When trading the GBP/USD pair, how much money is required to be in my account to trade:
3 lots with a lot size of 10,000?
5 lots with a lot size of 10,000?
10 lots with a lot size of 10,000?
Given a $400:1 leverage since it is a mini-account.
And, be able to allow a 50 pip loss?
And, while we’re here…what if it isn’t a mini-account just a regular account with a 100:1 leverage?
Is there a formula for this type of information?
Thank you in advance for your help!
To answer this question, we will learn how to calculate leverage and margin in general. To simplify, let’s first assume you are trading a currency pair where the base currency is USD (i.e. USD/JPY, USD/CHF, USD/CAD). So, you buy one 10K lot of USD/CHF. You are buying US$10,000 worth of USD and selling US$10,000 worth of Swiss Francs at the same time. If your margin is set to 400:1 (.25%) then you would take $10,000 and divide it by 400, which equals $25. $25 would be set aside in margin.
If USD is the counter currency (i.e. EUR/USD, GBP/USD, AUD/USD, etc.) then you would need the exchange rate to calculate the margin required. Let’s say you buy one 10K lot of GBP/USD. You are buy 10,000 British Pounds and selling the equivalent amount in USD. Assuming the exchange rate is 1.9800, then you are selling US$19,800 (10,000 GBP x (US$1.98 per GBP) = US$19,800). So, you are trading a position worth $19,800. At 100:1 leverage, your broker would set aside $198.00 ($19,800 divided by 100). At 400:1 then your broker would set aside $49.50 for every 10,000 unit lot you trade of GBP/USD.
So, to answer you first question, assuming an exchange rate of 1.9800 for GBP/USD then your broker would set aside $148.50 for 3 mini lots, $247.50 for 5 mini lots, and $495.00 for 10 mini lots at 400:1 leverage.
I hope this helps. You can find more information on leverage by visiting our lesson: “Leverage the Killer” in the School of Pipsology.
To find out more information on how to calculate pip values please visit our page, “Know your P’s and L’s” in the Pre-school. Good luck!
It doesn’t really matter how much leverage your broker gives you - 100:1 or 400:1
When trading GBP/USD with minilots 1 pip equals $1
So, 50 pips loss will be $50 for 1 minilot, $150 for 3, 250 for 5 and 500 for 10 minilots or 1 standard lot
Now, let’s say you’re willing to risk 2% of your account on each trade
$150/.02=$7500
$250/.02=$12500 and so on
If you can risk only 1% on each trade you need twice as much money on your account
Hope this is clear
Good luck!