Hey everyone,
I am new to forex and I was just wondering what 1:20 leverage means when I have a $2,000 account?
I recently signed up for OANDA and selected a leverage of 1:20. If I deposit $2,000, and put my volume as 1.00, what does that mean?
How much money am I losing or gaining per pip?
Am I risking all my capital ($2,000) if I open a trade on a volume of 1.00 on 1:20 leverage?
I traded using eToro a couple of times and whenever I open a trade, I am able to select how much money I wish to use on a trade and select my leverage.
However, for OANDA on MT4, when I open a trade, it only asks for VOLUME, TP, and SL. Why am I unable to select how much money I wish to use to open the trade? What if I only wanted to use $1,000 instead of my $2,000?
What is the difference between choosing a volume of 0.04 to 1.00 when I open a trade?
I am really confused and any help would be appreciated.
Try using the standard Java platform with Oanda to place trades instead of MT4. Its far more user friendly if your trying to figure out lot sizes. Maybe just use MT4 as charting software
I havenāt tried MT4 yet, but I really hate the charts on Java.
The main reason Iām with them is the easy access to exotics.
I still donāt understand this: Why does a chart from the last 5 minutes or 15 minutes show activity for the past 3 days? I e-mailed them asking them this, and they said the chart shows detail from the past 5 or 15 minutes. A chart for the past 15 minutes should start 15 minutes ago!
How would you like it if you click on a chart for a stockās pricing history over the past year and the chart goes back for 5 years, but gives you detail of the past year?
But since you mention MT4 for charting software, maybe Iāll give it a try.
When you request to see an X minute chart for whatever currency you are trading, each CANDLE on the chart will represent X minutes. For example, on a 15min chart of the EURUSD, each candle (im assuming youāre using some type of red/green candlestick method to view price movements) will represent the currencyās activity in THAT 15 MINUTE BLOCK of time. If your chart is showing ten 15minute candles, your chart is showing the past 150 minutes of activity, divided into ten 15-minute blocks. SOO on a 15 minute chart, youāre screen is probably flooded with these candles, so its easy to understand why it would reveal price action for the past day or so.
No offense but youāre considering deposting $2 000 into a live account and asking THE most basic of questions??? Slow down my son!!! LOL!!!
Let me try to help (but honestly, and no offense, if you donāt understand position and lot sizing then I have my doubts as to how competent a trader you are but, Iāll give you the benefit of the doubt, and at least try to help you out on this one anyway).
Leverage has NOTHING to do with the DOLLAR VALUE PER PIP MOVEMENT. It doesnāt matter whether youāre trading with 20:1 leverage or 5 000 000:1 leverage. The DOLLAR VALUE PER PIP MOVMENT IS THE SAME GIVEN THE SAME āVOLUMEā or āLOT SIZEā. The only difference that leverage makes is how much of your trading capital is used (reserved) as margin to open the position.
So as a rule of thumb and using EUR/USD as an example:
[ul]
[li]100 units = $0.01 per pip movement (usually referred to as a ānanoā lot)[/li][li]1 000 units = $0.10 per pip movement (usually referred to as a āmicoā lot)[/li][li]10 000 units = $1.00 per pip movement (usually referred to as a āminiā lot)[/li][li]100 000 units = $10.00 per pip movement (usually referred to as a āstandardā lot)[/li][/ul]
The problem: it normally depends on your broker as to exactly what THEIR āvolumeā (as you put it) or ālot sizeā is in MetaTrader. In other words: you need to ask Oanda the simple question āhow many units of EUR/USD am I buying or selling if I enter 1.00 as my volume or lot sizeā???
As a GENERAL ārule of thumbā it SHOULD ātranslateā as follows:
[ul]
[li]MetaTrader 4 āvolumeā or ālot sizeā = 0.01 = 100 units = $0.01 per pip movement (usually referred to as a ānanoā lot)[/li][li]MetaTrader 4 āvolumeā or ālot sizeā = 0.10 = 1 000 units = $0.10 per pip movement (usually referred to as a āmicoā lot)[/li][li]MetaTrader 4 āvolumeā or ālot sizeā = 1.00 = 10 000 units = $1.00 per pip movement (usually referred to as a āminiā lot)[/li][li]MetaTrader 4 āvolumeā or ālot sizeā = 10.00 = 100 000 units = $10.00 per pip movement (usually referred to as a āstandardā lot)[/li][/ul]
But BE CAREFUL because at SOME brokers, depending on your account TYPE (be it a āmicroā account or a āminiā accout or a āstandardā account) the above table may NOT be correct. In other words: if you have a āmicroā account a MetaTrader 4 āvolumeā or ālot sizeā of 1.00 MAY represent 1 000 units but if you have a āminiā account a MetaTrader 4 āvolumeā or ālot sizeā of 1.00, at the same broker, MAY represent 10 000 units. That may sound / look / feel strange but āit is what it isā.
