maybe 500.00.

My 2 cents

Good Luck
Make sure you read my TOILET TEST thread in the NEWBIE ISLAND Forum

[swisstrader]

Thank you very much for all your responses I know it's annoying when newbies ask a lot of questions that have probably been answered everywhere already, but I just got kind of confused about the whole lot/pip thing. I have a much clearer picture now I think Forex.com allows $250 or something Micro accounts which is probably what I'll start out with. I don't want to dive in big when the time comes, because I don't want it to become a habit of losing $1000 if something does go wrong (or likely, will). I don't want it to become a gamble.

I've read through the BabyPips School guide and I'll probably read it another 10 times.

[swisstrader]

Okay, some more questions I don't get yet and want to make sure I get it right

I see on the Forex.com demo account, I buy lots of 100,000 each with a 100:1 leverage. That means each lot I buy is worth $1000 right?

On the Mini account, the leverage is 200:1 and with lot sizes of 10,000 - meaning that 1 lot is worth $50?

Say I buy 1 lot for $1000 and I put a stop-loss at -$100, would I lose a total of $100 and get $900 back? Or would I lose $1100?

I'm sorry for the stupid questions, I'm sure in a few years I will dig up this thread and laugh at myself.

[daydreamer65]

A standard lot = 100 000 units.

A unit is a variable amount dependant upon the base
currency of the pair in question.

So therefore 1 lot is not always equal to $100 000.

For example when the Euro is the base, a unit equals
100 000 x Eur/Usd rate at the time of the trade.

With 100:1 leverage the margin required would be the
unit value divided by 100.

So if the base currency were USD 1 lot = £100 000
& $100 000/100 = $1 000 this is the margin required to
activate a trade of 1 lot.

But in the 2nd question, in a mini account, they have reduced
the lot size to a mini lot, 10 000 units instead of 100 000 units.
Then the math is correct 10 000/200 = 50.

Your margin is just a deposit to activate a trade, it is therefore
returnable at the end of the trade, minus/plus trade losses/gains.

I'm sorry for the stupid questions

You would be surprised how many experienced traders are not
aware of the above explanation.

[tymen1]

To Swisstrader :

Take particular note of the post by Daydreamer65.

He has the ability to make complicated things very simple, and his posts are not only very accurate, but also some of the best presented and easiest to understand on this forum.

[Yarcofin]

Lot size depends upon both your account type (standard, mini, micro.) and your leverage. I was trading on a standard account for my demo, so I was trading 0.2 lots at a time. When I went live with a mini account, the same amount of money was trading 2.0 lots at a time.

Most good brokers allow you to open an account with only $250 and trade as little as $1, although I wouldn't really recommend it. Either you will be using too high of a leverage and taking on too much risk to get a decent gain, or your gains will be measured in dollars and cents.

Also start a new demo account that exactly matches how you plan to trade your live account and trade that for a while. I was trading with a $5,000 demo account since February and then this week I just finally went live with an account of the same value.

Personally I would just trade demo and save your money until you have at least $1,000 to begin with. Trading a few hundred dollars seems rather futile and useless to me.