Margin and trade size help/info

[Pager]

I’m struggling to understand how margin and trade size works in Forex ?, futures you have set contract size and a margin requirement for that contract, for example the Spi has a margin of $2750 per contract and a point value of $25 all of which are set although margin does fluctuate at times, so a 10 point move equals $250, with forex am I right in thinking you CHOOSE YOUR TRADE SIZE and margin is a percentage of that trade size ?, e.g. I trade $50,000 worth of AUD/USD then my margin requirement with for example IB is 2.5% so is $1250 and each big point move is $500, so a tick is 1/100 so $5 ?.

I see some providers seem to quote a figure of 1 which equals $100,000 and 0.5 which equals $50,000, 0.25 equals $25,000 etc so is there set trade size or is it user defined or does it vary provider to provider as I also see there is mini forex and even micro forex

Just as an example I could choose to risk 2% or $200 of a $10,000 account and if I determine my risk to be 53 pips therefore my trade size would be buy/sell $37,700 AUD/USD as that would equal 1 pip to be $3.77, so x 53 would equal $199.81 and the margin required on that using IB, s 2.5% is $942.50?.

One last question in regard to margin, does this change as a position moves, e.g. increases when the position is in a loss or decreases when in profit?

Cheers

Pager

 

[Pager]

Maybe the Forex traders on hear are all having a day off?

Been searching and reading for an hour or too and correct me if im wrong but most of the above is correct?

The only difference I can find is this Lot size, there are 3, a standard lot being in the case of the Aussie $100,000, a mini lot being $50,000 and a micro lot being $10,000, so I assume should you wish to trade $70,000, you buy/sell 1 Mini and 2 Micro lots ?, then pay commission on those 3 lots in and out, not sure about this commission free brokerage that some offer, its either out of the goodness of there hearts *Cough*, or the spread is bigger and that’s were they make there money, personally I prefer to pay brokerage and get the tighter spread.

Interactive Brokers seem to offer Forex differently (maybe others do as well?), they have minimum trade size, for the Aussie its currently $35,000 but as long as your trade is above that you can choose e.g., $35,100, with a minimum brokerage of US$2.50, so as they are with stocks and futures very cheap.

Metatrader 4 is mentioned a lot but IB,s TWS seems not to run it, but being with IB for while trading Futures and stocks, if the Forex trading is the same order entry types then wont need it, TWS has everything I need.

 

[Wysiwyg]

IG Markets Forex Margin. No commission only spread. Mini contract = 10,000 of base currency and Standard contract = 100,000 of base currency.

If you are using a Trader Account, the margin requirement for the following markets is 1% of the overall position value: EUR/USD, GBP/USD, USD/JPY, USD/CHF, EUR/GBP, AUD/USD and EUR/YEN. All other forex pairs typically require margin of 2%.

For Select Account users, the typical margin requirement is 2% of the position value for all forex pairs.

Note that Tiered Margining applies; this means that higher margins may be required for large positions. Please see our Tiered Margining page for details.

 

[tayser]

1 EUR/USD invariably means buying/selling 1,000,000 EUR/USD, at 1:100 leverage you need 10,000 EUR to open the position, pip value is 100USD.

0.5m GBP/JPY requires 5,000GBP to open the position, pip value is 5000JPY.

0.01m AUD/CAD requires 100AUD to open the position, pip value is 1CAD.

You always need the equivalent of the currency on the left hand side of the pair (multiplied by your leverage) to open a position.

example:

Broker account denominated in AUD, trading GBP/JPY with lot size 0.01m (smallest lot size on most retail brokers).

the broker works out the minimum required to open the position by looking at the current GBP/AUD rate (1.7326) - 100GBP = 173AUD, so you need 173AUD to open a 0.01m position in GBP/JPY, with the pip value being 100JPY.

price moves 5 pips in your favour and you close out, gaining 500JPY.

