Hello all,
I am new to trading, and was thinking as anyone would to start very low 100€. I have a micro account. So for me to start a deal I understood that:
I need 33.33€ as a margin (my leverage is 1:30)
The profit I make = price difference x size of the order
I had a demo account first, and was trying out the gold market, and made 7800€ from:
I don’t understand the Size here; does ‘5’ mean (lot) here? If so, and my demo account is 100,000 units, this means that I bought 500,000…what? I don’t know how to calculate how much I need in order to buy.
Pip value = 0.01/1324.01 = 7,55x10-6 … and then multiply by 500,000 I guess? = 3.776€ (correct?)
I have pieces of info but I am unable to connect them together. I would love it if someone briefly explains this to me using the numbers in the table. I tried all kinds of calculations but could not reach the same profit value shown to me
Thanks in advance,
Yes I know but that was just an example to show that I dont understand how the profit calculation works, and how to calculate how much to pay in the first place.
The micro account is just to trying out some small deals (not yet started).
Aaaaah I forgot to convert to EUR. I assumed that it is already in that currency. So this part is not clear. Thank you very much.
Last thing for me now is the leverge. Can you change it? I understand that the higher it is, the more dangerous the loss will be. But still, witht the current setting, I came to the conclusion that trading is useless unless you are already rich. To trade with few thousands generates an income of hundreds only. As seen in my demo account. I needed 33,333€ = 100,000 (30:1) to start making 7800€. if I had 33 thousand euros I would not be trading in the first place considering how risky it is to lose all of this money.
So the question is:
Can you make a profil equal to what you invested in the first place? I mean you spent 1500€ and make 1500€ ?
You should be able to change it via your brokers client portal area. You can ask them.
Leverage is just a gearing ratio between your deal size and your margin requirement.
If your account is set to 100:1 leverage but you have $1000 in your account and you trade one micro lot (deal size $1000), you are in effect trading on a one to one leverage. If this is the only deal you have open. If you open a second micro lot, your account is now geared at two to one.
Irrespective of what your accounts leverage is set at.
I hope this make sense.
Yes, you can double your money on any single trade. but you are taking high, relative risk.
I think I have to learn more about it before saying that I totally understood what you wrote. I am very new to this and don’t have any background. The leverage thing is a bit tricky. Once I understood it I come back to your comment, but for now, Thank you for your help.
It makes calculating your lot size, SL, risk, all of that really simple. And then you can adjust the lot size to change your account leverage. My demo account’s minimum leverage is 10X, which I don’t want to trade, so I adjust my lot size to bring that down to 1:1.
Thank you for this tool! It is actually quite useful for me at this stage.
I started now trading with 1€ (100€) (0.01 lot gold) account. At this scale I feel very confident. My broker does not allow changing the leverage, I don’t understand how can you achieve that by changing the lot size.
My demo account can’t go below 10x leverage. So I use the calculator, enter my account demonination, risk %, size of my stop loss, and price. The calculator spits out the units. I take that number and divide it by my leverage, in this case 10. And I use Oanda demo, which allows me to place trades in any unit increment I want.
So, let’s say for EURUSD, after entering my details, if the calculator tells me to trade 13,333 units with 2% risk and a 150 pip stop loss ($10k USD account balance), I’ll divide the units number by 10, and open a trade of 1333 units, not 13,333. At 13,333 units, I’m risking $200 USD x 10X leverage or $2000 USD (or 20% of my account balance). At 1333 units, I’m risking $20 USD x 10X leverage or $200 USD ( or 2% of my account balance). The account leverage always stays the same at 10x, but my position sizing keeps me at 2% risk for the trade. Make sense?
Thanks for the example, and the explanations. Yes indeed it makes sense now. It all starts to be clearer as I read more
It will just need some time.
So on more question: Is there a time limit for your trades? I mean what if you bought some gold and just waited until the value skyrockets, even after like 2 years of decline. Can you do that if you have a lot of money in your free margin?
There’s no time limit but if it keeps going the opposite way then it will wipe your account out, so the limit is how much drawdown can you sustain until you get margin stop out.
I see, So in my example earlier of the demo account, I needed 22,000€ to gain 7800€ in the end after few days only. That’s a lot of money. But as I just understood from you in case the market drops down few times before reaching the highest value, I must have enough free margin to keep the trade open? correct? And this of course depends on the risk%, as I read somewhere. So theoretically, I need at least like 30,000.€ to enter such a deal???
Yes you need enough free margin to keep the trade/ trades open…
Different margin requirements for different assets . … And different retail brokers…
The margin requirements to open the trade are quoted in the instruments specification details… This is how much % of the cost of the trade you need to put up front/ open the trade.
Margin stop out
is a trigger to automatically close your trades when your margin drops to a certain percentage of you available funds Eg. 50% used to be 20%
So 50% of you 100 is 50
When your $100 deposit gets to $50 you get stopped out and now left with $50 real balance.
If a 0.10 Lot of eur/usd got you $1 per pip
It would go 50 pips against you and stop you out.
There is no time limit but there is a price limit. The deal will stay open as long as the price does not reach a stop loss as defined by you or your margin stop out level as defined by your broker.
If you start running out of money, the broker will liquidate your position because you cant afford it anymore. Its like what @A1lenTrader has said, if you are trading at $1 per pip with $200 in your account, and your margin is $100 and the margin stop out level is 50% or $50, then the price can move against you by 150 pips before the broker stops you out. If you set a stop loss of 50 pips. then you still have $150 in your account but you didnt get a margin stop out. You defined the stop.
Its like you have 20K to open and start a business.
You spend some on stock, you spend some on marketing, you spend some on rent and other overheads, expecting a return. If cash is not flowing in, but more out, you will be forced to close shop. You cant stay there indefinitely just because you opened it.
If you do want to stay indefinitely, then trading on no leverage would be the closest thing you could do to achieve that. Like for example, you buy one ounce of gold and its trading at $1,300 per troy ounce. Without any leverage you will not be putting up a small margin, but you will put up the full $1,300. You will pay full price for the asset. The assets price has to go to zero for you to lose your position. You can essentially hold this asset or the troy ounce of gold for life even it is is showing a loss on paper.Does that make sense? its a simplistic explanation without including swap fees.
It doesn’t matter what the leverage is at your broker or how much margin you need to open a deal. If you have $1,300 in your account and you buy one ounce of gold that is trading for $1,300 per ounce. The price per ounce of gold has to practically go to zero for you to be ‘stopped out’. Like this, you are essentially trading with no leverage if you dont trade anything else.
