OK, so brand new to this and trying to get info. If I open up a $1K account, I get $50K worth of equity. When it comes to calculating MY profit, are all of my profits in excess of $50K my own, or are they reduced by the 50:1 ratio?
As an example, if I have a $50K account, I take it up to $57K, do I now have $7K I can cash out, or do I have $7K/50 to equal $140?
Thanks
IF you have a 1k account, that’s all you really have.
Ignore the leveraged amount. The value per pip you are trading for is the only thing that will add, or subtract from that initial 1k deposit.
As for pip value, if you are trading a 1k account, a mini lot would be about max lot size for me anyway. A mini lot is $10,000 units.
But trading the euro, that mini lot will pay you $1.00 a pip.
You earn 10 pips, you now have $1,010.00 of withdrawable funds.
You lose 10 pips, you now have $990.00 of withdrawable funds.
OK, just to be clear, let’s have a look at one of the transactions from a practice account:
CAD/JPY
Volume=1,000,000
Bought=85.707
Sold=85.814
Pips=10.7
Gross P/L=1,311.21
So I ignore the Gross P/L and look only at Pips. Pips=10.7.
I have a U.S. based account. I typically do .25 - .40 lot sizes. That equates to .25 - .40 cents a pip and I am a 50:1 leverage. At the end of a trade and say, I have made 100 pips and closed the trade say at .25 a pip. I have added $25 bucks to the value of the account that is now mine. I can take that money, or keep it in my account and continue to use it to trade using my money management system that will allow me to ultimately trade larger lot sizes.
Wow, seems like a lot of risk for not much reward. I’m still unclear on why the P/L is irrelevant. If the broker is taking a portion of the $50K and placing your bet, and you increase the $50K by $7K, the broker is taking back in the $7K, right? But your takeout on that is a paltry sum by comparison?
Honestly, I still to this day really don’t get all that leverage crap. I think it just allows you to make more trades or take trades with larger lots sizes which is crazy. All I know is that if I take a trade at say 1 mini lot (1 dollar a pip) and I set a stop loss at 80 pips. All I am risking is 80 dollars. Now my account, I don’t do that, but just for ease of reading.
Sample
Assume a price for the EurUsd of 1.5000 and I think its now going to go down. So I short it.
I take the trade at that price.
Price 1.5000
SL 1.5050 - If I get stopped out. My account is now worth $980 - spread = 978
TP 1.4900 - If I take profit. My account is now worth $1040 - Spread = $1038
Thats how I see it and work with it.
Cool, so in the example above that I gave, how much would I have made?
Assuming your orders get filled on both the fill and the sell side… you would have made 7k. The only thing you gotta worry about is not over extending yourself and trying to run to many trades at once and get yourself a margin call. Check out the baby pips school and get into the money management portion of it as well as risk and reward.
Me, the way I run my account, I can lose lose lose and then lose some more. Mainly because I don’t put myself in a situation to get a margin call on me. Obviously that is not my goal to lose, its to make money. However, if I run into a bad streak. I’m still going to be in the game. You just need to run through the pips school a couple times and then come back to the forums and ask more questions and then more questions… and even more.
wtf, how did you get $7K from that? can you plug the numbers into your equation and show me? tyia.
I was referring to this. If you take your account balance up to 57k… you can pull the 7k yes.
okay, doing the math on the 50k account.
So back to my other example…
Price to short 1.5000
SL - 1.5050 - If I get stopped out - I lose $500. Account goes to 49,500
TP - 1.4900 - If I take profit - I gain - 1k account goes to 51,000
In this scenario, I would have either decreased the account by 1% or improved it by 2%
To get a 7k single trade gain. You would have to hope you could get a 700 pip run without getting stopped out. Which is pretty unrealistic.
Basically, 2% risk keeps you in the game for a very long time.
In my example, I netted $1300 in p/l but only 10 pips. So my question remains, how much would be in my account if I closed it after this transaction. I would think it would be $1300, but you seem to think that each pip is worth $10 *10 pip movement * ??? to equal =??
The broker makes nothing but the spread.
The broker doesn’t make 7 k off his investment. The broker invested nothing.
The broker let you use his money in order to make your trade.
So, if you have a 1 k account, and you use max leverage, you COULD trade 5 mini units.
But the trade would close as soon as it opened on a margin call.
SOOOO… Your biggest lot size would be 4 mini lots to have some usable margin. In this case, your leftover usable margin would be roughly $200 dollars.
Which means, at 4 bux a pip, you have 48 pips before a margin call happens.
Why 48? Two pips went to the broker.
Four dollar pips would be all the profit you see.
The broker doesn’t make another $40 per pip.
You’ve used leverage to trade that lot size, and you get the gain, or loss. If the broker had a share of your gains because of the money you used, he would also share in your losses. That doesn’t happen.
When the trade closes, the $40k you were using from the broker goes back into the holding pen there, and broker gets your spread.
Of course the spread varies depending on the pair. On the euro, the broker might make $8.00, or the first two pips.
Other pairs can go up to 8 or 10 pip spreads.
Just talked to those in charge of my practice account. On my hypo, I would have made about $2, mostly because with a $1K account I would not be able to get any realistic kind of leverage.
Conclusion: Currency trading is a complete waste of time.
dude, you just don’t understand… you are all hung up on that leverage thing. It doesn’t matter, you not some super shark out there with millions on the table that is going to put these brokers in a pinch. You mean nothing to them, they just want you for your pidley 5k account. You will never hurt them, they won’t let you. All you have to do to make money is to stay within your limits. As purple patch says “its simples”
No… You look at GROSS PROFIT AND LOSS.
The amount a pip is worth is dependent upon the lot size you entered the trade at. So, if you started with 50k, your account would now have $51,311.21 in it.
This seems to be a serious dispute, and I think MT is right-the problem is, for the size trade I did, I had 1,000K for volume. I guess with a $1K account, that type of trade is not possible, I’d be in for more like 1-4K volume. So yeah, pretty weak sauce.
It is obvious that these places just want your $5K and that retail traders have little effect on the market. I just figured a few smart picks a day would be worth it, but now don’t see how it is with just a $1K account.
Of course it’s worth it.
A few smart pips a day can put 1 to 2 percent a day in your account. That gets silly when compounded.
But hey, to each his own:D
What were your expectations? Make 100, 1000, 10000, 100,000k a month? It’s pretty obvious that you really don’t understand just yet. There are guys here and that do this that make 70%+ trades everyday, which in my opinion really isn’t a gamble.
Sure, you don’t understand right now. Thats why it has been expressed to you to go through the babypips school.
My expectations? $1K/day would be worth it for me to do this, $80 is a waste of time and resources, especially since it is a gamble. I would note that I’m the only one in this thread that doesn’t understand, judging from some of the responses I’ve received-this is post #19 to a question that was pretty straightforward-ultimately between a couple of responses and talking to my broker, I was able to figure it out.
Anyway, it is understandable why so many people lose their ass at this, I’m glad I started with a practice account. Now I can delete it from my cpu.