It is important to be clear and fully understand the concept of support and resistance (S&R) if you want to interpret the movement of a Forex chart correctly. So, what exactly is support and resistance? Why do support & resistance happen? It is basically an economic question that will be beyond the scope of my post today, and also it is not necessary for us to underatnd it.
What we need to do is to understand what exactly is support & resistance.
Resistance are levels that exists above the current price. It act as a barrier to the price preventing it from increasing above that level.
Support are levels that exists below the current price. It act as a barrier to the price and preventing it from falling below that level.
Try to imagine having a bouncing with unlimited energy in a room. When the ball bounce up and hits the celing, it will rebounce and head towards the floor. When it hits the floor, it will rebounce and head towards the celing. You can simply take the ball as the price, the celing as the resistance and lastly the floor as the support. It takes great effort to break strong S&R like the celing and the floor.
So to trade in Forex, it is very important to know where all the S&R lines are for the currency pair that you are looking. Why? The reason is simple. The lines are the place where price can either breakout or price will rebounce S&R. It might present you a new trade opportunity. So by knowing where the S&R lines are in advance, we can try to take profits at these lines.
Friday, September 25, 2009
Tuesday, September 22, 2009
Video - Support and Resistance Line Trading
The video is brought by a third party and I do not promote or try to recommend any products mentioned in the video.
Monday, September 21, 2009
What is Market Activities and How do we measure them?
I have discussed in my previous posts, the Asian, European and North American sessions, their operating hours, and how they affect price action for the different currency pairs. A currency such as the Japanese Yen would be the most active during its own market. It will see higher volatility on average during the Asian session.
This is simply due to the fact that most of the banks, big businesses and major traders from Japan will use their own domestic currency for foreign exchange transactions and as such the currency Japanese Yen will be more active and volatile during the Asian session. The other reason it is also more difficult for banks, traders to buy or sell a currency from a region where their market is still closed. That is why, you should not really expect the USDCHF pair to be active and volatile during the Asian market.
To explain this further, if a Euro bank would like to make a multi-billion dollar currency exchange for Japanese Yen, it would most likely do so when Asian (Japanese) banks are online and there is a greater pool of liquidity. Otherwise, large orders like this in a thin market (if this is done during the European session) would definitely result in prices moving away from the ideal entry point when the order is processed.
Since a currency is the most active and volatile during its own market, it can therefore lead to another conclusion. The price action is usually greatest when the sessions overlap. When traders, banks and business from two different sessions are online, there are more participants in the market and, therefore, a greater level of liquidity is available. The first sharp rise in price action will generally occurs around the closing hours of the Asian session and opening of the European session at around 0700 GMT.
The second and larger jump in activity could be seen when the North American and European sessions converge between 0000 and 1600 GMT. This four-hour overlap is the greatest union in two different sessions. The volatility can be clearly seen from the large amount of liquidity.
However, beside overlapping session, there is another factor at work that will drive price action further up or down. This driving force normally appears at around 0800 GMT. This is due to the release of economical news from the U.K. There is also another moment which economical news release will affect the price action and that is the release of the U.s. news at between 1230 to 1400 GMT, which will coincides with a sharp peak in the activity for GBPUSD, EURUSD.
There is another area that we have to consider. Each currency pair consists of 2 currencies. If the components of the currency pair are made up of currencies from the same session, they are more likely to have a greater level of activity and volatility. One such pair is the USDCAD. For the GBPJPY pair, they will see more activity and volatility during the overlapping of the Asian and European session.
This is simply due to the fact that most of the banks, big businesses and major traders from Japan will use their own domestic currency for foreign exchange transactions and as such the currency Japanese Yen will be more active and volatile during the Asian session. The other reason it is also more difficult for banks, traders to buy or sell a currency from a region where their market is still closed. That is why, you should not really expect the USDCHF pair to be active and volatile during the Asian market.
To explain this further, if a Euro bank would like to make a multi-billion dollar currency exchange for Japanese Yen, it would most likely do so when Asian (Japanese) banks are online and there is a greater pool of liquidity. Otherwise, large orders like this in a thin market (if this is done during the European session) would definitely result in prices moving away from the ideal entry point when the order is processed.
Since a currency is the most active and volatile during its own market, it can therefore lead to another conclusion. The price action is usually greatest when the sessions overlap. When traders, banks and business from two different sessions are online, there are more participants in the market and, therefore, a greater level of liquidity is available. The first sharp rise in price action will generally occurs around the closing hours of the Asian session and opening of the European session at around 0700 GMT.
