Hello guys,
Imagining that someone just trade Indexes and have a defined Stop loss of 4points/handles
Now the Trader wants to move to Forex and want to keep the defined Stop Loss.
4 points in indexes is how many pips in forex ?
Using the Trading View tool (long/short position), it seems that 4 points is equivalent to 16 units. Should I consider16 units in Trading view for indexes is the same as 16 pips for Forex pairs ?
Thank you very much,
Francisco
There is no direct conversion from index points to forex pips. you can’t even directly compare points in different indices with each other.
However, you could apply a forex pip stop-loss distance which is comparable in terms of volatility. So if 4 pips is 1% of the current value of your preferred index, you could calculate how many pips would be 1% of your preferred pair’s current value and use that number as your SL distance.
A better way would be to calculate 4 points as a percentage of your index’s volatility (ATR) and apply a similar percentage to your preferred forex pair’s ATR.
But note that 1 pip of EUR/USD is not the same as 1 pip in any other pair as a percentage of either value or volatility.
Really appreciate your answer.
Let me see if I understood.
Imagine my stop loss for a long position is 4 points or 16 ticks in S&P.
I plan to get in at 3760 with a stop loss at 3756. Accordingly the Trading View tool for a long position, this would be 16 ticks/4points.
The % of the variation would be calculated this way:
(4 x 100) / 3760 = 0.10%
So 0,10% would be the volatility corresponded that i would have to calculate for the Forex pair I’m interested to trade. Correct ?
Example EUR/Usd with a price of 0.98800, the corresponded 0,10% would be 0.000988.
Considering a Long at 0.98800, my stop loss should be placed at 0.987012 which is around 99 ticks.
Ok. This actually makes sense.
Thank you so much !
Yes, you could calculate 4pts as a percentage of the index value and apply the same percentage to a forex pair.
But the forex pair might be much more volatile than the index. Or much less. So a 0.1% move on the index might take place over on average any 10 minute period. But on a low volatility forex pair price could take 2 days to travel 0.1%. Or 2 seconds. You’re not comparing like with like.