Hi, my first post!
Im confused, please help me out.
In stocks trading one can short sell and the max loss can be unlimited.
However, if you short sell eg. NZD / AUD, the max you can lose is the amount of NZD sold. Illustration:
Sell NZD1,000 for AUD1,000.
NZD rises from 1:1 to 1:999AUD.
Unwind position = buy NZD1,000 at AUD999,000.
Whats the loss? AUD998,000. That’s as good as (slightly less than) NZD1,000.
So short sell losses are capped in FX in this sense? After all, short selling NZD = buying AUD and buying anything means your losses are capped.
You’re on the right track. In forex you’re playing relationships, not assets. It’s akin to doing a spread trade in the stocks.
Thanks for that!
I have another question: I’m probably a few days trader (i think you call that intraday or swing trader). My practice shows i earn about 600 pips, on 3k @ 0.92 for gold thats about $17 dollars profit.
Is this realistically profitable? I am using in this case $3K risk for $17 reward. I may be expecting too much; since I don’t do scalp trading i would have expected a more decent payout for this risk reward ratio. Is trading right for me?
Sounds about right but it depends on the currency your account is in. Sounds like USD. If trading $3000 then you are trading micro lots. To make the math easy to understand let say XAU/USD (gold) was traiding at 1.0000 then your $3000 investment has a pip value of .03. This mean for every pip it moved in your favor you got .03. Now since it went 600 pips thats 600X.03=$18 or in your case 17 since it was trading at .92
Also you did not actually risk $3000 on this trade. I think of it as more of a deposit on the investment. Remember you can close the trade long before you lost that $3000 if you would have lost 600 pips you would have only been out $17. You can chose your pip value by increasing your lot size. The babypips school has a lot of info on this and can explain it a lot better than I can. I would strongly recommend to go to the school of babypips and learn position sizing and risk before upping you position size.
Thanks, i will but am doing training first in the meantime to test my strategies and then the other technical aspects.
I guess my quick question is, am i doing the lot size correctly and therefore expected to do more trading, or am i better off increasing my lot size to maintain a swing trader?
Hi, is there an error in the calculation of pips using Oanda demo account?
Example, gold has moved 7.88 pips rather than 78.8 pips. And even then the calculation is incorrect. Can someone guide me on this? Thanks
