Thread: Pip Value and Leverage

Hi everyone!

Sorry for my english. I am new in this world and I am triying to understand everything I could. I have a question however before I comment the situation:

I have a demo account and I started a place of 0.01 lots having a 100:1 leverage in EUR/USD, and that I thought as a pip is 1 ? When you trade with 1 lot, I trade with 0.01 lots, 1 pips = 0.01 ? But I utilize a 100:1 leverage whats make 1 pip = 1 ? . Thw surprise came when I checked my own position and I had 12 pips but the profit was 0.87 ? .

I do not understand the reason. Can someone explain me this?

Thanks

No, my demo account isn't financed in USD but should I make 12 pips with a 0.01 lots and 100:1 leverage, the profit will be 12 EUR or 12 USD no?

Anyways I have another quiestion:
When you start a trade of 1 lots with a 10:1 leverage, are you exchange with 100 ? Or are you trade 1 lot 10:1 leverage = 10 lots?

Thanks

Originally Posted by ;

No, my demo account isn't financed in USD but should I make 12 pips using a 0.01 lots and 100:1 leverage, the profit will be 12 EUR or 12 USD no? Anyways I have yet another quiestion: whenever you open a commerce of 1 lots having a 10:1 leverage, are you currently trade with 100 ? Or are you currently really trade 1 lot 10:1 leverage = 10 lots? Thanks

0.01 equals 10 dollar cents per pip or equal on your account currency. This is the exact same regardless of what leverage you utilize. Leverage impacts the total amount of margin you want to put up to be able to open that commerce. In 100 to 1 leverage you want $10 (or equal) to open an 0.01 trade.

Originally Posted by ;

quote 0.01 equals 10 dollar cents per pip or equal in your account currency. This is the same regardless of what leverage you use. Leverage affects the amount of margin you want to put up to be able to open that commerce. In 100 to 1 leverage you want $10 (or equal) to start an 0.01 trade.

In fact, I think it depends on the quote price of the pair you're trading. For instance for my USD acct:

at 100:1 leverage to buy 0.01 lots (at the time of this article) the margin required is...

EUR/USD -- $13.57 (bid price 1.35750)

GBP/USD -- $16.28 (bid price 1.62856)

CAD/JPY -- ??? $9.63 (bid price 96.396) or do I have to take into account the exchange rate to turn my USD to CAD?

Thanks you guys that I understand.

Originally Posted by ;

quote Actually, I think that it is dependent upon the quote price of the pair you're trading. For instance for the USD acct: at 100:1 leverage to buy 0.01 lots (at the time of this post) the margin required is... EUR/USD -- $13.57 (bid price 1.35750) GBP/USD -- $16.28 (bid price 1.62856) CAD/JPY -- ??? $6.63 (bid price 96.396) or do I have to take into account the exchange rate to flip my USD into CAD?

You might be right about that but as a guideline that a 0.01 position is just like buying $1000 of currency and at 100:1 you will need $10 to start the trade. Jpy and chf pairs are somewhat different.

That is a fantastic rule of thumb I guess, but what about the poor undercapitalized S.O.B. who just got a margin call and is attempting to determine EXACTLY what his/her risk per trade will be?
Remember that 0.01 lots isn't $1000 -- it is 1000 UNITS of the base currency... so in GBP/CHF 0.01 lots is 1000GBP
@ carlostedo --(recall that the pips you make are in the BASE currency, not your house account currency currency)
You always need to change your account currency into the base currency for money. Examine the below example to get a trader funded in USD looking to place a 0.01lot commerce in GBP/CHF
by Way of Example, suppose:
Home Currency = USD
Currency Pair = GBP/CHF
Base = GBP; Quote = CHF
Base / Home Currency = GBP/USD = 1.6282 --(this is where you need to refer to the appropriate exchange rate for your account currency and BASE currency)
Units = 1000
leverage = 100:1Then, margin used:
= (1.6282 * 1000) / 100
= 16.28USD (BASE / Home Currency) * components) / (margin ratio)
NOW LETS Have a Look AT MY CAD/JPY Example from post #5 house = USD
pair = CAD/JPY
foundation = CAD, quote = JPY
base/home = cad/usd (USD/CAD =1.0590 so we have to undo it) lt;0.9410)
components = 1000
leverage = 100:1Margin used =(0.941*1000)/100
= $9.41

thanks guys, I learned something today

Margin requirements and pip worth do vary with price.
Leverage doesn't effect pip worth but greatly effects margin.

You will find large differences in currency pairs compared to pip worth
and margin requirement. (there are additionally account differences
but that's another topic).

So here's a handy-dandy margin calculator that shows pip
worth as well.

http://www.forexrazor.com/en-us/tool...alculator.aspx

Originally Posted by ;

Margin requirements and pip value do vary with price. Leverage does not effect pip value but effects margin. There are large differences in currency pairs as to pip value and margin requirement. (there are also account differences but that's another issue). So following is a margin calculator that shows pip value as well. Http://www.forexrazor.com/en-us/tool...alculator.aspx

thanks Slim, that's going to come in useful.

Originally Posted by ;

Hi everyone! Sorry for my english. I'm new on the planet and I'm triying to understand everything I can. I have a question but before I comment that the situation: I have a demo account and I started a position of 0.01 lots with a 100:1 leverage in EUR/USD, and that I believed as a pip is 1 ? When you exchange with 1 lot, I exchange using 0.01 lots, 1 pips = 0.01 ? However, I utilize a 100:1 leverage whats create 1 pip = 1 ? . Thw surprise came when I checked my position and I had 12 pips but the profit was 0.87 ? . I don't understand the reason. Can someone explain me this? Thanks

At a 1:100 leverage, a lot size of 0.01 will yield 0.1/pip

12pips*0.1= 1.2 minus the spread and the 0.87 figure Ought to Be correct

Danny