How to know how much a “pip” is worth for any pair!

Many times, newer traders ask me how they can find out how much a “pip” is worth for any pair. Some will refer to these as pip “costs”, others will say pip “values”, etc. but it’s all the same thing.

They all want to know, if my pair moves up one increment or down one increment…how many dollars does that equate to?

Here’s the simple answer. It’s automatically calculated for you on your trading station. You can view this on the “Advanced rates” which is the default setting..OR…you can view it on the Simple rates” tab.

See both of them below.

I’ve circled (in each format) where to find the pip cost/value for a pair. Notice that any pair that ends in USD (ex. EUR/USD, GBP/USD, NZD/USD, etc.) all have pip values of $1.00 per standard mini lot. Had this been a micro account, then the pip value would be 10 times less or .10 (10 cents) per pip of movement (since a micro lot is ten times smaller than a standard mini lot).

Remember, that a standard mini lot = 10,000 units of currency and a micro lot = 1,000 units of currency.

So the pairs that end in something other than USD (ex. EUR/CHF, USD/JPY, EUR/AUD, etc.) will have pip values that change slightly over long periods of time.

However, you can easily see what a “pip” is worth in that pair BEFORE you place your trade since it’s conveniently located on your quote screen.

This is important to note because there’s a big difference in EUR/GBP’s pip value of $1.66 and EUR/AUD’s pip value of .84 (84 cents).

So one pip of movement for or against you in EUR/GBP is +/-$1.66. However, in EUR/AUD this same amount of movement is +/-$0.84 (big difference, dollar wise…yet the same amount of pips moved). Click on the charts to enlarge them.

Sean Hyman

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.php

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

Green shoots are smokin!

It’s difficult to ignore that some green shoots are taking root. We may have seen the absolute bottom of the equity markets, but a steep incline is not sustainable, nor is a ‘v’ shaped growth graph. Reality and gut feeling tells us that we need to dredge along the bottom for a period of time before true growth can become sustainable. Perhaps we will get a rude awaking this coming Friday with NFP. There are whispers of a -200k print. Consensus has us at -375k with a +9.6% unemployment rate. Euphoria is always welcome, but the crash from the highs takes a lot of getting use to. Markets are flush with cash and after 5-months of a steep incline, many question ‘have they missed the boat’? Hardly, ‘the less bad is worse’ has occurred because of deep costing cutting and personal sacrifices. This quarter we get to see if it’s sustainable. All we are searching for is the true inherent value! And with US households with less cash to spend, it’s got to be lower not higher…

The US$ is weaker in the O/N trading session. Currently it is lower against 9 of the 16 most actively traded currencies in a ‘subdued’ illiquid O/N session.

Yesterday’s data confirms that the US consumer subtracted from last Q’s GDP growth. To fully understand one must look beyond the ‘nominal’ headline and focus on the ‘inflation’ adjusted print. In reality the consumer remains a drag on the US economy! In ‘Real’ terms spending was down in Mar., April, and June and flat in May. In total, spending was down -1.2% annualized for the Q (2/3’s of the economy remains in defense mode). According to analysts, the 1st Q rise was an anomaly vs. the yearly pattern of declines despite all the Government stimulus packages. Digging deeper, nominal-personal spending advanced in June (+0.4%, m/m) because of the surprising gains in non-durable goods, as durable goods expenditure fell -0.2%. Nominal-personal income fell -1.3% after 2-months of gains. Weakness was reported across most of the sub-categories. It’s worth noting that Government wages and salaries continued to rise despite the private sector depreciation. Social benefits fell -6%, m/m (1st decline in 10-months), despite UI rising in the month. With the ongoing pressures of the private sector wages, one can expect collection of personal taxes to also fall (less income for the Government). It’s fair to say that personal income will deteriorate further or best, remain static! The Core-PCE index (the Fed’s go-to inflation indicator) advanced in line with expectation (+0.2%), indicating that inflation remains well behaved.