The second and larger jump in activity could be seen when the North American and European sessions converge between 0000 and 1600 GMT. This four-hour overlap is the greatest union in two different sessions. The volatility can be clearly seen from the large amount of liquidity.
However, beside overlapping session, there is another factor at work that will drive price action further up or down. This driving force normally appears at around 0800 GMT. This is due to the release of economical news from the U.K. There is also another moment which economical news release will affect the price action and that is the release of the U.s. news at between 1230 to 1400 GMT, which will coincides with a sharp peak in the activity for GBPUSD, EURUSD.
There is another area that we have to consider. Each currency pair consists of 2 currencies. If the components of the currency pair are made up of currencies from the same session, they are more likely to have a greater level of activity and volatility. One such pair is the USDCAD. For the GBPJPY pair, they will see more activity and volatility during the overlapping of the Asian and European session.
Thursday, September 17, 2009
More in Depth on The Three Major Session of the Forex Market
The 24 hour Forex market offers great advantage to alot of us traders as it guarantees liquidity and the opportunity to trade at any conceivable time, BUT it also has its own drawbacks. It is a fact that currency can be traded over 24 hours a day but we traders are basically human and there is no way that we can monitor the Forex market every single minute.
The inability to track the market every minute would result in missed opportunities, or even worse, when a sudden increase in volatility that will result in a move against our already open position.
As there are 3 major sessions in the Forex market, traders will have to understand the effect of the various session on the different pairs of currency so as to minimize his risk, and also the best time in which he can trade with his trading strategy/plan.
It is a fact that the Forex Market is separated into 3 sessions, namely the Asian Session (Tokyo), European Session (London) and the North America Session (New York). These 3 cities represent the 3 major financial cities for the 3 sessionsand as such their names can be used to name the 3 sessions. The Forex markets are the most active and volatile during the operation of the 3 sessions. Banks, large corporations, investment firms and individual investors look to trade mostly during these sessions.
Forex markets starts off with the Asian Session (Tokyo). When liquidity is restored to the Forex market after the weekend, Asian markets are the first to see actions. It is unofficially but a fact that activity from this part of the world is generally represented by the Tokyo capital markets, which are alive from 0000 to 0600 GMT.
It is also an important thing to keep in mind that many other countries such as Australia, New Zealand and China have strong influence on the Forex Market as well.
Due to the nature of the scattered markets, the opening and closing of the Asian session are stretched beyond the standard Tokyo hours in order to allow the different markets' activities. Therefore Asian session operating hours are often considered to be between 2300 and 0800 GMT.
The next market to open will be the European Session (London) at 0700 GMT, just before the close of the Asian market. The overlapping trading hours kept the Forex market alive. This Forex time zone is very dense and includes a lot of other major financial markets such as Germany, France, that could replace London. The official business hours for London starts at 0730 GMT and ends in 1530GMT. As explained before, due to the presence of the other markets, the London session actually run from 0700GMT to 1600GMT
Next and last to open will be the North American Session (New York). By the time it opened at 1200GMT, the Asian markets have been closed for almost 5 hours while it is only half way through for the London session. This session is the most important session of the three sessions. It is dominated with activity of the U.S. and with contributions from Canada, Mexico and of course a number of other countries in South America. This is the session with highest concentration of activites and volatilities. This is due to the early activity in financial, futures, commodity trading and the concentration of economical news releases during the North America session.
There is a big gap between the close of the U.S. market and the next opening of the Asian market at 2300 GMT. A lull in liquidity set in at the close of New York exchange at 2100 GMT (winter time) upto the time the North American session closes at 2200 GMT.
The inability to track the market every minute would result in missed opportunities, or even worse, when a sudden increase in volatility that will result in a move against our already open position.
As there are 3 major sessions in the Forex market, traders will have to understand the effect of the various session on the different pairs of currency so as to minimize his risk, and also the best time in which he can trade with his trading strategy/plan.
It is a fact that the Forex Market is separated into 3 sessions, namely the Asian Session (Tokyo), European Session (London) and the North America Session (New York). These 3 cities represent the 3 major financial cities for the 3 sessionsand as such their names can be used to name the 3 sessions. The Forex markets are the most active and volatile during the operation of the 3 sessions. Banks, large corporations, investment firms and individual investors look to trade mostly during these sessions.
