I have very weird situation. Been testing some strategy on demo account of chosen broker. In MT4’s Navigator window, there are list of active accounts. Under ‘‘BrokerName-Demo’’ (note: instead of demo, it could be real account to but obviously i am working on demo since i need to get feedback on my strategy first) is also listed another hierarchy level where says Account number and my name. If I move the mouse cursor to Account number, little window occurs with text and the last piece of text says Leverage which is the same what i wanted to have 1:1000
My question: Is it possible (if yes, how and where?) to TEST the accuracy of this information 1:1000 to make sure that broker doesn’t fake it? The reason i ask is the following: I have two positions active. One for 0.62 lots investment and one for like 1.03 lots investment. Both are related to Currency Pair type of financial instrument. However the problem is that trend has already moved on one position for tens of points and another position for over 500 (yes, over five hundreds!) of points and current profit or loss is still basically zero or around zero. How on the world is this possible??? According to my understanding, larger the leverage is, larger increase of either loss or profit but even after few hundreds of points and honestly, investment is not really that low, the current profit or loss is still around zero. Only Swap is changing.
I have been doing some research what other people are using for leverages and most of them are using lower one which means 1:1000 is still big leverage. However current profit and loss, after the distance of trend done from entry point, it seems like leverage is 1:10 and not 1:1000. Please tell me what to do.
I swore to myself I wouldn’t get involved in other discussions this time around (long story) but what the hell!!! LOL!!! if I can help then why not.
Either I’m misunderstanding you or you’re misunderstanding leverage. And for what it’s worth: it’s very easy to misunderstand leverage.
Leverage dictates the amount of funds used to open a position of a given size or trade value Nothing more and nothing less.
I think you may be getting confused with lot sizes. Unfortunately lot sizes are not standard throughout the industry and this is particularly true of unregulated brokers. At one broker one full lot may be denoted as 1 unit and may have $1 per pip movement while at another broker one full lot may be denoted at 10 units but still have $1 per pip movement. And this is where it can become confusing.
You need to check the broker and make sure that you know what the $ value per pip movement is for a given lot size. And on this you base your risk management. The only difference leverage will make is just how much capital is used or required to open the position and to keep it open.
If the above doesn’t make sense then let me know and I’ll give some practical examples if necessary.
Thank you for your reply. I have a tool which, as one of several features, tells me how much of base currency on trading account (which is automatically recognized by the tool) is one point movement worth based on exact investment where leverage is auto recognized too. I am still testing my new strategy so i am using demo accounts on multiple brokers. On the broker (leverage is 1:1000) where i am observing this problem with leverage, i have the following two positions active:
usdchf (for investment 0.62 lots, is one point movement based on 1:1000 worth 0.6096 usd)
usdcad (for investment 1.03 lots, is one point movement based on 1:1000 worth 0.7661 usd)
on other broker, where i don’t have those two positions opened so i cannot comment whether i see the same problem or not, i have leverage 1:30 (demo).
for same lots investment, the one point movement is worth:
usdchf (0.5441 EUR)
usdcad (0.6837 EUR)
If i go off-topic to my question: converting EUR to USD results in pretty much the same as on terminal where i am observing the problem with leverage and where i have 1:1000 leverage. I don’t understand how is possible that two completely different leverages “produces” same or almost the same worth of 1 point movement. According to my understanding in MT4 where there is 1:1000 leverage should be the worth of 1 point movement equally higher than 1:1000 is higher comparing to 1:30. Explanation, even if this is not what the purpose of my primary message was for, would be HIGHLY appreciated.
If i go on-topic to my question (so the real purpose of my message): In terminal with 1:1000, where those two positions are opened, should be, according to my understanding quantity of points done distance by trend multiplied with how much is 1 point of movement worth. E.g. usdchf did around 540 points movement so current profit or loss should be around 329 usd but it says that current profit is around 0.8 usd for that much distance (around 530 points) according to said investment. The ‘‘0.8’’ says in line at the bottom right hand corner in column Profit where CURRENT profit or loss is shown.
You would probably get more help if you simplified your questions.
To me, it seems, you have over complicated things and I got very confused. I don’t know where to start to try and help you but at the beginning and to keep it simple.
The pip value is related to the lot size and has nothing to do with leverage.
Leverage just determines how much margin is required to open the deal of said lot size.
So what do you want to test? Opening a lot size with more or less money as margin?
The pip value should be the same regardless of the leverage used.
I would suggest contacting your broker for an explaination about the profit and loss situation.
we the traders can experience leverage performance in demo account , this process also can be supporter to avoid unfortunate risk and losses , because leverage contains huge risk for all time.
