Excuse my ignorance with this question

Beginner Questions
1

I’m trying to work out the valuation of a pip in relation to my account.

Now I’m using the MT4 app on my android phone with a demo account.

I’m working through the modules in this site, I’ve read how to work out pips but if for example I had a to work out a pip for the following
If I bought a micro lot on MT4 is this the volume set at 0.01? Worth a 1000

1 usd - 1.0200 CAD
=0.0001 × (1 ÷ 1.0200) x 1000 = 0.980 or roughly 10cents per pip.

Now the problem and where I am getting confused if in a real money account i had $300

And on MT i set the volume at 0.01is that 1% of the value of my account and do i work the pip value from this example or the one above.

Any advice help would be greatly appreciated.

Thanks, Dom.

2

Hello, Dom

Let’s walk through it, step by step.

You have a balance of $300 (what you’re calling your real money) in an MT4 account, with volume set at 0.01, and you want to enter a trade in USD/CAD.

With the volume set at 0.01, you will be trading 1,000 units of USD/CAD (that is, a micro-lot).

The pip-value calculation that you copied from the School lesson is badly out of date, being based on a USD/CAD price of 1.0200.

Let’s use the approximate current price — USD/CAD = 1.4500.

If you do a calculation by hand, following the pattern used in the School lesson (or if you use the Pip Value Calculator), you will calculate that 1 pip is worth $0.069 in your one-micro-lot position
(that is, 6.9¢ USD per 1,000 units traded).

You asked a question in your post —

The term “volume” in MT4 refers to position size in standard lots. A standard lot is 100,000 units. So, a “volume” (or position size) of 0.01 standard lot would be 1,000 units. This has nothing to do with the size of your account.

Then you asked —

I don’t understand this question.

Let’s continue to walk through the planning of your trade.

You need to determine the risk you are willing to take, in terms of pips, and in terms of dollars.

Let’s say that your chart is telling you that you need to give the USD/CAD pair at least 50 pips of breathing room (space to move against you, before stopping you out). If you set a stop-loss at 50 pips from your entry price, what loss in dollars will be generated, if that stop is hit?

Clearly, if each pip is worth $0.069 in profit or loss, depending on which way price moves, then a 50-pip move the wrong way will cost you 50 x $0.069, which equals $3.45

Are you content with that amount of risk? $3.45 is 1.15% of your account balance.

If that risk is acceptable to you, you might choose to enter this trade.

2 Likes
3

Thank you so much for taking the time to reply to my question. You have answered it in a clear and precise manner, thankyou.

4

Good answer

5

That was really well explained. You really helped them out.