Bottom line: you must check with your broker HOW MANY UNITS you are buying or selling based on the MetaTrader 4 āvolumeā or ālot sizeā.
I really appreciate your input. It makes much more sense after reading what you just wrote.
I started trading in September and was really eager to āmake moneyā so I basically lost $3,000 money gambling.
I was using eToro but after reading forums and noticing that people are using software like MT4, I started looking into it.
Since then I have been reading forex books and seeing how āimportantā events can affect the currencies. Iāve also been using different trading systems to see how I can make a good trade on the technical side. Looking at weekly, daily pivot points.
eToro and Oanda are two different things. In eToro you can choose how much money to invest in a trade and that was why I was confused.
Iām not ready to trade with real money yet.
Would $2,000 be a good amount to start with when the time comes to start trading real money?
Well first: youāve at very LEAST come to the realization that there is a big difference between trading and simply gambling (and NO everyone else I donāt want to start that debate here)!!! It takes most people a good few years and a LOT more than $3 000 to come to this realization (and TRUST me when I say this i.e. itās based on personal and very bitter experience)!!! LOL!!!
$2 000??? Ample and you stand a GOOD chance i.e. youāre not uncapitalized and can therefore manage risk adequately (DEPENDING on WHAT you trade of course). Unfortunately (fortunately???) for you: Iām afraid that spot FOREX and me are not āthe best of friendsā i.e. I trade almost exclusively equity futures and commodities (although Iām SLOWLY ādipping intoā the world of spot FOREX trading again BUT ONLY because I now have a lot more experience āunder my beltā and ONLY on some VERY specific pairs known as āexoticsā i.e. I wonāt even bother to look at the major pairs). Also: Iām a long-term trend trader and trade, almost exclusively, the daily and longer time-frames, so my stops can be HUGE (and one of my systems uses no stops AT ALL) so enough capital is a MUST for me if I donāt want to āwipe-outā (AGAIN)!!! LOL!!! Anyway, and if youāre interested, my forums can be found at techtradercentral.proboards.com. All my trading systems (and some live trades) are detailed there. The reason for my forums is because there was no interest in discussing the trading of equity futures and commodities here on BabyPips so I decided to take my ātrading instruments of choiceā elsewhere (but, well, I see spot FOREX has ācrept into the mixā)!!! LOL!!! Take a look there anyway if you like (you have my personal PROMISE which is BETTER than a āguaranteeā of NO spam, advertising, fees, or any other ābulls*itā). Iāve put together a sort of ābasketā of trading systems that I use (as I said: mostly long-term trend trading) that donāt require a degree in economics to trade or be profitable (as a matter of fact: the LESS you know about the fundamentals the better at least with MY trading systems of choice i.e. it means that you never āsecond guessā the signals because they appear to be contrary to your āhuman logicā)!!! LOL!!!
eToro: Iāve never taken them seriously (although they sure do seem to able to solicit their āfair shareā of clients) and they donāt have many ārave reviewsā thatās for sure. Oanda I believe is a very good broker (as much as I HATE to have to say it of course)!!! LOL!!! Deltastock??? Well. I can say no more!!! LOL!!!
Take a look at this post of mine too (it may address a lot of things that you may be wondering about too):
You may have cleared it up for Brandon but youāve touched on something I just canāt get my head around. How on earth can the value of a pip vary depending on how many units you trade or what type of account you have??? Itās not like youāre buying āin bulkā so you get a different price or you have a ātrades accountā (no pun intended).
Well the answer to the first part (āhow can the value of a pip varyā): same thing as how much is ONE Gold bar worth compared with how much TEN Gold bars are worth. Nothing more and nothing less really. If you buy ONE Gold bar TODAY and sell it in a yearās time at a profit (hopefully) itās the same thing as buying TEN Gold bars TODAY and selling them in a yearās time at a profit (again hopefully) except your profit will be TEN TIMES as much. If that doesnāt make sense ask again and Iāll try to come up with another example.
The āaccount typeā question??? Thatās just something that I āthrew inā there is all (probably just overcomplicating matters as is āthe wayā with me normally)!!! LOL!!! But itās just something to watch out for. At ONE MetaTrader broker: a āvolumeā or ālot sizeā of 1.00 may represent a certain number of units (Gold bars???) while a āvolumeā or ālot sizeā of 1.00 may represent a different number of units (Gold bars???). Thatās all. IN THEORY this should not be so but unfortunately IN PRACTICE it is (sometimes).
Thank you (again). Read your response and re-read your original (well-written) explanation and Iāve got it now. As I understand it, the size of the pip movement depends on how many lots(āgold barsā) you bought/sold to begin with.