US housing is doing its bit to contribute to the ‘green shoot’ theory. Yesterday, pending home sales of existing homes surged last month (+3.6% vs. +0.8%), this was the 5th-consecutive increase and exceed all analysts’ expectations. The main reason, lower prices continued to be backed up by low mortgage rates!

The USD$ currently is lower against the EUR +0.03%, JPY +0.28% and higher against GBP -0.06% and CHF -0.06%. The commodity currencies are weaker this morning, CAD -0.12% and AUD -0.32%. Yesterday was a time to reflect, the loonie treaded water in the morning session after its aggressive gains across the board this week. The greenback has managed to print new yearly lows and by default, apart from the MXN, most currencies have strengthened against the buck. The world covets commodity currencies as risk appetite increases and green shoots root. For the loonie per-se, nothing has changed, the currency managed to print its strongest level in 10-months yesterday. Last month it was the biggest G10 winner vs. the greenback, and this month like all its commodity traded cousins, it’s starting off on the same foot. This on-again, off-again recession is bringing risk takers back into the market. With US corporate earning’s beating expectations, this has prompted investors to seek riskier assets such as stocks and commodity-linked currency’s. By default, higher yielding assets like the loonie do much better. The strength of the currency continues to get ahead of fundamentals. Even the Finance Minister Flaherty said ‘there are some steps that could be taken to dampen it’. This would imply some kind of intervention in the market to weaken the CAD. This week we get to see North America’s employment numbers. Are we in for more surprises? Let’s see if the domestics want to cash in on the recent surge this morning and sell their own currency or are they about to take on the BOC?

Earlier this week the RBA kept O/N borrowing costs on hold for a 4th-consecutive month (+3.0%). Governor Stevens said that the Australian economy is stronger than their original predictions a few month’s ago, ‘with both consumer spending and exports notable for their resilience’. Last week Stevens indicated they may not wait for unemployment to peak before hiking rates again. This has heightened speculation that Australia will increase borrowing costs faster than most other nations. After touching its highs, its strongest level vs. the greenback in 11-months, the currency has managed to pare some of the gains after the RBA comments and Asian equities are off their highs (0.8424).

Crude is lower in the O/N session ($71.04 down -38c). It’s not surprising to see crude pare some of its 13% gains over the past 3-trading session. The fear of over extending the euphoric nature is just. Demand destruction remains intact, and there are no fundamental reasons to suggest otherwise at this point. Analysts are expecting another weekly gain in this morning’s EIA report. Reality tells us that inventories are high, demand is still really weak and the risk is increasing that we will see a bigger correction towards $60. We tried last week briefly, but the ‘Bulls’ went on a rampage, pushing prices briefly over the $72 a barrel on Monday. This was the 1st time in over a month and all of this on the back of stronger US fundamental data. Even gas prices surged, as increasing US industrial activity has boosted optimism and swayed investors that fuel consumption will rebound. This is a tall order on the back of recent crude fundamentals, where we continue to experience healthy ‘demand destruction’. The recent appreciation of the black-stuffs prices has been too rapid. There is no denying that with growth comes a commodity price increase. We are not seeing growth, but indicators are showing us a ‘less bad is good’ scenario. Investors are getting ahead of themselves. One of the major factors has been the amount of cash that has been left idle in this downturn. Money managers are aggressively trying to put some of it to work. It’s worth noting that OPEC increased their output levels for a 4th consecutive month in July (agreed compliance is slipping as some members states take advantage of the stronger prices).Their output averaged +28.39m barrels a day (up +45k, m/m). The key to this recent rally will be the US economy ability to continue this pick up or if it limps along! Last week crude prices plummeted on the back of a staggering surprise in the weekly EIA inventory numbers. They reported a whopping +5.1m barrel increase to +347.2m, w/w. The market had anticipated an average decline of -1.2m barrels. Refiners cut operations by -1.2% to +84.6%, relative to capacity, while imports climbed +8.9% to +10m barrels a day last week (the highest since Jan.). Gold prices are following other commodities, the yellow metal advanced to a new 2-month high as the greenback faltered, printing 10-month lows and equities climbed, thus boosting the appeal of the commodity as an alternative investment ($967).

