Info for beginners to Forex

[Wysiwyg]

A simple explanation of how central bank interest rates move the forex.

Part 1



Part 2

 

[Lammii]

great info!

i have a question on price per pip movement.
after reading baby pips they have examples like:

USD/JPY at an exchange rate of 119.80
(.01 / 119.80) x $100,000 = $8.34 per pip

USD/CHF at an exchange rate of 1.4555
(.0001 / 1.4555) x $100,000 = $6.87 per pip

In cases where the US Dollar is not quoted first, the formula is slightly different.

EUR/USD at an exchange rate of 1.1930
(.0001 / 1.1930) X EUR 100,000 = EUR 8.38 x 1.1930 = $9.99734 rounded up will be $10 per pip

GBP/USD at an exchange rate or 1.8040
(.0001 / 1.8040) x GBP 100,000 = 5.54 x 1.8040 = 9.99416 rounded up will be $10 per pip.

and they want to know how much a pip is in USD.
so for us having a broker like go markets that holds your money in AUD.

if we trade
AUD/USD using a rate of 0.6850 using a lot size of 100,000
we have
(0.0001 / 0.6850) x AUD 100,000 = $14.60AUD

EUR/AUD using a rate of 2.0598 using a lot size of 100,000
we have
(0.0001 / 2.0598) x EUR 100,000 = EUR 4.85 x 2.0598 = 9.99AUD

GBP/JPY using a rate of 132.80 using a lot size of 100,000
where GBP/AUD = 2.1367
we have
(0.01 / 132.80) x GBP 100,000 = GBP 7.53 x 2.1367 = 16.09AUD

are my calculations correct?
would i be right in saying that when AUD is the quote currency each pip is worth $10AUD?

 

[Page]

Friends here are some currency rates seen according to some charts and calculators.
Following are the exchange rates for most important currencies against the euro:

CURRENT HIGH LOW:
US Dollar 1.4152 1.4173 1.4062
Japanese Yen 128.09 128.39 127.54
British Pound 0.9657 0.9658 0.9592
Swiss Franc 1.5 1.5041 1.4947
Danish Crown 7.4492 7.4509 7.4492
Norwegian Crown 9.91 9.9855 9.911
Swedish Crown 11.0986 11.1096 11.109
Australian Dollar 2.0584 2.0619 2.0485
Canadian Dollar 1.7142 1.7213 1.7113
Hong Kong Dollar 10.943 10.943 10.944
Russian Rouble 40.9315 40.976 40.732
Singapore Dollar 2.0267

 

[tayser]

Lammii: The pip value is always in the currency on the right. So if the currency on the right is not the currency you want to know the value in, you need to convert that using the appropriate cross (see the GBP/JPY example). You're on the right track however.

AUD/USD using a rate of 0.6850 using a lot size of 100,000
we have
(0.0001 / 0.6850) x AUD 100,000 = $14.60AUD

100,000 AUD/USD, pip value is $10USD, and you just convert it back like you did at the market rate.

EUR/AUD using a rate of 2.0598 using a lot size of 100,000
we have
(0.0001 / 2.0598) x EUR 100,000 = EUR 4.85 x 2.0598 = 9.99AUD

AUD is on the right here, 100,000 EUR/AUD always has a pip value of $10AUD

GBP/JPY using a rate of 132.80 using a lot size of 100,000
where GBP/AUD = 2.1367
we have
(0.01 / 132.80) x GBP 100,000 = GBP 7.53 x 2.1367 = 16.09AUD

Pip value here is in Yen - 100,000 GBP/JPY, pip = 1000 Yen.

So to convert this, you actually need AUD/JPY ( current market rate now: 62.15) - remember you want to know what the AUD value is: 1/62.15 = 0.0161 * 1000 = $16.10 AUD.

we both arrive at the same conclusion but just remember about the currency on the right hand side of the pair.

cheers.

 

[Lammii]

awesome! thx tayser!

 

[dit1]

Hello I've just joined today. I am very new to forex but have read babypips a few times, I opened a practice account with Forex.com and my trial is nearly over, I've made over 30,000 in 3 weeks. I have become quite used to the platform and am just wondering if I am better off sticking with FOREXTrader when i join or if it is safer to choose an Australian based broker. From what I have read on here I gather most are with Aussie brokers. Has anyone had experience with Forex.com?

