Well im new to forex and i have a few friends that are helping me which is really good. But something i have noticed is that on at the start of the trading week on monday with the opening of the sydney market there can be a pip jump from 20-50 and sometimes more on most majors pairs, which is as a understand it is a direct cause from all the friday positions being closed which creates a bearish market… am i correct so far?
What i am wondering is that this must be a really good opportunity to enter the market right? then wait for 10-15 minutes until the pips get to a good level then sell right?
So say i want to buy GBP/USD which is Asking say 1.6913 at the start of the day i buy in with say $1000, which is 20standard lots(2,000,000units!!!) giving a pip value of $200 USD and from there say the Ask price rose from 1.613 to say 1.6958 then thats 38pips which means 200*38pips is $7600 USD… so am i right to assume this??
Your math is a bit off here and I think your entire trade idea set-up for blowing account after account. For starters 1.0 lots @ 1.6913 would equal $169,130 so 20 lots would be $3,382,600 with a leverage of 1:1. Buying this with $1,000 would mean your broker is giving you leverage of 1:3,383.
Each 1 pip would be $200 (as your rightfully stated), but if you enter a trade at the ask price you need to look at the bid price for closing a trade and the other way around. While the mathematical part of 38 pips * $200 = $7,600 is correct and if you would be trading with a leverage of 1:3,383 you would need at a sizable account unless you ignore risk management and you decide to gamble.
I am not sure what account size you had in mind, but as you can tell by your own example if you have a small account size of $10,000 a 38 pips move against you will almost wipe you clean.
In order to trade 20 lots per trade (depending on your SL levels and how much you are willing to risk per trade) I think you need to have at least $1,700,000 in your account if you use 1:100 leverage and risk no more than 2% per trade (the math is very rough and I just wanted to use it as a quick example).
hi thanks for the answer, i am just confused as i have been using the the pip value and the position size calculators offered on this site, And am wondering where i am going wrong with this.
Wish it was that easy, unfortunately this is something that is distorted on historical charts, and can’t really be trusted on backtest. For example this morning with the big gap down on GBPJPY my charts started drawing the candles 1 hour before the market opened for me. About a quarter of the gap was already closed before a trade was able to be placed in the retail trade and I just had to sit and watch my profits disappear, probably not quite as distressing for the traders who had the gap jump over their stops they could at least watch losses reduce !
I think TLBear is spot on here once you factor in the spread which is likely to be quite wide with some brokers on Asian open and the fact that many of the smaller gaps are probably a trading illusion for us retail traders (the major players having already sucked them up.)
If you ask around I am sure there will have been dozens of EA’s written that could trade this or be easily adapted to do so because it would be pretty easy to code.
Don’t start looking at the dollars before you start looking at the PIPs. The dollars will flow regardless of the size of the account if you can earn more pips than you lose and keep them with good trade management. I am not downplaying the importance of Money Management but it can’t turn a pip losing system into a $ winning one, it can however turn a pip winning system into a $ losing one.
2% risk is fine in my opinion, but in order to buy 20 lots of GBPUSD in a standard account at the price you mentioned in your example you need to have leverage which I think nobody offers and one which in my opinion makes no sense at all.
what i do not understand is why is babypip position size calculator is telling me that my entry size will be 20 lots… i must be misinterpreting something which might be why it sounds confusing. (when i enter $50000 balance, 2% risk, 5p SL, with a USD currency pair)
Yes that 's the right figures according to my spread calculator - and it must be right cause I wrote it:47:
don’t know about the leverage because mine doesn’t calculate it but at 2% risk and one trade the
leverage would have to be fine.
Your math for the risk you take is correct (2% of $50,000 is $1,000 and if you would buy 20 lots you will get there with 5 pips), but you need to also have the funds to enter a trade with 20 lots. In a standard account 1.0 lots of GBPUSD @ 1.6913 (your example) totals $169,130 (1.6913 x 100,000) if your account is in USD. 20.0 lots total $3,382,600 ($169,130 x 20). You stated buying this with $1,000 which I don’t think you will be able to do as your leverage would have to be 1:3,382.60, but later you stated this with a $50,000 account where mathematically you would be able to buy 20.0 lots.
LOL, brokers would be lining up to offer higher leverages…that’s never an issue since there are always the newbies who read millions into the 1:1000 leverage…
In the end, the only one to profit is the broker…I suppose there’s a moral somewhere in this…