The Nikkei closed at 10,252 down -122. The DAX index in Europe was at 5,418 up +2; the FTSE (UK) currently is 4,673 up +3. The early call for the open of key US indices is lower. The 10-year Treasury’s backed up 5bp yesterday (3.68%) and is little changed in the O/N session. Despite the plethora of US product last week (a record $150b), treasuries managed to grind higher. But yesterday we witnessed a 2nd-consecutive day of price declines as pending sales of existing homes in the US advanced more than forecasted last month. This is further evidence that the deepest US recession in 50-years is easing. On Monday, Treasuries prices declined the most in more than 2-months, as reports on manufacturing and construction spending topped analyst’s original estimates. Recent US data suggests that the 2nd Q may prove to be the final ‘negative’ US GDP number. If true, there is no reason to see lower yields in the short term. This Friday’s North American employment reports could provide some support for the freefalling FI asset class!

It appears the Swiss keep “raising the floor” on the EUR/CHF trade!

Okay, I realize that this isn’t the only pair out there. However, it is likely the ideal candidate right now as it likely has much more upside potential than downside due to the constant intervening of the SNB - Swiss National Bank (Switzerland’s central bank).

Also, keep in mind, the trend is now upward recently…and no longer downward. Being that the EUR/CHF is one of the more widely watched/traded pairs by institutions (which produce such enormous volume for a “cross pair”), it won’t be long before their automated “trend following” programs kick in and aid the central bank’s efforts.

And…it appears that the SNB keeps going into the market and selling francs “sooner and sooner” all the time. See how it continues to “raise the floor” for the EUR/CHF pair. Click on the chart to enlarge it.

Sean Hyman

www.forextradingblog.com

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

At the “Economic Turning Point”?

If we’re at the “economic turning point” as I believe we are…then that will be bad for the dollar, yen and Swiss franc but will be particularly good for those currencies that tend to be influenced by inflation, commodities and risk taking…which would be the Aussie dollar, New Zealand dollar, Canadian dollar and British pound…and arguably in that order.

As an additional note, if this is true…then the natural course of “Swiss franc weakness” may kick in and help the Swiss central bank out with a weaker franc. They’ve been proactively “selling francs” but there may come a time (and we could be there now) that the market actually kicks in and “aids” their intervention efforts for a weaker franc to the euro in particular. If so, between their collective “franc selling” and the market’s turning point…it could bode well for those that are long (buyers of) EUR/CHF. The Swiss are attempting to put in a floor on the EUR/CHF pair around 1.50-1.51. So anytime it gets to around the 1.51 region, one could go long the pair with a wide stop and low number of lots and probably experience a good “upside to downside” risk ratio.

I’ll also note that, so far, the Swiss have been able to reverse the daily downtrend on the EUR/CHF pair and have “held the line” quite well so far. You can look at it from most any aspect you wish and it still holds true. The pair is technically above its downtrend line, 50 SMA, 200 SMA, etc…all of which are bullish for the EUR/CHF pair. See the chart below. Click on it to enlarge it.

Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

Sean Hyman

www.forextradingblog.com

British Pound “Pauses for Breath” [Part 1 of 2]

After a nearly 20% rise against the Dollar, the British Pound has been rangebound for nearly the entire month of June, with one columnist likening the situation to a “pause for breath.” For him, this amounts to a temporary cessation on the Pound’s inevitable upward path: “Compared to long term levels, the pound was still better value than its peers. He said: ‘It’s still cheap - about 10% below it’s trade-weighted average at present.’ ” For others analysts, however, the picture is not so cut-and-dried.

Forgetting about purchasing power parity for a minute, there are numerous factors which could halt the Pound’s rise. First and foremost is the British economy, which is still struggling to find its feet. “The U.K. economy will recover ‘mildly’ next year, according to the OECD, compared with a previous projection of a 0.2 percent contraction. Gross domestic product will drop 4.3 percent this year, versus a March forecast of 3.7 percent.”

