In the lesson: “Trading Scenario: Margin Call Level at 100% and Stop Out Level at 50%” I’m stuck at a point halfway through the lesson. There seems to be a discrepancy with what I’m learning in this lesson and what was taught in the previous lesson.
This is where I’m stuck. It is in the section headed “GBP/USD falls 400 pips!”, and it is in the calculation of “Floating P/L”. This is what the lesson states:
Floating P/L
GBP/USD has fallen from 1.30000 to 1.26000, a difference of 400 pips.
Since you’re trading 1 standard lot, a 1 pip move equals $10.
This means that you have a Floating Loss of $4,000.
Floating P/L = (Current Price - Entry Price) x 10,000 x $X/pip
-$4,000 = (1.26000 - 1.30000) x 10,000 x $10/pip
The lesson states that you’re trading 1 standard lot (i.e. 100,000 units), yet in the calculation of the Floating P/L they multiplied by 10,000 (instead of by 100,000) and I don’t understand why. My understanding of it is that multiplying by 10,000 implies 1mini lot. Multiplying by 10,000 provides the correct answer but I don’t follow why that number was used. Any help would be greatly appreciated!
Later in the same lesson, in the section headed “GBP/USD drops another 290 pips!”, again in the calculation of “Floating P/L”, they multiplied by 10,000, though, two lines prior to the calculation it stated that they were trading 1 standard lot. An explanation of why 10,000 was used in the multiplication will help me to understand why it was used where I’m stuck.
In the earlier lesson “Trading Scenario: Margin Call Level at 100% and No Separate Stop Out Level” where we were trading 1 mini lot, 10,000 was used in calculating the “Floating P/L” in the section headed “EUR/USD drops 500 pips!” and I followed the logic (as well as the math) of why it was used.
HELP!
Thanks.
Izzy