ProfitPotential: you said the pip value is related to only lot size and not both lot size AND leverage. Thank you for telling me this. I admit i didn’t know that. But was thinking that pip value should depend on leverage so if 1:1000, comparing to 1:30, is around 33,3x bigger number than i thought that for the same investment (lot size) on same symbol, the value one point movement (you said pip but i believe same logic is for point) should also be 33,3x bigger. Using your comment that point (or pip) value has nothing to do with leverage surely helps so thanks again but this wasn’t my main question. I am trying to figure out how to test that leverage shown is correct and not fake one. So this is what i want to test. On my previous message i said where can be leverage seen in MT4. I only want to see if this given leverage is really correct one.
Higher the leverage is, more profit or loss can occur in smaller time on currently active position.
Not sure how any of the latest responses are any different to what I said in my first reply to you but whatever.
One thing that’s not been mentioned here though are fractional pips. Are you sure you’re not looking at movements of 500 when actually the movement is only 50 WHOLE pips??? That’s a possibility.
Higher the leverage is, more profit or loss can occur in smaller time on currently active position.
You’re still not getting it evidently. The higher the leverage the bigger the position size you can open with lesser capital i.e. margin requirement is less. That’s all. Nothing at all to do with time frames or profit or loss or anything else. BUT with high leverage and limited capital one CAN open much larger positions and therefore your profits and losses are magnified i.e. magnified as a direct result of position size not leverage. Maybe there’s where the confusion comes in???
But a word from the wise and battle hardened:
Forget about trading at 1 000:1 leverage. Trust me when I tell you that you WILL wipe out your account. There is a VERY good reason why margin requirements have been increased, in the past year or so, for retail traders. It should have been done YEARS ago in my opinion. And quite frankly: the authorities could and should go even further than they have for retail traders.
Hmm this changes everything a lot. I was even doing unwanted brokers list to refrain from opening account there without defining the reason. 70% are suspicious brokers that can be considered upon reviews as scam. Other 30% are reasons such as leverage i didn’t like and the fact that they don’t offer MT4 which is mandatory for me. The list is too big, basically impossible for me to find reason of leverage i didn’t like - clearly i was judging the leverage (max the offer) without even knowing what leverage really is. Wow blacklisting (unwanted list) a broker just because of my lack of understanding of leverage, thats crazy.
I will say example what i WAS thinking what leverage is: Lets say we focus on some X currency pair and Y investment in lots unit. On terminal1 there is, in this example, leverage 1:100, on terminal2 (different broker) it is 1:1000. So what I WAS thinking about the leverage is: if i open on terminal1 X position with Y lots then when the price comes to A price level, i earn B profit. But if i open same symbol, with same investment, in same direction on terminal2 then i earn B*10 (so multiplied with 10) when prices comes to identical A price level. This is because according to my past understanding, on terminal2 is ten times larger leverage. So for same distance of trend done, the profit is ten times larger. Of course ten times larger could be loss too. The reason why i was so sure about this is because every resource i was looking at said that higher leverage means higher risk. What i described in my example is first idea i thought about when it comes to ‘‘risk’’.
I assume there is no other way to increase profit or loss based on distance done unless (which is surely not possible) we could change value of 1 point movement.
ProfitPotential I know that with your “$100,000” you were referring to quantity of units so you are basically saying 1 lot, right?
dpaterso: 500 points equal 50 pips. 1 pip = 10 points. I knew that from day1 of trading. Trend moved for over 500 points and there is barely and profit or loss. Problem seems to be somewhere else and not in leverage. Yes dpaterso, you are correct where confusion one. Thank you for clarification. The proof how sure i WAS that my understanding of leverage is correct is the fact that i was searching for regulated brokers who have offshore departments (offices) where they can legally bypass regulations forcing them (the brokers) to put very low max leverage limit. I was doing everything i can to find as high as possible leverages just to be able to earn (or loss) larger amount from 1 point movement.
So if we put leverage on the side, what else could be the reason for no profit or loss at all even if large trend distance done and investment in lots is far away from being minimum required?
I wish I could answer your real question as to why the profit that is showing should be a lot more than it is. Is there any chance you could post a screenshot of the platform as well as your open trades??? That may help me (us) to see exactly what’s going on and try help you further.