Some economic indicators have begun to stabilize, but the two most important sectors, housing and finance, are still wobbly. Economists warn that “any recovery could be slow and uneven because banks are still unwilling to pump loans into the economy.” In the latest month for which data is available, mortgage lending slowed to a record low, with consumer lending not far behind. With regard to housing,”The annual fall in house prices in England and Wales slowed for a third consecutive month in June, according to property data company Hometrack, but prices were still 8.7 percent lower than a year ago.”

There is the possibility that the BOE’s quantitative easing plan and the government’s fiscal stimulus will provide the economy with the boost it needs. At the same time, both programs will have to be reined at some point, sooner rather than later in the case of government spending. With UK national debt predicted to reach 90% of GDP by 2010, “Most people - the prime minister excepted, apparently - believe that taxes will have to rise and/or public spending fall after the next election. This would at least threaten to hold back economic activity.” Not to mention that both QE and government spending could actually backfire and generate inflation without economic growth (i.e. stagflation). BOE Governor Mervyn King captured this overall sentiment, when he said, “I feel more uncertain now than ever. This is not the pattern of a recession coming into recovery that we’ve seen since the 1930s.”

In short, from a purely economic standpoint, it doesn’t look good for the Pound Sterling. But of course forex is about much more than GDP…stay tuned for Part 2, in which I’ll elaborate on this point, and bring interest rates and inflation into the discussion.

Is Risk Aversion Back?

At the end of last week, I posed a question: what will be the next theme to dominate forex markets? Perhaps the answer can be found in Monday’s massive market selloff (”Triple-M Monday” anyone?), the worst day for stocks in over two months. Commodities and currencies- both of which have taken their cues from stocks of late- also trended downwards.

While I would be the first to caution against reading too much into one day (especially since the early indications are that some of these losses will be erased today), it’s possible that yesterday marked the breakout that many technical analysts have called for over the last few weeks. Asked one such analyst last week, “Taking a step back to look at the daily price action of the EUR/USD, we can clearly see that the currency pair is consolidating and a sharp breakout is imminent. The big question is, will it be an upside or downside breakout?”

What was the catalyst for Monday’s selloff? Perhaps it was my blog post on uncertainty: “The World Bank said Monday that prospects for the global economy remain ‘unusually uncertain,’ and it cut its 2009 growth forecasts for most economies” from 1.7% to 2.9%. But really, the World Bank was only echoing what every investor already knew- that the stock market rally rested on a house of cards, and that in fact the arguments in support of an economic recovery are still quite tenuous. In other words, “Some of the buying since early March was been based on a conclusion by many investors that government intervention had forestalled the threat of a doomsday scenario, such as another Great Depression…expectations were so low that stocks rose merely on news that indicators such as manufacturing activity or the service economy were shrinking less than had been feared. Investors didn’t require signs of actual growth.”

From trough to peak, stocks rallied 34%, pushing P/E levels back to normal levels. Now that all of the temporary pricing inefficiencies have been “corrected,” investors are taking a step back and looking to see whether the data supports further buying. Until there is solid proof that the “green shoots” are real, it’s my prediction that markets will trend either sideways or downwards.

What does this mean for forex markets? Investors will probably shun riskier currencies in favor of the Dollar and the Yen, which are still perceived as relative safe-havens. “Risk aversion has resurfaced as market participants take profits on riskier exposures. There are “renewed concerns about the extent of the ongoing global recession and the sustainability of the ‘green shoots’ of recovery,” said one analyst.

Of course, some would argue that that the emerging markets forex rally was built on a more solid foundation than US stocks. If this is the case, then perhaps the correlation between stocks and currencies will break down in the coming weeks. For now, at least, risk-averse investors will probably start to unwind carry trades and pile back into the mainstays of forex. Those with the highest interest rates will suffer the most. Until the day comes that bad economic news in the US doesn’t paradoxically buoy the Dollar, we can be certain that the current narrative is once again one of risk aversion.

