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POSITION SIZE & PIP VALUES

 

 

 

pip is the smallest price move that an exchange rate can make based on market convention

Pip is an acronym for “percentage in point”.

   quotes currency pairs by “5, 3 and 2” decimal places – also known as fractional pips or pipettes.

  • On a 5 decimal place currency pair a pip is 0.00010
  • On a 3 decimal place currency pair a pip is 0.010
  • On a 2 decimal place currency pair a pip is 0.10

(multiply face value by .0001.  1/10,000th is a pip for all pairs (except JPY pairs a pip is .01)

AUD/USD – AUD is the base currency/ USD is the counter currency

For example: If AUD/USD moves from 0.70609 to 0.70619, that .00010 USD move higher is one pip.

When trading FX and other symbols there are some easy rules to calculate the ‘pip-value’ of the trade so you can work out your Risk Reward quickly (potential gains and losses quickly)

 

  • When trading a ‘spot’ instrument the pip value will always be in the second quoted symbol in the currency pair lets take a look at some examples:

                                          EUR/USD, this means the pip value will be based in USD (U.S. Dollars)

                                          GBP/AUD this means the pip value will be based in AUD  (Australian Dollars)

                                           EUR/GBP this means the pip value will be based in GBP (Great British Pound) also known as Pound Sterling

  • This also applies to commodity pairs such as Gold (XAU/USD) – where the pip value will be based in USD

  • For Indices, the point value will be based in the currency of the country that hosts that stock index; for instance, AUS200 is traded in Australia, which mean that the point value is given in AUD (Australian Dollars);     GER30 is traded in Europe which means that the point value is given in EUR (Euro); US500 is traded in the US, so the point value will be in USD (US Dollars)

(multiply face value by .0001.  1/10,000th is a pip for all pairs (except JPY pairs a pip is .01)

 

A list of all traded symbols and their pip values is shown below. The pip scales in direct proportion to the trade size – so a 5 lot trade will have five times the value per pip as a 1 lot trade.

FX pairsPip Value per 1 Standard LotPip Value per 0.1 Standard LotsPip Value per 0.01 Standard Lots
AUDCAD10 CAD1 CAD0.10 CAD
AUDCHF10 CHF1 CHF0.10 CHF
AUDJPY1000 JPY100 JPY10 JPY
AUDNZD10 NZD1 NZD0.10 NZD
AUDSGD10 SGD1 SGD0.10 SGD
AUDUSD10 USD1 USD0.10 USD
CADCHF10 CHF1 CHF0.10 CHF
CADJPY1000 JPY100 JPY10 JPY
CHFJPY1000 JPY100 JPY10 JPY
CHFSGD10 SGD1 SGD0.10 SGD
EURAUD10 AUD1 AUD0.10 AUD
EURCAD10 CAD1 CAD0.10 CAD
EURCHF10 CHF1 CHF0.10 CHF
EURCZK10 CZK1 CZK0.10 CZK
EURGBP10 GBP1 GBP0.10 GBP
EURJPY1000 JPY100 JPY10 JPY
EURNOK10 NOK1 NOK0.10 NOK
EURNZD10 NZD1 NZD0.10 NZD
EURSEK10 SEK1 SEK0.10 SEK
EURSGD10 SGD1 SGD0.10 SGD
EURUSD10 USD1 USD0.10 USD
GBPAUD10 AUD1 AUD0.10 AUD
GBPCAD10 CAD1 CAD0.10 CAD
GBPCHF10 CHF1 CHF0.10 CHF
GBPJPY1000 JPY100 JPY10 JPY
GBPNZD10 NZD1 NZD0.10 NZD
GBPUSD10 USD1 USD0.10 USD
NZDCAD10 CAD1 CAD0.10 CAD
NZDCHF10 CHF1 CHF0.10 CHF
NZDJPY1000 JPY100 JPY10 JPY
NZDUSD10 USD1 USD0.10 USD
SGDJPY1000 JPY100 JPY10 JPY
USDCAD10 CAD1 CAD0.10 CAD
USDCHF10 CHF1 CHF0.10 CHF
USDCNH10 CNH1 CNH0.10 CNH
USDJPY1000 JPY100 JPY10 JPY
USDMXN10 MXN1 MXN0.1 MXN
USDNOK10 NOK1 NOK0.10 NOK
USDSEK10 SEK1 SEK0.10 SEK
USDSGD10 SGD1 SGD0.10 SGD
USDTRY10 TRY1 TRY0.10 TRY
USDZAR10 ZAR1 ZAR0.10 ZAR
CommoditiesPip Value per 1 Standard LotPip Value per 0.1 Standard LotsPip Value per 0.01 Standard Lots
XAGUSD50 USD5 USD.5 USD
XAUUSD10 USD1 USD0.10 USD
IndicesPoint Value per 1 Standard Lot
US5001 USD
US301 USD
NAS1001 USD
AUS2001 AUD
STOXX501 EUR
DE301 EUR
FR401 EUR
IT401 EUR
SPA351 EUR
UK1001 GBP
JPN225100 JPY
US20001 USD
CN501 USD

