How much $ is equivalent to Nano lot, Micro lot or 1 unit!

[Red Herring]

Hi guys

I have been trading demo for a while now and in the process of opening a live account with a minimum amount of $50.00
Thus I have (will have) $50.00 in my account.
Well, now I want to be sure what kind of minimum trade requires how much $ ?
Lets make it more clear what I want to be sure:

Suppose I need to buy/long USD/JPY and current price is say for example 101.10
I have three brokers to go with the following min. trade offer:
No. 1 offers 1 Nano Lot (100)
No. 2 offers 1 Micro Lot (1000)
No. 3 offers 1 Unit (1)

With which broker I can make a real trade (above pair) with a least cost that is what I want to be sure! Can anybody do the calculation and show me how it actually costs?

Regards

 

[FringFX]

you forgot to take the spread and leverage in to consideration.

you also forgot about the mini lot.
nano lot
micro lot
mini lot
standard lot

 

[Pharaoh]

Let me try to simplify things. If your account is based in USD and you are trading xxxUSD pairs, then:

nano = 1 cent/pip, 100 units of currency
micro - 10 cents/pip, 1000 units of currency
mini = $1/pip, 10,000 units of currency
standards = $10/pip, 100,000 units of currency

Since 101.10 isn't too far from 100.00, let's just assume the USD and JPY are at 100.00 to make life simple. In that case, the cents/dollars per pip above work fine.

With any account, you want to limit risk to a small percentage of the account on each trade. Let's say we start conservatively and limit risk to 1% of the account value, which would be 50 cents in your case.

If so, opening a microlot is a risk of 10 cents per pip. You'll probably pay about 2 pips in spread, so you'll be about 3 pips from your stoploss. That's too close - simple noise on the market could take out your trade.

With nanolots, you would have 50 pips range to play with. if you plan to have your SL in the 20-25 pip range, you could open 2 nanolots and remain well within your risk management rules.

2 nanolots would be $200 in currency on the table - in a $50 account, that's using 4:1 leverage. You've also got only 50 cents on the table so you're well within reasonable rates of both leverage and risk for learning.

 

[Red Herring]

Let me try to simplify things. If your account is based in USD and you are trading xxxUSD pairs, then:

nano = 1 cent/pip, 100 units of currency
micro - 10 cents/pip, 1000 units of currency
mini = $1/pip, 10,000 units of currency
standards = $10/pip, 100,000 units of currency

Since 101.10 isn't too far from 100.00, let's just assume the USD and JPY are at 100.00 to make life simple. In that case, the cents/dollars per pip above work fine.

With any account, you want to limit risk to a small percentage of the account on each trade. Let's say we start conservatively and limit risk to 1% of the account value, which would be 50 cents in your case.

If so, opening a microlot is a risk of 10 cents per pip. You'll probably pay about 2 pips in spread, so you'll be about 3 pips from your stoploss. That's too close - simple noise on the market could take out your trade.

With nanolots, you would have 50 pips range to play with. if you plan to have your SL in the 20-25 pip range, you could open 2 nanolots and remain well within your risk management rules.

2 nanolots would be $200 in currency on the table - in a $50 account, that's using 4:1 leverage. You've also got only 50 cents on the table so you're well within reasonable rates of both leverage and risk for learning.

I have still some confusion Pharaoh:

Q1. My account is based in USD and still I want to trade USDJPY not JPYUSD, I know what these mean: I want to buy USD and sell JPY, right? But my account is based on USD (I have $50.00 in my account not JPY 5,000.00 right?) But when I will try to buy USDJPY with my $50.00, will my trade be rejected for this based currency problem or it will be converted to JPY by my broker so that I can buy the desired USD (USDJPY pair) !

Q2. If I do not wish to take the advantage of leverage, what is the problem? I want to trade with my own fund of $50.00 (to make life simple) then 1 nanolot requires $100.00 , is it the problem ( I have say $50.00 only) or I must use leverage??

Sorry for asking such a long question but none of the schools have discussed these practical issues!

Thanks Pharaoh

 

[Pharaoh]

Q1. Trading pairs that don't end in USD on a USD account requires some calculations to get the exact cash value of a 1 pip movement. Check TASK#1 in this chapter of Forex Military School for an example on the USDJPY that Sive wrote:

https://www.forexpeacearmy.com/fore...-leverage-margin-profit-loss-joining-all.html


Q2. Unless you can find a broker offering picolots ($10 currency), you'll need at least $100 to trade at 1:1 leverage. I am glad that you don't want to overleverage yourself. Way too many people would want to try to make $10 a trade on a $50 account without realizing that they'd continuously be within a few pips of a margin call.

If you've only got $50 and want to trade conservatively, opening one nanolot (which will put you at about 2:1 leverage) really isn't very dangerous. You'll gain or lose 1 cent per pip, so it would take a 5000 pip movement to erase your account. You can set a SL as wide as 50 pips to limit your total risk on the trade to 1% of your account size.

 

[Red Herring]

I imagine how do you know all these things (lol...)
Thanks for helping me right from the beginning....

 

[Pharaoh]

I imagine how do you know all these things (lol...)

Mostly painful experience.

 

[Rambo35]

I struggle to understand how you want to operate a portfolio with $50 and impose a good risk management strategy in order to protect your account.

 

[Pharaoh]

Why not? If it was a $500 account, the risk management advice would just change from nanos to micros. If a $5000 account, it would be mini lots.

Maybe Red Herring is on a budget. Maybe he's just testing out the broker. Maybe he's trying live trading for the first time.

Sure, it's only $50, but if he learns to practice proper risk management at that level, he'll be in a much better position to control risk on larger accounts later.

 

[FringFX]

I struggle to understand how you want to operate a portfolio with $50 and impose a good risk management strategy in order to protect your account.

it is possible.
proper risk management is applicable regardless of account size.

I personally trade/have traded accounts ranging from 1 digit to 4-digit and up using similar/various risk management protocols.