Definition of Forex pips lots leverage

{}Posted in2023/2/24 17:52:04 | 7Browse

Today well do a little math you may have hea bestforexrebatecompanyd of pips forexrebatecommission"https://www.ccityrebates.com">fxrebatecentral lots, now well explain what th best forex rebate company is and how to calculate it please take a moment to understand this concept, its essential common sense for every forex trader dont even think about trading first, wait until youre used to pips then learn how to calculate what a pip really is? The most common unit of currency growth is the pip. If EUR/USD increases from cashback forex.2250 to 1.2251, thats an increase of one pip. A pip is the last digit of the quote change unit. For example, in the case of USD/JPY, the exchange rate is 119.80 (note that this currency pair has only two decimal places after the decimal point, while other currency pairs usually have 4 decimal places), in the case of USD/JPY, a point is .01, so USD/JPY: 119.80.01 divided by the exchange rate = the value of the point .01/119.80 = 0. rebatesforexbroker0834 This Seems like a very long number, lets go back and discuss: the number of lots USD/CHF:1.5250.0001 divided by the exchange rate = the value of a point.0001/1.5250 = 0.0000655USD/CAD:1.4890.0001 divided by the exchange rate = the value of a point.0001/1.4890 = 0.00006715 In this example USD is not quoted first, we want to get the price in USD, we need to add a step EUR/USD:1.2200.0001 divided by the exchange rate = value of the point so: .0001/1.2200 = EUR0.00008196 we need to count back to USD again so we need to add a calculation step EURx exchange rate so: 0.00008196 x1.2200=0.00009999 so the total is 0.0001GBP/USD:1.7975.0001 divided by the exchange rate = point value.0001/1.7975=GBP0.0000556 we need to calculate back in USD so we need to add a calculation step GBPx exchange rate 0.0000556x1.7975= 0.0000998 so the total is 0.0001 you may now be thinking, do I really have to calculate it all myself? The answer is of course no. In fact all forex brokers will automatically tell you the calculated values, but it is necessary to tell you how they are calculated. In the next section, lets discuss what these seemingly insignificant data can be calculated together with lots. The standard lot is 100,000 units and of course there are also 10,000 unit mini lots as you already know, the currency is calculated in pips, pips are the smallest unit of currency increase to profit from this smallest increase in pips, you need to operate a very large currency order to see a significant loss or gain. If the USD/JPY rate is 119.80, (.01/119.80) x 100,000 = $8.34 per pip USD/CHF rate is 1.4555 (.0001/1.4555) x 100,000 = $6.87 per pip Sometimes USD When it is not the base currency, the formula is slightly different EUR/USD rate is 1.1930 (.0001/1.1930) x 100,000 = 8.38 x 1.1930 = $9.99734 Total $10 per point GBP/USD rate is 1.8040 (.0001/1.8040) x 100,000 = 5.54 x 1.8040 = 9.99416 for a total of 10$ per pip Maybe your broker will give you different pips depending on the number of lots you trade, but no matter how they do it, they will tell you what the spread is at the time you are trading and the value of the pip will vary depending on the time you are trading. Now that you know how to calculate the value of a pip, now tell if the profit and loss is calculated lets buy the dollar and sell the Swiss franc rate quoted at 1.4525/1.4530 because you bought the dollar at 1.4530 and at that point the traders are ready to sell so you buy a standard lot (100,000 units) at 1.4530 and a few hours later the The price becomes 1.4450 and you are ready to close your position you close your position which means you were buying before and now you are selling at 1.4550, a point where other traders are buying at 1.4530 and 1.4550 the difference between 1.4530 and 1.4550 is 0.0020 or there is a 20 point spread before using our formula we now have (.0001/1.4550) x100,000 = $6.87 per pip x 20 pips = $137.40 Remember, when you enter or exit a trade you are following the bid/ask price when you buy a currency you use the ask price and when you sell a currency you use the bid price so when you buy a currency you are paying the spread on the entry and not the exit when you sell a currency you are paying the spread on the way out rather than the way in What is leverage? You may be wondering how a small investor can operate with such a large amount of money? Imagine a trader lending you $100,000 to buy and sell currencies and he only requires you to provide $1,000 in margin that he is saving for you instead of keeping what looks like a good unbelievable? In fact, this is the principle behind the use of leverage in forex trading. The amount of leverage depends mainly on which dealer you choose, or how much leverage you are more comfortable with. For example, if the leverage is 1:100 (or at least 1% of the position), if you want to trade $100,000, your dealer will set aside $1,000 as margin so you have at least $5,000 before they will allow you to trade $500,000 Minimum margin is different for each dealer. In the above example, the dealer requires a minimum margin of 1%, meaning that for every $100,000 traded, the dealer requires a minimum margin of $1,000 What is margin call? When your account falls below the required minimum margin, your dealer may force you to close some or all of your positions. This will prevent your capital from reaching negative values in this volatile and fast-moving market. The available margin is the amount of money that can be used to open a position or take a loss because your initial capital is $2,000, so your available margin is $2,000 but when you trade a lot, which requires a margin of $1,000, your available margin is $1,000. Example 2: If you open a $10,000 Forex live account and you trade 1 lot of EUR/USD with a margin requirement of $1,000 after entry, you have $9,000 available margin and $1,000 used margin If your loss exceeds $9,000 available margin, you will receive a margin call. The difference between Margin and Used Margin You must understand that if your account equity (your account funds) falls below the available margin, you will either have to deposit or the broker will force you to close your position to protect you and the broker from your own losses As a result, your losses will never exceed your deposit amount If you trade on a margin account, it is critical that you understand the brokers margin account policies You must also know that Most dealers require higher margins on weekends. For example, if your usual requirement is 1%, your position may become 2% or higher on the weekend. The relationship between the two is: Leverage = 100 / Margin Ratio Margin Percentage = 100 / Leverage

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