 

[Cartman]

Hello I've just joined today. I am very new to forex but have read babypips a few times, I opened a practice account with Forex.com and my trial is nearly over, I've made over 30,000 in 3 weeks. I have become quite used to the platform and am just wondering if I am better off sticking with FOREXTrader when i join or if it is safer to choose an Australian based broker. From what I have read on here I gather most are with Aussie brokers. Has anyone had experience with Forex.com?

hi Dit (nice lips by the way )

ive trialled two systems on the EUR/USD over the past week that returned over 90% strike rate --- but would i back them with 'REAL' money is the question ?? (maybe i already have lol )

$30,000 bucks means nothing on a demo account unless u can simulate the same risk/reward with real dough ------

what was yr starting capital --- what was yr maximum risk and on a given trade --- what was yr max draw down??

dont get fooled by the 'big numbers' ----- treat the demo like its YOUR money ---- funny things happen when its YOUR money ---- blase logic can kinda go out the window when stress gets factored into the equation if u get my drift --

 

[Stormin_Norman]

so true cartman. especially the point about the 'real' money.

the key is to develop a trading plan. then trade that plan. dont deviate from it.

so use that demo account, record what youre doing, develop your rules. write out your plan - when you enter, when you exit (and anything in between).

when you have that in stone, its time to trade with real money.

plan your trade. trade your plan.

 

[fapturbo]

Hi all,

Thought I'd post this. Most already know this, but I'll put it up anyway.

Lot sizes are shown as a percentage of a full lot. 1 full lot in forex is equal to $100,000.00 of the underlying currency so 1.0 lot of USDCAD equals $100,000.00 USD. If the USD appreciates versus the CAD you will have more than $100,000.00 (profit) if you went long (bought the USDCAD contract) and less than $100,000.00 (loss) if you went short (sold the USDCAD contract).
If the USD depreciates versus the CAD you will have less than $100,000.00 (loss) if you went long (bought the USDCAD contract) and more
than $100,000.00 (profit) if you went short (sold the USDCAD contract).

The amount of the profit or loss from a contract purchase are related to the lot size and the number of pips the underlying moved. Here is
how it works:

1.0 lot = $10.00 per pip, you are trading a full lot, or $100,000.00 of the underlying currency
0.9 lot = $9.00 per pip, you are trading a .9 lot, or $90,000.00 of the underlying currency
0.8 lot = $8.00 per pip, you are trading a .8 lot, or $80,000.00 of the underlying currency
etc....
0.1 lot = $1.00 per pip, you are trading a .1 lot, or $10,000.00 of the underlying currency
0.09 lot = 0.90 cents per pip, you are trading a .09 lot, or $9,000.00 of the underlying currency
0.08 lot = 0.80 cents per pip, you are trading a .09 lot, or $8,000.00 of the underlying currency
etc....
0.01 lot = 0.10 cents per pip, you are trading a .01 lot, or $1,000.00 of the underlying currency

**note: some currencies are not exactly $10.00 per pip or a fraction thereof but for our needs assuming so is fine.

Remember, recommended risk levels are no more than 1-2% of your account balance per trade.

So if you trade 0.1 lots, you are risking $1.00 per pip. If the underlying moves against you, and your stop loss is at 60 pips, you are risking $60.00. If your account is $500.00 you are risking 60/500 = 12% of your account on this one trade.

So with a $500.00 account what lot size should I be trading to only risk 1-2% of my account?
$500.00 X .01 = $5.00 risk per trade at 1%, $10.00 risk per trade at 2%

Now lets say our stop loss is 50 pips, so with $5.00 at risk (we have determined our comfort level is risking 1% of our account per trade), we need to be trading a lot size that only risks 0.10 cents per pip ($5.00/50=0.10) so to manage our risk we should set our lot size to 0.01 lots per trade. If your comfort level is 2% risk per trade, then 500.00 x .02 = $10.00 per trade. So $10.00/50=0.20 cents per pip risk which means we should set our lot size to 0.02.

 

[Stormin_Norman]

to help with the above position sizing:

http://www.forexcalc.com/

is a position size calculator.

 

[Cartman]

anyone uneducated in MM please listen to what Norm and Fap just pointed out above --- might save some heart ache down the track !! ---- im no expert but i know too much leverage can crucify yr sense of logical reasoning ----

play within yr comfort zone!! ---- or you will eventually LOSE !!