TRADING GAP’S

What are Gaps?

Gaps are areas on a chart where the price of a financial instrument that moves sharply up or down, with little or no trading in between.

As a result, the asset’s chart shows a gap in the normal
price pattern. This is an opportunity as a trader can interpret and exploit
these gaps for profit

A gap is a change in price levels between the previous close and the open. Most common on the stock market over two consecutive days

example:  Apple closes at 152.31 and the following open price is 150.99

Apple Gaps Down

The Gap Gets Filled 

Gaps can be caused by many factors such as buying or selling pressure, supply and demand or economic announcements such as a Brexit which frequently occurrence in all financial markets. However, they are More commonly seen in the FX market on a Monday Morning since it is highly liquid and trades 24 hours a day.

Know your FX Market Sessions!

The FX market trades 24/5 and there are three main session to be aware of: Asia Pacific (APAC), London and the US. While the US market is the biggest in the world the London trading session is actually the busiest.

You can check all market and forex opens and active sessions using the session map on MT4

Most often, gaps occur on the open of global markets and exchanges. Gaps result from fundamental or a newsworthy event that occurs after the market as closed, and the value of the effect can’t be realised until the market re opens that’s when the effect will be priced in resulting in an imbalance in supply and demand as the market opens causing a gap.

Currency day traders exploit these gaps to take quick profits from the price action corrections that take place as buyers and sellers struggle to find a new equilibrium price.

Gaps that form in the intraday market are usually a result of major economic announcements, but gaps can be formed in many ways and throughout 2018 Donald Trump’s twitter account caused market moves much greater than macro data releases from the FED (US Federal Reserve Bank)

The Monday Morning Gap is a distinct empty space between Friday’s close and Monday’s open as market prices react to headlines and events that occur over the weekend, when the market is closed. Characteristically gaps will get “filled”. The MFX Indicator has been designed to quantify this opportunity for active traders to get a jump on the trading week.

Gaps can be caused by many factors such as buying or selling pressure, supply and demand or economic announcements such as a Brexit which frequently occurrence in all financial markets. However, they are More commonly seen in the FX market on a Monday Morning since it is highly liquid and trades 24 hours a day.

A filled gap is one in which the price completely retraces and fills the gap within a few bars following the gap.
These gaps typically happen in either direction during sideways range-bound trading markets or in the direction opposite the trend in trending markets

Many traders trade the US Sunday afternoon Forex open which is Monday morning    gap trading in Australia set up their decisions about when to enter a trade.

A general rule of thumb that many traders use for trading the Forex market open:

Calculate the distance between the close and open price.

Trade back to Fridays close price = TAKE PROFIT IS FRIDAYS CLOSE PRICE

Look for Gaps greater than 10 PIPS + the spread

You can apply two stop loss options:

(a) apply no stop loss at all INITIALLY but as price moves in favor by say 50 pips, place stop loss above high or low of the Monday Candlestick when it closes 

(b) Place stop loss above/below nearest swing high/swing low the you can find in 1 hour or 4 hour timeframe.