Why multiply by 1,000 Euros? (Where did that 1,000 Euros come from?)

Beginner Questions
1

Hi Forum Members,

I was studying the lesson “Trading Scenario: What Happens If You Trade With Just $100?” I need a bit of help to understand why we had to multiply the 5 micro lots by 1,000 Euros in the calculation of the Required Margin. Any help would be most appreciated. Thanks.

This is copied from the lesson:

Step 2: Calculate Required Margin

You want to go short EUR/USD at 1.20000 and want to open 5 micro lots (1,000 units x 5) position. The Margin Requirement is 1%.

How much margin (“Required Margin“) will you need to open the position?

Since our trading account is denominated in USD, we need to convert the value of the EUR to USD to determine the Notional Value of the trade.

€1 = $1.20

€1,000 x 5 micro lots = €5,000

€5,000 = $6,000

2

I marked up copy of your post as a way of answering your question —

BP school lesson explanation
BP school lesson explanation754×599 28.4 KB

3

Thanks Clint. That was most helpful.

While I have your attention, one more question that I hope you can help with:

Where did you get the symbol for the Euro? Is there a keyboard shortcut that I can use to get to it? I’ve been looking at my keyboard and nothing suggests (to me) a way to get to an alternative set of characters (such as the Euro, the Pound, etc.) so that I don’t have to write out the words/names.

Thanks again for your help.

Izzy

4

Hi Izzy,

Yes, I use keyboard shortcuts for currency symbols –

£ (pound sterling) is ALT 0163
€ (euro) is ALT 0128
¥ (yen) is ALT 0165

(I used to have a symbol/shortcut for the Swiss franc, but I’ve misplaced it. For the Canadian, Aussie, and Kiwi dollars, I just put letters behind the $-sign – C$, A$, and NZ$)

Some other keyboard shortcuts that I use from time to time are –

¢ (cent) ALT 0162
¼ (one-quarter) ALT 0188
½ (one-half) ALT 0189
¾ (three-quarters) ALT 0190
± (plus or minus) ALT 0177
÷ (division sign) ALT 0247
• (bullet point) ALT 0149

And sometimes I use –

π (pi symbol) ALT 277 (note that there is no zero in the shortcut)
√ (square-root sign) ALT 251 (no zero in the shortcut)

(for some odd reason, the square-root sign can’t be bolded in this (Discourse) forum platform)

1 Like
5

Hi Clint,

Those keyboard shortcuts you shared are like nuggets of gold. Thank you. Thank you. Thank you. Is there a website that lists them all, or did you acquire them over your trading career and created your own list? In the meantime I’ll print off the ones that you’ve provided so that I can have it as a ready reference.

Thank you for coming to my rescue for the second time. Are there any books on FX trading that you can recommend that will give me greater insights into the subject matter so that I’m not being blindsided by these subtleties that (in hindsight) seem simple (but of which I’m unaware). I realize that becoming a skilled FX trader takes time and dedication, but, in the meantime, if there’s anything that I can do/study that would help me to get to that point, I’d be prepared to do it.

Thanks again for your help.

Izzy

6

This reminds me of high school math: (please let me know if I’m way off base here)

€1 = $1.20
This equation can be re-written as (€1/1) = $1.20
As we’re trading MICRO lots (where 1 micro lot = 1,000 units)
Multiplying both the numerator and the denominator by 1,000 gives us
(€1,000/1,000) = $1.20

So the second line would become (€1,000/1,000) x 5 micro lots = €5,000, so that
€5,000 = $6,000

Is that basically what’s happening here?

7

The few that I use were discovered years ago by googling “keyboard shortcuts”.

As I recall, there were numerous websites offering menus of shortcuts. The websites I found were not identical, and in some cases they offered conflicting information. And some of the shortcuts they offered just didn’t work. Given that circumstance, I had no recourse, but to pick and choose from the various menus, and then test the shortcuts I selected.

I think you’ll have to do a similar search and test.

There are dozens. But, you have to start somewhere, so I would suggest these for starters:

  • Kathy Lien – Day Trading and Swing Trading the Currency Market
  • Dr. Alexander Elder – Trading for a Living, also Come Into My Trading Room,
    and Sell and Sell Short
  • Barbara Rockefeller – Technical Analysis for Dummies

Two book lists – HERE and HERE – posted in this forum a few years ago will provide you with many more suggestions.

When Babypips switched forum platforms, from the previous one to the Discourse platform we’re using now, the formatting (bold type, etc.) in old posts got screwed up, during the migration of those old posts to the new platform. The two posts linked to, above, display some of that screwed-up formatting.

It’s perfectly legitimate to apply algebra to forex prices.

However, I suggest that you use the ISO currency symbols (EUR, USD, etc.), rather than the common symbols (€, $, etc.). That way, you can apply your algebraic transformations to any currency pair, not just the ones for which you have keyboard shortcuts.

Your algebra can be simplified. I would write it this way:

  • EUR/USD = 1.2000

  • This can be re-written, as follows: EUR = 1.2 USD

  • Multiplying both sides of the equation by 5,000 yields: 5,000 EUR = 5,000 x 1.2 USD

  • This resolves to: 5,000 EUR = 6,000 USD

8

Hi Clint,

I’ve made a note of your suggestions. Thanks a bunch. I’ll have to re-read that book by Kathy Lien. When I first read it, a lot didn’t make sense to me as I’m new to FX trading. I’ve ploughed through Dr. Elder’s “Come into my Trading Room”, but there again, quite a few things went over my head. I’ll have to take another look at it (and the other two). I’ll have to get Barbara Rockefeller’s book. Thanks again for your help (and your suggestions).

Izzy