Forex markets starts off with the Asian Session (Tokyo). When liquidity is restored to the Forex market after the weekend, Asian markets are the first to see actions. It is unofficially but a fact that activity from this part of the world is generally represented by the Tokyo capital markets, which are alive from 0000 to 0600 GMT.
It is also an important thing to keep in mind that many other countries such as Australia, New Zealand and China have strong influence on the Forex Market as well.
Due to the nature of the scattered markets, the opening and closing of the Asian session are stretched beyond the standard Tokyo hours in order to allow the different markets' activities. Therefore Asian session operating hours are often considered to be between 2300 and 0800 GMT.
The next market to open will be the European Session (London) at 0700 GMT, just before the close of the Asian market. The overlapping trading hours kept the Forex market alive. This Forex time zone is very dense and includes a lot of other major financial markets such as Germany, France, that could replace London. The official business hours for London starts at 0730 GMT and ends in 1530GMT. As explained before, due to the presence of the other markets, the London session actually run from 0700GMT to 1600GMT
Next and last to open will be the North American Session (New York). By the time it opened at 1200GMT, the Asian markets have been closed for almost 5 hours while it is only half way through for the London session. This session is the most important session of the three sessions. It is dominated with activity of the U.S. and with contributions from Canada, Mexico and of course a number of other countries in South America. This is the session with highest concentration of activites and volatilities. This is due to the early activity in financial, futures, commodity trading and the concentration of economical news releases during the North America session.
There is a big gap between the close of the U.S. market and the next opening of the Asian market at 2300 GMT. A lull in liquidity set in at the close of New York exchange at 2100 GMT (winter time) upto the time the North American session closes at 2200 GMT.
Thursday, September 10, 2009
The Three Major Session in Forex Market
It has already been discussed before the 24 hours trading nature of the Forex market. The continuous round the clock trading allows investors from all around the world to trade during their normal business hours, after work or even in the middle of the night.
But there is an interesting to note, not all trading times will result in great price action for the world's most volatile market. There will be times when the market is muted and price just consolidate around the region.
It is also interesting to note the price action behaviour of different pairs of currency and its volatility during certain trading hours. This is mostly due to the general demographic of those market participants that are online at the time.
In my subsequent posting, I will try to discuss the effects of the world's three major trading sessions, and try to explore and analysis what kind of market activity can be expected during the three major trading sessions.
But there is an interesting to note, not all trading times will result in great price action for the world's most volatile market. There will be times when the market is muted and price just consolidate around the region.
It is also interesting to note the price action behaviour of different pairs of currency and its volatility during certain trading hours. This is mostly due to the general demographic of those market participants that are online at the time.
In my subsequent posting, I will try to discuss the effects of the world's three major trading sessions, and try to explore and analysis what kind of market activity can be expected during the three major trading sessions.
Sunday, September 6, 2009
The Mechanics of Currency Markets - Margin Call
Margin Call is an important call that you as a Forex Trader will have to be familiar with. It is basically a broker's demand on you whom is using margin to trade to top up your account with additional money so that your margin account can be brought up to the minimum safety level. Margin Call will occur when your account reduces to a value lower than that the value calculated by your broker.
For example,if your broker thinks that your position is in danger, maybe with your open position of $100,000 and with a margin of one percent ($1,000). With your losses are approaching your margin of $1,000, your broker is most likely to initiate a Margin Call for you to increase the fund in your account or for you to close your position in order to limit both of your risk.
If you think that you are going to trade using a margin account it is off great importance that you confirm or talk to your broker about their policy on margin account. It is important to know how your broker will handle Margin Call. Would they request you to top up that margin or would they close off your position automatically?
Let's say you have decided to trade with $5,000 in your account with your broker. You then open 3 position (standard lot) of EURUSD, which is $300,000. You would required $3,000 (assumed 1%) as margin for the trades. Your trade goes bad and your record a loss of $2001. From this moment on, your account has a equity balance of $2,999 which is less than your required margin. Your broker in this case may request that you top up your account or even close off your positions by a Margin Call. The reason that your broker may do a Margin Call even though you still have $2,999 in your account is because the broker needs that as a form of security and if they allow you to use it, it could finally endanger both of you.
To look at it in another manner, If you have a $3,000 account, with 1 standard lot open, the margin required will be $1,000. In other words, this $1,000 will not be available for you to use as your trading capital. The $1,000 is still yours, but it is being held in trust for you by your broker as a form of security.