Learn to accept risk in forex

To be able to invest successfully with many things to think about, but one of the things to consider is finding a transaction by yourself, a way transactions bring results. But very difficult to find an effective suit you, because no one rules, regulations about what you should learn something. That led many people to take up direction when you do not know what to do before entering the currency market. But one thing that any one should know that your ability to accept risk to any degree, in other words is the amount you accept the investment risk is how much. It is a problem related to the investment is considered with any who want to invest successfully in the currency market.

You can accept the risk, how much loss as the market changes with the strength biên, the first major changes sometimes occur in only 5 minutes or even in 1 minute …? You really have a need to consider carefully the risks can affect each transaction that you make? In fact many people have no idea or a feeling that they need to protect themselves from the risk is not necessary. In many cases they are not understanding the risks they are having. In this article we will review the type of risk and how risk management:

- What is Risk?

- The type of risk may encounter

- The rate of risk and profit potential

- Diversifying the list of your investment

What is risk?

Either do any work and what the potential risks. Main character, your lifestyle is a big role when deciding the level of risk you can accept. For investors, risk means the loss, loss of money invested. And if the investment choices you must make formal sports are not sleeping, it shows you can accept is the level of risk is large compared with their abilities.

Ability to earn as high means high risk as well. It can see through the minutes of the fluctuation and the lever in the currency market are reasons that this market is considered to be a market investment risks high. This is clearly the investment is not like anything to risk, to them, accept a risk level promises to give them a one level higher. Some others also have ideas that higher risk means the ability to earn a higher, and also the ability to attach a greater loss. However, not the chance to make a high and always accompanied with the ability to big loss. That is the reasons why many people have to define an investment strategy and implementation of all transactions by their strategy, and it is an important affect investment results. So need to see how to apply a managed money effectively to limit the risk that you may encounter. You never have to deliberately think when you put money investment of currency market, the contract you have to work hard to make one of each? If the answer is it means you belong to the type of investors hate risk. Naturally, if not, you belong to the type of investors like venture risk. But one, whether you invest in any market from any currency, securities, goods, the future market or any one any other market, the market potential risks to anticipating, outside the predicted ability of most people when looking into it.

Types of risk may encounter in the currency market

2 form the basic risks: the risk that the system - the type of risk may affect more progressive. Examples for this type of risk that political events are global, the natural disaster or wars. Remaining type of risk is not systematic - sometimes regarded as a form of risk is individual, separate. This type of risk is of course vice versa, only affect a few types of funds, some progressive. For example, the information economy affect a country or a region that, as a strike or an adjustment in the interest of the Canadian dollar. The diverse list of investment rải are many currency pairs are not related to each other is the only way you can help avoid the risks from non-type system.

So we know through 2 basic types of risk, time to go out kĩ forms of risk.

Risk is not paid money - This is the risk that a company that you open account transactions is the ability to pay when you request cash. Many investment money can still remember the Refco to occur in 2005. It is unfortunate Refco is one of the investment under the form of the world’s largest operations with investment brokers from market goods, the future market and currency have declared bankruptcy and the longer the company’s auction sales for the company or the other. Customers can not withdraw their money and investments from the original company to the entire assets of the company is sold out. And it is still too early to say that the old customers that have received all their funds. Therefore, the choice of the appropriate broker, stability sometimes is better to select the type of companies belonging to the largest.

Risks related to the situation in the country - this risk occurs when a country is the ability to control the economic and financial stability as their own. When a country problems, the debt that will affect the financial activities in the country and other countries concerned, have relations with that country. This risk also affects the financial markets as stocks, investment funds, the right to choose, the future and most important is money in circulation, use of it. Types of risk are often found in countries everywhere, are the developments of the face of large budget shortfalls.

