Apologies for the newbie question here, but I have an excel spreadsheet which I use to help me calculate position size, amount risked and potential reward. This is all based on calculating the pip value. Please can somebody give me the formula for calculating it as I can’t seem to work it out. I trade with Alpari UK.
If anyone can help me it would be greatly appreciated. In the meantime I will try to find the answer for myself.
Thank you
Hi there fellow newbie. 
As far as I know, the pip value for gold and silver (or I think to every currency/commodity pair) depends on the contract size.
Examples:
*For Gold (XAU/USD):
****1 lot = 100 oz. of gold = pip value of $1.00
****1 mini-lot = 10 oz. of gold = pip value of $0.10
****1 micro-lot = 1 oz. of gold = pip value of $0.01
*For Silver (XAG/USD):
****1 lot = 5000 oz. of silver = pip value of $5.00
****1 mini-lot = 500 oz. of silver = pip value of $0.50
****1 micro-lot = 50 oz. of silver = pip value of $0.05
If you are asking about the position value for XAU/USD and XAG/USD:
*For Gold = (Volume in lots) x (100 oz.) x (price) = position value in USD
*For Silver = (Volume in lots) x (5000 oz.) x (price) = position value in USD
(this is taken from Alpari UK website from faqs)
If you are just asking on how to read the pips on a quote:
*For Gold, 1 pip is 0.01
*For Silver, 1 pip is 0.0001
I hope I helped! :60:
Whatever formula you end up using you can always double-check your spreadsheet data with the forex calculator provided by your broker. I think every solid forex broker provides one to their traders.
Thank you very much, but if I’m honest I’m still struggling to understand. Where I think I’m struggling is that I trade based on a risk percentage first and work out the contract size from that. If I traded a £5000 GBP account, an wished to open a trade on gold/silver risking 2%, what would my position size be?
Once I have this then I’ll not only understand better but also be able to plug the formula into my excel spreadsheet. If someone could be patient enough with me and calculate this for me I will be very grateful.
Thank you for your help so far!
I’ll try to answer this. Can you please tell me the leverage or margin of your account for each trade? or maybe you could attach your excel spreadsheet here so we could understand more on what you’re trying to achieve?
Thank you. Leverage doesn’t really matter because the formula will always remain consistent for any given leverage, but if it helps use a 500:1 leverage.
Here is where I have got with my understanding. I honestly don’t know why this is so hard for me to understand.
The first question I wish to understand is: how much is each pip worth for metal. I use gold for the following working out.
Gold is traded in ounces, with 100 ounces traded per standard lot (100,000 units). Each pip movement (0.01) on a standard lot is $10USD. This means for 1 ounce of gold which equates to 1 mini lot equals $0.10USD.
Using a given GBPUSD exchange rate for a each mini lot (1000 units) of gold is equivalent to £0.05GBP ($0.10USD/1.68 = £0.05GBP).
So this answers one of my questions, which was how do I find out the pip value of gold.
Please, if I have gone wrong somewhere above please tell me so I can correct myself.
My second question was how do I calculate my position size for gold.
I trade a £5000GBP account risking 2% on each trade which is equivalent to £100GBP. This translated into USD at an exchange rate of 1.6800 equals $168USD. This is $168USD I am risking for this trade I am about to hypothetically place.
Given this risk, I have decided (hypothetically) to risk 50 pips. AND NOW I’M STUCK, I DON’T KNOW WHERE TO GO FROM HERE. Could someone continue.
Account balance x leverage x risk percentage = Position Value
£5000 x 500 x 2% = £50000
So if your position value is £50000, then your contract size would be calculated based on my earlier reply:
*For Gold = (Volume in lots) x (100 oz.) x (price) = position value in USD
*For Silver = (Volume in lots) x (5000 oz.) x (price) = position value in USD
…just convert to your account currency (GBP) and change the variable on the formula. We now get:
*For Gold: Position Value in GBP / Price of Gold / 100 oz = Volume or contract size in lots
*For Silver: Position Value in GBP / Price of Silver / 5000 oz. = volume or contract size in lots
To compute:
*For Gold: £50000 / 1293.40 / 100 oz = contract size of 0.38 lot
*For Silver: £50000 / 19.5340 / 5000 oz. = contract size of 0.51 lot
*Prices are based as of posting date
That looks really good but I don’t understand the £5000 x 500 x 2% … what is that figure getting me?
I think the confusion here is Gold is a commodity and is priced in US dollars so unlike say Euro/dollar the pip rate for gold will be fixed as it is a physical commodity.
To answer your question if you are trade 10oz it will be 0.10c a pip, if you were trading 100oz it will $1 per pip and $10 for 1000oz. So at 50 pips your dollar amount will be 50 pips x $1 for 100oz of gold. So a 50 pip change is is simply $50 the thing with gold is this changes so fast as the commodities price does not change at the same fractional rate as currency pairs.
In effect 50 pips on gold is just the spread, you essentially need to think of gold in terms of 1000’s of pips. So for example.
Spot price is 1296.50/1297.00 Bid/ask spread
You buy 10oz at the ask price.
Price moves to 1350.00 (this happens in a matter hours).
Total move of 5300 pips (A total of $530 at $0.10 per pip)
Had you bought 100oz you would have been $5300 up but the the reversal can be equally punishing. So like all commodity trades gold is still requires a significant capital to trade comfortably.
Simply your £5000 GBP account will limit you to 10oz trades at a time and probably no other currency trades, just gold and your exposure would be more like 20%-30% of your capital rather than the 2% you have in mind. Gold traders have big lines like all commodity traders.
A 10oz position is simply 10 x spot asking price (the asking price is per ounce) in this case 10 x 1297.00 = £12,970 worth of Gold for me margin requirement does not come into it because you know you need a big line at 1:500 you only need 0.2% of that position $25.94 considering golds movement this is ridiculous margin requirement, just shows how higher leverage is not always best when evaluating your financial requirements.
Hope this helped. These days I trade it and don’t think much about these numbers…
That sounds great. Please can you tell me where you got the “account balance x leverage x risk percentage = position value” from. Why do you need that? I only ask because I have never seen that. I calculate my position size (for normal currency/ currency pair) by the following:
5000 x 2% = 100
100 x currency rate (for EURGBP I divide because GBP is the counter currency) / GBP/??? exchange rate * 10,000
The answers in here are so over complicated:
Minimum Pip Cost (Value)
XAU/USD has a minimum value of $0.01 per point (Your per point value may be different if your account is denominated in a different currency.
The pip/point location is shown below. Each 0.01 price movement on XAU/USD is 1 pip/point.
GOLD 1324.0**(4)**
So the pip is the last digit the 4 in this case
Great explanation Binsyo. If I understand you correctly, you use position value (levraged) to determine lot size for an entry of 2% risk on account.
Is all this for a 100 oz price movement?
Is that calculation to position SL or TP?
Gold is calculated as 1 decimal place I.e (0.1) so depending on the amount of pips you want to add
For instance if Gold has a bid price of 1000.36 and let’s say you want to earn 2pips your calculations will be
0.1 (time number of pips) 2 + current bid price (1000.36) =
0.1 * 2 = 0.2 + 1000.36 = 1000.56
Gold is not like the normal 4decimal place or 2decimal place number like other currencies
Hi Imccormick ,
is there any chance you could share the excel spreadsheet that you use to help calculate position size, amount risked and potential reward?
Thank you so much
Question how much pips is this in gold? 2.748