 

[Stormin_Norman]

i like having large leverage. however i keep my risk <5%

here's why (how):

position 1: risk = 5%

position 1 increases. stop loss set to 0. risk = 0%

position 2 opened. risk position 1+2 = 5%

position 2 increases. stop loss set to 0. risk 1 + 2 = 0%

position 3 opened. risk position 1+2+3= 5%

...ect i think you get the logic on it.

hence having high leverage to open many positions is good.

having high risk is bad!!!!!

 

[Cartman]

i like having large leverage. however i keep my risk <5%

here's why (how):

position 1: risk = 5%

position 1 increases. stop loss set to 0. risk = 0%

position 2 opened. risk position 1+2 = 5%

position 2 increases. stop loss set to 0. risk 1 + 2 = 0%

position 3 opened. risk position 1+2+3= 5%

...ect i think you get the logic on it.

hence having high leverage to open many positions is good.

having high risk is bad!!!!!

i like the way u think Norm --- our adaptations of entry positions may be different but the position of the end result looks very similar --- hope u r doing well

 

[Stormin_Norman]

yeah reasonably well. 50-100% most months.

trying to code it into an EA. wont be selling it for $175 on the internet when we do though .

 

[Cartman]

yeah reasonably well. 50-100% most months.

trying to code it into an EA. wont be selling it for $175 on the internet when we do though .

haha ---- wonder why not !! ----- sounds like u r well advanced -- well done ---- i have come up with some great looking systems but capital base keeps me grounded atm ---- i still treat it like a game cause money is just a capatalistic perception of success isnt it ?? -- lol ----- 3 meals a day and a roof over yr head --- what more could ya want !! ---- good luck to ya Norm

 

[Stormin_Norman]

haha ---- wonder why not !! ----- sounds like u r well advanced -- well done ---- i have come up with some great looking systems but capital base keeps me grounded atm ---- i still treat it like a game cause money is just a capatalistic perception of success isnt it ?? -- lol ----- 3 meals a day and a roof over yr head --- what more could ya want !! ---- good luck to ya Norm

i think that's the key part to the psychology of it.

 

[Cartman]

i think that's the key part to the psychology of it.

haha ---- are we brothers ??

if punters approached the market as a form of 'train to be excellent with minimal risk' in the early stages, there would be a lot less punters go under from
1) over -leverage and
2) excessive risk taking ----

but who am i to talk ---- i nearly went under !! ----- i now call that experience lol !!!

 

[Stormin_Norman]

haha ---- are we brothers ??

if punters approached the market as a form of 'train to be excellent with minimal risk' in the early stages, there would be a lot less punters go under from
1) over -leverage and
2) excessive risk taking ----

but who am i to talk ---- i nearly went under !! ----- i now call that experience lol !!!

i blew my first two accounts. no matter how many times youre told. its not until you blow a couple of accounts do you learn the lesson.

 

[Cartman]

i blew my first two accounts. no matter how many times youre told. its not until you blow a couple of accounts do you learn the lesson.

we are brothers

amen --- !!

 

[dit1]

hi Dit (nice lips by the way )

ive trialled two systems on the EUR/USD over the past week that returned over 90% strike rate --- but would i back them with 'REAL' money is the question ?? (maybe i already have lol )

$30,000 bucks means nothing on a demo account unless u can simulate the same risk/reward with real dough ------

what was yr starting capital --- what was yr maximum risk and on a given trade --- what was yr max draw down??

dont get fooled by the 'big numbers' ----- treat the demo like its YOUR money ---- funny things happen when its YOUR money ---- blase logic can kinda go out the window when stress gets factored into the equation if u get my drift --

Thanks! My starting capital was 50,000, playing in a standard account, $10 per pip. I havn't been recording what I'm doing yet, so I'm not sure on percentage success rate.
I'm not sure even if what I have been doing is a system, I am VERY new to any trading. I mainly read the candle graphs. I havnt been setting a stop loss at all and have only been aiming for 20-30 pip limits. I'm watching the screen the whole time I'm doing this so I can sell if I do see it dropping by alot, but it generally goes back up.
I don't know if I've just been lucky or what, but I've only had one trade I lost on. That was about $700.
I have mainly been playing EUR/USD, GBP/USD, AUS/USD.
Where do you guys get this information on systems to trial?

So should I just keep playing demo's for alot longer?