Many discussions have been help on the topic of margin and many argue that too much margin is dangerous. This is a point for YOU to note. It is important to remember as with all trading is concerned, you should thoroughly understand your broker's policies on the subject and you are comfortable with and understand your risk.
Please always remember that you should trade only with money that you can afford to lose and YOU SHOULD NOT trade more than what you can afford to lose. You would like to live to trade another day.
See my post on Money Management.
For example,if your broker thinks that your position is in danger, maybe with your open position of $100,000 and with a margin of one percent ($1,000). With your losses are approaching your margin of $1,000, your broker is most likely to initiate a Margin Call for you to increase the fund in your account or for you to close your position in order to limit both of your risk.
If you think that you are going to trade using a margin account it is off great importance that you confirm or talk to your broker about their policy on margin account. It is important to know how your broker will handle Margin Call. Would they request you to top up that margin or would they close off your position automatically?
Let's say you have decided to trade with $5,000 in your account with your broker. You then open 3 position (standard lot) of EURUSD, which is $300,000. You would required $3,000 (assumed 1%) as margin for the trades. Your trade goes bad and your record a loss of $2001. From this moment on, your account has a equity balance of $2,999 which is less than your required margin. Your broker in this case may request that you top up your account or even close off your positions by a Margin Call. The reason that your broker may do a Margin Call even though you still have $2,999 in your account is because the broker needs that as a form of security and if they allow you to use it, it could finally endanger both of you.
To look at it in another manner, If you have a $3,000 account, with 1 standard lot open, the margin required will be $1,000. In other words, this $1,000 will not be available for you to use as your trading capital. The $1,000 is still yours, but it is being held in trust for you by your broker as a form of security.
Many discussions have been help on the topic of margin and many argue that too much margin is dangerous. This is a point for YOU to note. It is important to remember as with all trading is concerned, you should thoroughly understand your broker's policies on the subject and you are comfortable with and understand your risk.
Please always remember that you should trade only with money that you can afford to lose and YOU SHOULD NOT trade more than what you can afford to lose. You would like to live to trade another day.
See my post on Money Management.
Thursday, September 3, 2009
The Mechanics of Currency Markets - Leverage
Leverage basically means the borrowing of a certain amount of the money that is needed for investment. In our case, the Forex. The money is is usually borrowed from your broker. In Forex trading the possibility of using high leverage in the sense that for an initial margin requirement, a trader can build up and control a huge amount of money.
In order to calculate your margin-based leverage, you will need to divide your total transaction value (US$) by the amount of margin (US$) you are required to put up.
Margin-Based Leverage = Total Value of Transaction / Margin Required
Look at this example. If you are needed to deposit 1% of the total transaction value as your margin and you intend to trade one standard lot of USDJPY which is equivalent to US$100,000. The margin that you required would be US$1,000. Thus, your margin-based leverage will be calculated as: -
Levererage = 100,000 / 1,000 = 100:1.
For a margin requirement of 0.5%, your margin-based leverage will be 200:1 using the same equation.
I have discussed about margin-based leverage. However, margin-based leverage will not necessarily affect one's risks. It does not matter whethere you are required to put up 1%, 2% or even 3% of the transaction value as margin. This will not influence your profits or losses. This is because you can always attribute more than the required margin for any position. What it means in this case is that you need to look at your real leverage, and not margin-based leverage.
How do you do that? Simply, to calculate the real leverage you are currently using, you can apply the following equation: -
Real Leverage = Total Value of Transactions (Open Positions)/ Total Trading Capital
As an example, if you deposit $5,000 into your trading account, and you have decided to open a standard lot (which is equivalent to $100,000), you will be trading with a 20 times leverage on your account (100,000/5,000). If you trade two standard lots, which is worth $200,000 in face value with $5,000 in your account, then your leverage on the account is 40 times (200,000/5,000).
The only time that margin-based leverage and real leverage will be equal is when you are trading to your maximum. And since you do not normally use your entire account as margin for each of your trades, your real leverage tends to vary from your margin-based leverage.
In the next post, I will discussed about Margin Call by your broker.
In order to calculate your margin-based leverage, you will need to divide your total transaction value (US$) by the amount of margin (US$) you are required to put up.