The broker then needs to look at the AUD/JPY rate to credit your account with the gain. As your profit(and loss) is recorded in JPY, and JPY is on the right hand side of the pair, you need to divide the prevailing rate by 1 to get what 1JPY is worth in AUD: 1/74.83 = 0.01336. Multiply profit (or loss) by that value and you get your broker account credit(or debit): 6.69AUD.

 

[macca]

Hi,

<<Broker account denominated in AUD, trading GBP/JPY with lot size 0.01m (smallest lot size on most retail brokers).

the broker works out the minimum required to open the position by looking at the current GBP/AUD rate (1.7326) - 100GBP = 173AUD, so you need 173AUD to open a 0.01m position in GBP/JPY, with the pip value being 100JPY.>>

On Go Markets MT4 this example would apply to 0.10 not 0.01. If trade is 0.01 the pip value is 10c USD and you need $17.30 to open the trade

HTH

 

[Pager]

Can someone clarify the position size

For example the Aussie $

From what im reading there are 3 units most brokers use, the full lot = $100,000, a mini lot = $50,000 and a micro lot = $10,000 on these amounts there is 100/1 leverage so i need to front up $1000, $500 or $100, is this correct, .unless im with IB, were it seems as long as i trade $35,000 or above i choose my trades size but there margin is 2.5% so on $35K im looking at $875.

So if i want to trade for example $75,000 i cant , i either trade 1 mini and 2 micro ($70,000) or 1 mini and 3 micro ($80,00), unless im with IB

 

[Kryzz]

Can someone clarify the position size

For example the Aussie $

From what im reading there are 3 units most brokers use, the full lot = $100,000, a mini lot = $50,000 and a micro lot = $10,000 on these amounts there is 100/1 leverage so i need to front up $1000, $500 or $100, is this correct, .unless im with IB, were it seems as long as i trade $35,000 or above i choose my trades size but there margin is 2.5% so on $35K im looking at $875.

So if i want to trade for example $75,000 i cant , i either trade 1 mini and 2 micro ($70,000) or 1 mini and 3 micro ($80,00), unless im with IB

From what i understand (or i thought i did), 1 standard lot is 100,000 of the base currency, mini lot = 10,000, micro = 1,000 of base currency, Nano lot = 100.

If trading spot you can trade 75,000 (most spot brokers will offer trade values to .01), where 1.0 = one standard lot.

Dunno what the deal is with futures, i thought the minimum contract was 100,000 (where margin is set by exchange etc.)

For dealing with position sizing with spot FX:
http://www.earnforex.com/position-size-calculator
http://www.goforex.net/pip-calculator.htm

I was asking some similar questions in this thread:https://www.aussiestockforums.com/forums/showthread.php?t=19051

You can choose your position size to whatever you desire (as long as minimum trade size is 25,000k USD or greater, for spotfx for IB...i think)

 

[macca]

Hi Pager / Cookie

If you go to Go markets web site and down load a demo MT4 you can experiment to your hearts content

I realise that IB is different but you should find that most other brokers will be the same as Go because MT4 is the industry standard for retail traders.

HTH

 

[Robshan]

shaunkris is right with the position size,

100,000 units = 1 Standard Lot = $10 per pip
10,000 units = 1 Mini Lot = $1 per pip
1,000 units = 1 Micro Lot = $0.10 per pip
100 units = 1 Nano Lot = $0.01 per pip

Your leverage will define how much margin is required to open each position. At 100:1 you will need units/100 in margin, at 200:1 you will need units/200 and so on.

If you want to trade with $75,000 it's up to you how you manage your positions ... most professionals will tell you only to risk 2-3% per trade which in this case will be $2,250-$3,750. this will mean that you can open a position of 5 Standard lots ($50 per pip) and have a 50 pip stop loss ($2,500). For 5 Standard Lots at 100:1 leverage, your required margin will be $5,000 to open your position.

I hope that isnt confusing.