Hi all,
I’ve been mainly a BO trader the last few months and just now trying to get into spot forex but I was curious on how the profit per pip system works?
For example, if I want to earn 1$ per pip, is there a minimum amount that needs to be deposited?
Can it be changed to 2$ per pip and upwards whenever I want?
Hi Egomes,
The amount of money you can make or lose per pip is determined by your trade size.
For example, to risk $1 per pip on EUR/USD, your trade size must be 10,000 currency units or one mini lot.
Let me walk you through an example showing why that is.
Suppose EUR/USD is trading at 1.1274 and you buy one mini lot (10K) at this price.
That means you bought 10,000 Euros at a cost of $1.1274 each. That means you paid a total of $11,274 for your purchase.
If you the price goes up 1 pip to 1.1275 and you sell at this price for a 1 pip profit, then that means you would have sold your 10,000 Euros for $11,275, which is a profit of $1.
If you want to risk $2 per pip, then you must double your trade size to 20K.
As far as how much money you need in your account to trade 10K, depending on where you live you may have anywhere from 50:1 (in the US) up to 400:1 leverage (outside the US) made available to you. With 400:1 leverage, you only need $25 in your account for every 10K you control. However, the slightest movement of even 1 pip against you would cause your trade to run out of margin if you trade with the maximum leverage available to you.
A study by the DailyFX research team showed that traders who use 10:1 effective leverage or less tend to perform better than traders who use more than 10:1 effective leverage. Effective leverage is the actual amount of leverage you use despite the maximum amount available to you.
If you don’t want to exceed 10:1 leverage, then you need $1000 in your account for each 10K that you trade.