Hi all, just needing a bit of advice. Genuinely confused on this even though I keep reading up on it I feel like I am being a bit daft.
So I am trading a small account, using IG group for UK. I have been practicing a strategy on it but was confused on the way profits were being made. So I have a £1000 account, using mini lots(0.1), and I thought if the price moved 100 points it should make an average of around £10, however for me 100 points is making an average of around £1. I thought that’s what a micro lot would generate not a mini lot. I’ve been calculating things and nothing is making much sense to me.
I believe its a 1:200 leverage(when hovering over the account on MT4 it says 1:200)
so if I used 1 lot, 100 points move would be = £100.
0.1 lot, 100 points move would be = £10
0.01 lot, 100 points move would be = £1.
Is the above correct?
This is like the hardest part with wrapping my head around forex and I am really struggling with understanding it.
Yes, that’s right. If you make a movement of 100 points, the profit will be according to the calculation you are doing. Trading should be done by setting 1: 2 or 1: 3 risk and setting stop loss.
I may be wrong here, but I always thought that a PIP is one per ten thousand and a point is one tenth of a PIP - the fifth decimal place in the more modern quotation systems. Could this be the reason for the confusion?
Eg. GBPUSD is quoted as 1.35239. This is 3,523.9 PIPS or 35,239 points. Does this help?
Just remember that a PIP for JPY pairs is 0.01 and not 0.0001. That is why pips are used because once you calculate how many pips you have moved the rest is easy. On a side note if my profit calculations end up positive for a trade then I recheck them to make sure I did not mess it up.
If the trader can give up greed, fear, and resentment, his trading future will be bright. In such a miserable time in life, it is necessary to refrain from trading analysis.
