Here is a definition of different lot sizes you will come across in your trading career as well as micgo helpful micrk borrowed from one of the most respected books in the trading business. Using Micro Lots Micro lots are the smallest tradable lot available to most brokers. A micro lot is a lot of units of your accounting funding currency. If you are trading a dollar-based pair, 1 pip would be equal to 10 cents. Micro lots are very good for beginners that need to be more at ease while trading.
Using Mini Lots Before micro lots, there were mini lots. A mini lot is 10, units of your account funding currency. If you are a beginner and you want to start trading using mini lots, be well capitalized. Using Standard Lots A standard lot is a k unit lot. Standard lots are for institutional-sized accounts. Most forex traders that you come across are going to be trading mini lots or micro lots. A forex broker which only supports standard lot will allow you to trade with incremental of The standard lot is equal to This also applies for pairs involving JPY: For major pairs like: TP 50 pips at price For simplicity. In this case. While a trader closes 10 points of profit. Another example: You may add 1 digit of zero 0 at the back of trading price for pairs mentioned above.
The same calculation also applies for loss. For fractional forex platform. Traders earn profit if the price they bought is lower than the price they sold.
Understanding Forex Trade Sizes: Micro Lot, Mini Lot and Standard Lot
Please remember. Upward movement of currency pair indicates Base currency of the pair is getting stronger than Quote currency. Downward movement of currency pair indicates Base currency of the pair is getting weaker than Quote currency. There are two types of Pending Order: Stop Order and Limit Order. Also can be said: Traders can set the expiration date and time as they wish.
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Pending orders remain active if the price ordered have not been reached. Orders to open Buy or Sell only if the price set is reached hit. You can set a Buy Stop at 1. Current price is at 1.
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Current price is Fodex 2. You can set a Buy Limit at 1. You can set a Sell Stop at 1. You can set a Sell Limit at 1. If the date set is reached. Trader orders 2 pending orders at the same time. Once one of pending order is executed. Right after the position is liquidated.
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Margin and Leverage Leverage is borrowed capital to increase potential return. Keep in mind that margin is miicro by your broker until the order is closed. Leverage is commonly available in ratio. At above scenarios. With leverage function. Leverage makes a trader with smaller equity to have the SAME potential profit as trader with much bigger equity Margin: Good faith deposit required to open an order. Leverage 1: Margin is quantified in percentage and affected by Leverage offered by forex broker. The benefit of leverage: A trader is able to trade much bigger contract size with a relative smaller fund. Lets say. With or Without Leverage?
At the other side. OFrex or Small Leverage? Please note: Lot Size Contract Size used will affect pip value. From the example above. Margin Calculation There are 3 groups of Currency Pair: Open Sell uses bid price! Currency Pairs which do not involve USD. Open Buy uses Ask price! How to Calculate Margin of Cross Rates: Base Currency is the Currency located at the left side of the pair. How to Calculate Margin of Indirect Rates: From the illustrations above. Buy Liquid at Buy Liquid at 1. Take Profit. Stop Loss. Take Profit at 1. In order to lock the profit you have already got.
TP Take Profit at 2. A few hours later. The trader is in floating profit position of 40 points.
A trader Open Buy at 2. SL Stop Loss at 1. Stop Loss at 1. To lock 20 points profit. Micfo Stop is a development of stop loss function. Trailing Stop will be activated mirco positions opened have exceeded a specific minimum level of profit. Trailing stop will move stop loss upward Long Position or downward Short Position within range set by trader. Trailing stop will remain in pending state while current floating profit has not exceeded 15 points for a broker with minimum 15 points trailing stop level. After filling Take Profit and Stop Loss levels. If market moves higher to 2.
This technique is also know as the basic of Trailing Stop feature. Connection problem or other computer failure will prevent trailing stop from functioning correctly Traders have to aware that his position is still risky while his profit has not exceeded minimum trailing stop level allowed. Trailing stop feature is commonly executed at traders computer. The trader will get profit of 45 points 1. While current BID price is reaching 1. In addition traders may use BOTH stop loss and trailing stop to limit trading risk. Case A: When market moves downward from 1. Stop Loss 1. Case B: If market hikes from 1. Trailing Stop 15 points.
At this level. There are 2 approaches used to determine Margin Call: Using MetaTrader Platform. Free Margin is free withdrawable margin while there are open positions note: Please leave enough margin to hold losses and prevent Margin Call! Balance will be the same as Equity. Loss At the time of no positions opened. Please see Equity Calculation Formula above!