Margin-Based Leverage = Total Value of Transaction / Margin Required
Look at this example. If you are needed to deposit 1% of the total transaction value as your margin and you intend to trade one standard lot of USDJPY which is equivalent to US$100,000. The margin that you required would be US$1,000. Thus, your margin-based leverage will be calculated as: -
Levererage = 100,000 / 1,000 = 100:1.
For a margin requirement of 0.5%, your margin-based leverage will be 200:1 using the same equation.
I have discussed about margin-based leverage. However, margin-based leverage will not necessarily affect one's risks. It does not matter whethere you are required to put up 1%, 2% or even 3% of the transaction value as margin. This will not influence your profits or losses. This is because you can always attribute more than the required margin for any position. What it means in this case is that you need to look at your real leverage, and not margin-based leverage.
How do you do that? Simply, to calculate the real leverage you are currently using, you can apply the following equation: -
Real Leverage = Total Value of Transactions (Open Positions)/ Total Trading Capital
As an example, if you deposit $5,000 into your trading account, and you have decided to open a standard lot (which is equivalent to $100,000), you will be trading with a 20 times leverage on your account (100,000/5,000). If you trade two standard lots, which is worth $200,000 in face value with $5,000 in your account, then your leverage on the account is 40 times (200,000/5,000).
The only time that margin-based leverage and real leverage will be equal is when you are trading to your maximum. And since you do not normally use your entire account as margin for each of your trades, your real leverage tends to vary from your margin-based leverage.
In the next post, I will discussed about Margin Call by your broker.
Tuesday, September 1, 2009
The Mechanics of Currency Markets - Contract Size
Spot Forex is traditionally traded in lots and also most of the time referred to as contracts. The standard size/contract for a lot is $100,000. As the forex market opens up in the last few years, mini lot size has been introduced at $10,000 and this again may change in the years to come.
As I have covered on PIPS in my last post, PIPS is the smallest increment/decrement unit of a currency. To take advantage of these tiny increments in PIPS value, it is necessary to trade large amounts of a particular currency in order for us to see any significant profit or loss.
I shall cover the leverage portion of Forex trading in a later post. But for the discussion, I will assume that you have the ability to purchase a standard/contract at $100,000.00. I will show you now how to recalculate some examples in The Mechanics of Currency Markets - PIPS to see the actual value of each pair of currency.
Take for example, USDCAD at 1.0915, the value of 1 pip would be 0.0001/1.0915 = 0.0000916. The actual value of 1 pip in dollars and cents will be 0.0000916 * $100,000.00 = $9.16.
USDJPY at 93.95, the value of 1 pip would be 0.01/93.95 = 0.0001061. The actual value of 1 pip in dollars and cents will be 0.0001061 * $100,000.00 = $10.61.
EURUSD at 1.4301, the value of 1 pip would be 0.0001/1.4301 * 1.4301 (exchange rate) = 0.0000699 * 1.4301 = 0.0001 (round up). The actual value of 1 pip in dollars and cents will be 0.0001 * $100,000.00 = $10.00.
GBPUSD at 1.6267, the value of 1 pip would be 0.0001/1.6267 * 1.6267 (exchange rate) = 0.0000614 * 1.6267 = 0.0001 (round up). The actual value of 1 pip in dollars and cents will be 0.0001 * $100,000.00 = $10.00.
Different brokers might have a different way of calculating the PIPS value relative to the lot/contract size, but they will be able to tell you the PIP value for the currency that you are trading at that moment of time. But, that is not important, you need to remember, as the market moves, the value of PIPS will also change.
I have already shown you how to calculate the PIP value. Now, I shall show you how it is related to the lot/contract size.
EUR/USD is quoted at 1.4334/1.4336. You would like to buy 1 Lot of EUR and sell US Dollars. The rate that you have to look out for will be 1.4336, the rate that other traders are prepared to sell. You proceed to buy 1 Lot of EUR at 1.4336. The price increase and you have a re-quote of the EURUSD pair at 1.4396/1.4398. To close your trade, you need to look at 1.4396, the price that traders are willing to buy from you. The gain in pips is 60 pips.
EURUSD at 1.4396, the value of 1 pip would be 0.0001/1.4396 * 1.4396 (exchange rate) = 0.00006946 * 1.4396 = 0.0001 (round up).The actual value of 1 pip in dollars and cents will be 0.0001 * $100,000.00 = $10.00. The gain in 60 pips will be 60 * $10.00 = $600.00.
