Profit calculation and Lot

I still don’t understand why giving a fixed profit/loss value to a pip. Why not using same method as in stocks in which position is multiplied by number of shares?

Let’s say I open a position with 1000USD in the market, leveraged at a ratio of 50:1. Going Long (buying low for selling high), from my point of view the profit will calculated by:

Open: Bid 1.3144, Ask 1.3149
Close: Bid 1.3154, Ask 1.3159

100 USD x 50 = 50000 USD

(One line calculation) : (1.3154 - 1.3149) x 50000 = 25 USD

1025 USD

With a 1:100 leverage this would be 50 USD of gain OR 10 USD per pip. Is that why a fixed price of 10 pips is assigned to a 1000 USD lot with a 1:100 leverage?

If the leverage or capital change, this value should be multiply by (Margin * Leverage)?

Speaking of “I don’t know whys”, I don’t know why you would make this more complicated.

You open a position with $1,000, that’s that. There’s no need to over analyze.

Compared to equities, the leverage and liquidity are much higher in Forex. The pip value is calculated from the leverage size. If you had used 1:100 leverage on your trade, then you could have yielded $ 50.
Hope this helps, but incase you need more infor, please rephrase your question.

I understand that obvious statement. Which I don’t understand is how to value a pip movement and that’s why I’m posting.

(1.3154 - 1.3149) = 5pips
100 USD x 50 = 50000 USD = 0.38 lots (50000$ /1.3EUR/$ /100000EUR)
Value per pip = 10 USD
Without giving much thought I believe profit should be:
Profit = 10USD5Pips0.38lots=19Euro=25$

This might help you

Also might want to take a look at their “fixed pip money management” lesson.

I already said it before, but I will repeat it again: I don’t like how you tweak leverage into this… what matters is how big is your position size.

When you open a position with a forex broker you don’t go and multiply ‘‘100 USD x 50’’. You say: I want to open a position with a size of 0.38lots. Leverage is what allows you to open such a position if you don’t have thos 50000$ in your account, but it serves no other purpose.

Thanks to both of you for your answers