And I’m really not trying to be obtuse when I say that leverage is the worst possible thing around. It’s just one of the reasons why the failure rate in this business is so high (and I used to work for a broker so please trust me when I say this). Unfortunately it perpetuates the notion that somebody can begin to trade with very very little capital and think that they can make fortunes. It just doesn’t work that way. And because of high leverage invariably the trader quickly discovers that because their capital is not tied up in margin they can open many and multiple positions. Great if they’re right on the trades. But normally they’re not. Trades go against them and the entire account is wiped out. Next logical step: they deposit more funds. And the cycle just keeps repeating itself over and over until there are no funds left. And this is the reason why the authorities (at least in the case of regulated brokers) have changed margin requirements. It accomplishes two things: it makes it much harder to wipe out an entire trading account AND it makes it that much more difficult for a trader to enter the market and start trading in the first place because they need decent capital to begin with. I guess all I’m saying is be very wary of brokers that are still offering leverage of 1 000:1 etc. etc. etc. Believe me: they’re not doing you a favor and only have their own interests at heart for obvious reasons.
Anyways. That’s probably a lot more than you wanted to know. But there it is.
As I said: if possible post some screenshots and let’s get to the bottom of your problem once and for all.
I also agree with @dpaterso on the point of leverage. Too much is potentially dangerous.
It would be better for you not to open lot sizes that are many multiples of your account balance.
for instance, if you have $1000 in your account, trading one mini lot might be too much as it is. That would be $1 per pip.
Even with 1:30 leverage, that is $333.33 as a margin requirement. However, a 50 pip adverse price move, which is not a lot, is the equivalent to 5% of the account balance.
one screenshot is attached but current loss was almost the same ( ! ) on opening of green candle that i am pointing at with red vertical line.
I usually open positions with lower investment, e.g. up to only max 20% to 25% of balance. I don’t go too high with investment because i am aware at any time trend could change but i like to use Trailing. In average my Trailing is between 110 and 140 points. I don’t have exact theoretical (or even practical) explanation why this exact range. I am just used to it.
I am trying to think why current profit or loss (by ‘‘current’’ i am obviously referring to opened position) doesn’t change at all not even after larger distances done.
ProfitPotential, per $1000 on balance i would say around 1 lot investment in total opened trades (sum) would be ok if not having any other source of income because money needs to be earned somewhere. Extremely low investments surely reduce risk but also don’t make any income at all.
If you deposit $1000 and trade 1 lot, you are probably going to blow your account faster than you can ever imagine. Trading up to 1 lot per $1000 in balance would achieve similar results.
Its your money, I’m not telling you what to do. However, just heed the warning.
The profit and loss on the screenshot for those lot sizes looks fine to me.
The USDCHF trade is about 12 pips in a loss
The USDCAD trade is about 2 pips in a loss.
However, you also have to add or subtract the swap which is the interest paid or received for rolling your deals over to the next trading day. Those deals have been open for more than a week.
I’ve looked at that chart. Not sure where the issue is i.e. not understanding what the problem is.
But if I’m reading the rest of your information correctly then it looks to me like you need some help when it comes to position sizing and risk management.
So far as I can tell: you are opening positions based on a percentage of your capital in the account. In other words: you’re basing your position size on the amount of margin being reserved as a percentage of the capital in your account. If I’m correct then read on. If I’m wrong then no worries.
You need to forget about leverage here for a minute. You need to work out what percentage of risk you’re prepared to take on any one given trade. Such percentage risk could be 1% or 2% (or whatever) of the total capital in your account (nothing at all to do with leverage or margin requirements). Once you’ve calculated this then you must open lot sizes such that if the potential loss (if your stop is reached) does not exceed 1% or 2% of your account.
While the above may seem very basic to some: I can remember when I first started trading that I didn’t understand this and nobody took the time to explain it to me in terms that I could understand. So I started out opening trades by working out what margin requirement represented 1% or 2% of my capital. Needless the say (and at that stage I was also trying to trade with ridiculous amounts of leverage) this resulted in my being able to open HUGE positions and, well, I think it took me a few minutes each time to wipe out a few hundred $$$ trading accounts (which eventually added up to THOUSANDS of $$$).
If the above doesn’t make sense (as I see that your first language is not English) then please ask and I’ll post a detailed example of how to calculate risk, position size, and how to use a PIP Calculator.
dpaterso the 1% or 2% of total balance on opened positions are probably meant for people who have income from different kind of work (e.g. employer). But for others like me, who have no income at all and zero savings (i admit i lost twice on my trading account everything i had in two brokers), we need to open larger size position to earn some salary from trading as profit from closed positions. Therefore i cannot have such low investment otherwise, even if direction of trend will be wanted one, the profit won’t be sufficient to take for bills.
The problem in chart, but not just post one, is the fact that there is basically no current profit or loss on active position regardless how far does the price go from entry price level.
