Hi trader… I’m a newbie here who want to learn about forex seriously … I just started learn things about forex.
I just finished learning babypips preschool section,before I take one step further I don’t want to let even one little problem left unsolved… I found some trouble here about calculating pip value and it’s relation to the amount of loss/gain,hope you guys will help me and correct me when ever I’m wrong…
I’ve read about calculating margin trading, leverage,pip value,profit and loss at :
1).http://www.babypips.com/school/preschool/how-to-trade-forex/lots-leverage-and-profit-and-
loss.html
2). Time to Make Some Dough | How Do You Trade Forex? | Preschool
3). How You Make Money in Forex | How Do You Trade Forex? | Preschool
4) Pips and Pipettes | How Do You Trade Forex? | Preschool
first of all this moment I’m not a rich guy who have fat pocket so I don’t have many chance to let my money go waste… I’m just a collage student right now…
let say I just have US$ 200 as my initial capital
but with this small amount of money I can still do something,there’s leverage and margin trading would help me
GBP/USD 1.2345 which it means £ 1 GBP= US$ 1,2345
if I want want to open micro lot (1,000 unit of GBP/USD) and buying GBP at 2% margin trading when I buy one micro lot (1,000 units) of GBP/USD at a price of 1.2345, I’m buying 1,000 pounds, which is worth US$1,234.5 (1,000 units of GBP * 1.2345 = US$1,234.5).
but with that margin trading I don’t have to pay that US $ 1,234.5 all by my self but just 2 % of it
(2/100)*1,234.5 USD = US $ 24,690 -> I just need this as the down payment and “borrow” the rest US $ 1,209.81 (are you kidding me?)
assume few days later GBP go up against U.S.dollar and I decide to close position at 1.2354
GBP/USD 1.2354 which it means £ 1 GBP= US$ 1,2354
£ 1,000 * 1,2354 = US$ 1,235.4
profit = (1,235.4 - 1,234.5) U.S dollar = US$ 0.9 -> whis will go in to my account
I think I’ll get this US $ 0.9 after the exchange rate go up to 9 pip ( since the pip is described as a measurement to express the change in value between two currencies,and it’s measured from the last decimal place of quotation)
and every one pip increasing value equals to US $ 0.1 ( US $ 0.9 / 9 pips = US $ 0.1 per pip)
But then I found the problem when I read next chapter in this following link
Pips and Pipettes | How Do You Trade Forex? | Preschool
This chapter talk about calculating pip value,and here’s an a example written on this chapter :
Example exchange rate ratio: USD/CAD = 1.0200. To be read as 1 USD to 1.0200 CAD (or 1 USD/1.0200 CAD)
(The value change in counter currency) times the exchange rate ratio = pip value (in terms of the base currency)
[.0001 CAD] x [1 USD/1.0200 CAD]
Or Simply
[(.0001 CAD) / (1.0200 CAD)] x 1 USD = 0.00009804 USD per unit traded
Using this example, if we traded 10,000 units of USD/CAD, then a one pip change to the exchange rate would be approximately a 0.98 USD change in the position value (10,000 units x 0.0000984 USD/unit). (We use “approximately” because as the exchange rate changes, so does the value of each pip move).
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using this example above I was trying to calculate the pip value of my earlier calculation :
GBP/USD 1.2345 ( 1 GBP/1.2345 USD)
pip value = value change in counter currency * the ex. ratio
= 0.0001 USD * ( 1 GBP/1.2345 USD) = 0.000081 GBP per unit traded
so if I trade a micro lot 1,000 units of GBP/USD then the one pip change in the ex. rate would be approximately a 0.081 GBP change in the position value (1,000 units x 0.000081 GBP/unit).
but then if I want the pip value in USD, so I then must multiply 0.081 GBP to GBP/USD exchange rate : 0.81 GBP * 1.2345 = US$ 0.0999945 per pip and if I taking short position after the ex. rate increasing by 9 pips ( from 1.2345 to 1.2354) then my profit calculation would be
US$ 0.0999945 * 9 Pips = US$ 0.899505 rounded up would be US$ 0.9
Is this calculation true ? or there’s something wrong need to be fixed?
and also about leverage and margin trading,are they exist for real? Sounds too good to be true to me but thank God if it’s real,does every broker provide this feature for their clients?
by the way talk about broker I knew it there’re few conditions to choose a good broker,but my question is how do I know if they’re as good as I thought what if they keep a little secret behind me and behind the other client and it potentially lead me into trouble in the future? Please give me some suggestion for a good broker…the reason why I ask it to you because I think you guys are advanced trader you must have experienced good and bad things more than one broker, I know there’s nothing perfect but it’s not a mistake to try get ourselves closer to the perfection,isn’t it?
Now I’ll asking questions about forex big players the central bank and speculator,bank get involved to adjust interest rates to control inflation. By doing this, they can affect currency valuation. There are also instances when central banks intervene, either directly or verbally, in the forex market when they want to realign exchange rates. Sometimes, central banks think that their currency is priced too high or too low, so they start massive sell/buy operations to alter exchange rates. My question do you have some clue when central banks think their currency priced too high? When they’ll adjust their inflation level?
and speculator how do they work? #I’m confused
Please take a look at this page in this following link for sec.
Time to Make Some Dough | How Do You Trade Forex? | Preschool
Selena Gomes would say if this chapter keep hitiin’ re-peat -peat-peat-peat-peat saying “ if you believe this /that country’s economy will be weaken/stronger” how do I suppose to know that???
“If you believe that Japanese investors are pulling money out of U.S. financial markets and converting all their U.S. dollars back to yen, and this will hurt the U.S. dollar” I quoted this from the link above.when I read this I was thinking will japanese Investor text/send an email/call me first before they start to pulling out all of their Yen? Hahaha seriously give me some advice and teach me 
about news and economic data/report… where and how do you get it??
thank you for helping and I’m sorry for disturbing and for the inconvenience…I’m sorry if my English is not good enough so you have some trouble to understand what I was saying…if there’s some bad language or offensive word to you I apologize for that…I don’t mean it.
Have a good day/night where ever you’re…May God always be with you.
My Regards : Batara