Next, if you are looking to trade in USDJPY. The quotes given at that time is 93.13/93.15. You are to sell US Dollar and buy Japanese Yen. The quote that you should look out for is 93.13, the price that other traders are willing to buy from you. The price drops to 92.81/92.83 in a few hours time. You now look to close your trade at 92.83, the price other traders are willing to buy from you. The gain in pips is 30 pips.
USDJPY at 92.83, the value of 1 pip would be 0.01/92.83 = 0.00010772. The actual value of 1 pip in dollars and cents will be 0.00010772 * $100,000.00 = $10.77. The gain in 30 pips will be 30 * $10.77 = $323.10.
The reverse calculation is true for losses.
Just a simple recap, when you buy a currency you will use the Ask price and when you sell a currency, you will use the Bid price. As can be seen from this, you will only pay spread when you buy currencies. But to note, spread are being paid per trade as each trade involves buy and sell each time.
As I have covered on PIPS in my last post, PIPS is the smallest increment/decrement unit of a currency. To take advantage of these tiny increments in PIPS value, it is necessary to trade large amounts of a particular currency in order for us to see any significant profit or loss.
I shall cover the leverage portion of Forex trading in a later post. But for the discussion, I will assume that you have the ability to purchase a standard/contract at $100,000.00. I will show you now how to recalculate some examples in The Mechanics of Currency Markets - PIPS to see the actual value of each pair of currency.
Take for example, USDCAD at 1.0915, the value of 1 pip would be 0.0001/1.0915 = 0.0000916. The actual value of 1 pip in dollars and cents will be 0.0000916 * $100,000.00 = $9.16.
USDJPY at 93.95, the value of 1 pip would be 0.01/93.95 = 0.0001061. The actual value of 1 pip in dollars and cents will be 0.0001061 * $100,000.00 = $10.61.
EURUSD at 1.4301, the value of 1 pip would be 0.0001/1.4301 * 1.4301 (exchange rate) = 0.0000699 * 1.4301 = 0.0001 (round up). The actual value of 1 pip in dollars and cents will be 0.0001 * $100,000.00 = $10.00.
GBPUSD at 1.6267, the value of 1 pip would be 0.0001/1.6267 * 1.6267 (exchange rate) = 0.0000614 * 1.6267 = 0.0001 (round up). The actual value of 1 pip in dollars and cents will be 0.0001 * $100,000.00 = $10.00.
Different brokers might have a different way of calculating the PIPS value relative to the lot/contract size, but they will be able to tell you the PIP value for the currency that you are trading at that moment of time. But, that is not important, you need to remember, as the market moves, the value of PIPS will also change.
I have already shown you how to calculate the PIP value. Now, I shall show you how it is related to the lot/contract size.
EUR/USD is quoted at 1.4334/1.4336. You would like to buy 1 Lot of EUR and sell US Dollars. The rate that you have to look out for will be 1.4336, the rate that other traders are prepared to sell. You proceed to buy 1 Lot of EUR at 1.4336. The price increase and you have a re-quote of the EURUSD pair at 1.4396/1.4398. To close your trade, you need to look at 1.4396, the price that traders are willing to buy from you. The gain in pips is 60 pips.
EURUSD at 1.4396, the value of 1 pip would be 0.0001/1.4396 * 1.4396 (exchange rate) = 0.00006946 * 1.4396 = 0.0001 (round up).The actual value of 1 pip in dollars and cents will be 0.0001 * $100,000.00 = $10.00. The gain in 60 pips will be 60 * $10.00 = $600.00.
Next, if you are looking to trade in USDJPY. The quotes given at that time is 93.13/93.15. You are to sell US Dollar and buy Japanese Yen. The quote that you should look out for is 93.13, the price that other traders are willing to buy from you. The price drops to 92.81/92.83 in a few hours time. You now look to close your trade at 92.83, the price other traders are willing to buy from you. The gain in pips is 30 pips.
USDJPY at 92.83, the value of 1 pip would be 0.01/92.83 = 0.00010772. The actual value of 1 pip in dollars and cents will be 0.00010772 * $100,000.00 = $10.77. The gain in 30 pips will be 30 * $10.77 = $323.10.
The reverse calculation is true for losses.
Just a simple recap, when you buy a currency you will use the Ask price and when you sell a currency, you will use the Bid price. As can be seen from this, you will only pay spread when you buy currencies. But to note, spread are being paid per trade as each trade involves buy and sell each time.
Subscribe to:
Posts (Atom)