0.03 Lots

Beginner Questions
1

Hi,

I am completely new to FOREX and I was trying my understanding of the basic concepts using a demo account.

I made the following trades using an OANDA Metatrader practice account:

  1. sell 0.03 at 1.59266, which closed at 1.59064 giving me a profit of 3.81 and,
  2. buy 0.03 at 1.59398, which closed at 1.59297 giving me a loss of -1.90.

Now, from what I learnt online (which might as well be wrong) a lot size of 0.01 corresponds to a profit per pip of 10 cents, or 0.1, from which follows that a 0.03 lot corresponds to a profit per pip of 30 cents, or 0.3 (I am trading GBPUSD).

I was expecting then for the 1st trade to give me a profit of 6 (0.3 * 20 pips) and for the 2nd to give me a loss of 3 (0.3 * 10 pips). Instead it appears that my pip value when trading 0.03 lots is 0.19 cents. I do not understand why. Someone can help? If it is relevant my account size is a fictional 1000GBP and my leverage is 10:1.

Thank you very much in advance to anyone who will answer me.

2

If you are trading GBP/USD in a GBP-denominated account,

pips are [B]not[/B] worth £0.10 per micro-lot (0.01 lot).

In your trade #1, the pip-value which applies in this trade is:

[B]£0.10 ÷ GBP/USD price[/B] = £0.10 ÷ 1.59266 = £0.0628 per pip per micro-lot (rounded off)

You traded 3 micro-lots (0.03 standard lots), and earned 20.2 pips.

So, the profit on this trade is £0.0628 x 20.2 x 3 = [B]£3.81[/B] (rounded to the nearest penny).

I’ll leave it to you to check the loss figure on your trade #2. The exercise will be good for you.

In your £-denominated account, the ONLY pair which has a pip-value of £0.10 per pip per micro-lot is the EUR/GBP — because that’s the only pair in which the GBP is the cross-currency. In every other pair, the GBP is ALWAYS the base currency. So, for every GBP-pair, except EUR/GBP, you have to find a pip-value.

HINT - Instead of doing the division which I did in the example above, you can use a Pip-Value Calculator — such as this one — or you can get the current pip-value from your trading platform.

Be aware that floating pip-values (that is, all pip-values in your GBP-denominated account, except EUR/GBP) vary as currency prices vary.

3

Hi Clint,

Thank you very much for having clarified for me. That makes total sense.