Risks related to currency - When investing in currencies, you must remember that the fluctuation of the exchange rate in the country will affect the cost of money in the corresponding radical. For example, the economic events, political influence pound (GBP) will affect the transaction of the Euro (such as the fluctuation of the EUR / USD will have the same reaction pair GBP / USD before the event economic, political 2 that although money is money 2 separately and not included in the Funding 1). Know the water can affect the radical is a need for that to trade successfully.

Risks related to interest rates - the increase in interest rate reduction during the transaction will affect the amount but you can pay daily to maintain order transaction. The amount of interest is known under various names such as the rollover, swap, which is the time your order is placed and the transaction because the transaction typically order your spot - immediately should not be long-time transactions, This means the broker will have to close and open again under the command of 1 period, and when to open and close commands you will have to pay or receive interest based on the difference in rates of radical you are dealing. If you are selling the type of money with higher interest rates in the progressive, you will be charged at the time of rollover based on the provisions of brokerages on rollover. To learn more about the risks related to interest rate so you will need to contact the broker to have detailed information related to time of rollover, the cost / interest that you have may be subject or be eligible and other requirements of the account.

Risks related to economic, political - this risk is often said to economic events, political water has a direct influence, to immediately change the price of money that country. For example, when the intervention of the state to maintain a low rate of yen to boost exports.

Risk Market risks relating to market - This is the type of risk that we or mentioned, or face. Market risk is the fluctuation of the progressive occur daily. The fluctuations caused by the promotion of the best from the market. Biên level fluctuation is a measure of risk because of the changes is that every time someone searches for investment opportunities, a progressive is not as stable as they have large rate fluctuations, which sometimes means is more and more opportunities for investors.

Risk Technology Risk related to technology - This is the type of risk that many investors do not discount, though that most investors personally perform transactions through the Internet, and this transaction depends to technology. Are you ever concerned that you avoid the risk that a disruption, fails the machine technology or network broken? You have a backup on the network replaced when necessary? You have backup computer when the computer that you use damaged?

As you can see there are many types of risk that an investor needs attention, careful consideration when the transaction. Estimated interest rate but also to managed care, limit the risk is that investors must always be aware.
Risk and the ability to make a

Risk and the ability to make a will create challenges for the investors. Decide the level of risk you can accept, you can even leave your computer without worry, I still night when the commands in the transaction are still being implemented are considered to bring the the most important of a trader. Ratio between risk and profit levels that are considered a trader to see the lowest risk with a high level as possible. Remember that limited risk, the more limited benefit also much smaller, enter accept high risks, the more rates also increased profit potential much. The investment transactions are related to risk and the ability to search by. The understanding and implementation of place and stop the transaction strategy (effectively) will help you limit your risk is increased when the level in a potential.

Each order transaction will put the most money? How much money you accept the loss in each order transactions? Amount of risk you’re accepting with too great? If so, you may apply the wrong way in risk management while using the rate lever in the transaction. Select the appropriate lever and the deposit - a close margin requirement and in risk management.

No one level of risk is appropriate for all

Like no 1 food that everyone likes, as such, does not have a level of risk is appropriate for everyone. Once you determine a level of risk appropriate for you. You will need to estimate the rate of risk you’re willing to bear (on center lí) and the level of risk you can accept happens in reality. Usually almost all investors are willing heart lí ready to accept the risk level 1 is, but the risks they see that they are not interested in commitment acceptable level of risk that. Survive in the currency market in the long - long term - is most important to be able to earn from the market. To do so, you need to learn the ability to accept risk. It also means you will lose money in the school, but if the loss can help you understand the market, how the transaction as you do not lose much charge "fees" this . Money costs of the financial and spiritual account is always "pay" that investors have experienced is also not the exception in the first phase to start investing.

Conclusion

Each person will be able to ready to accept the level of risk varies. The accepted risk is not a number that, it changes the skills and knowledge of you. When you become more experienced, the risk the item may also increase based on the higher strategy, the system of your transactions. But do not let this make you become ngốc nghếch while always trying to find out how a money management perfect. Achieve a rate between risk and potential benefits received will help you achieve your goals and have a delicious sleep.