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  1. #1
    thomcooper is offline Registered User
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    Dec 2011
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    3

    Question My P&L Figures Don't Add Up!

    OK, so from my first week of trading on FXCM I've made the following trades:

    AUD/USD long - 1,000 units - Opened 1.01500 - Closed 0.99896. I have calculated the trade as follows - (£1,000 / 1.01500) * 0.99896 = £984.20 - £1,000 = -£15.80 loss. However a loss of only £10.37 is showing on my account.

    Similarly, I am currently in the following trade:

    AUD/NZD short - 2,000 units - Opened 1.32531 - Currently Trading 1.31077. Again I calculate my current position as follows - (£2,000 / 1.31077) * 1.32531 = £2,022.19 - £2,000 = £22.19 profit, however I am only seeing a profit of £14.25 on my account.

    Can anyone explain where I'm going wrong?

    Thanks


    T

  2. #2
    Julius at FXCM's Avatar
    Julius at FXCM is offline DailyFX Administrator
    Join Date
    Nov 2010
    Posts
    1,631
    Hello thomcooper, and thank you for your post! On behalf of myself and everyone here at FXCM, welcome to the forum community!


    Why are my P/L figures not adding up correctly?

    Please make sure that you are calculating your P/L figures correctly using the "pip cost" on your platform. I would like to walk you through how to properly calculate pip values for the trade sizes that you open.


    How can I calculate the value of a pip for the trade size I am opening?

    Before I explain how you can calculate the value of each pip movement for the size of your trade I would like to go over margin to make sure you understand what it is.

    Margin is the good faith deposit that you put down in order to hold open positions. This is not a fee or a transaction cost, it is simply a portion of your account equity set aside and allocated as a margin deposit. The margin that you put down to hold open positions is always used from the money that you have available in your account.

    Margin requirements at FXCM are determined by taking a percentage of the notional trade size plus a small cushion. A cushion is added to help alleviate daily/weekly fluctuations. For more information on how margin is calculated please click here.

    In the event that funds in the account fall below margin requirements, all open positions are triggered to close. This is designed to prevent clients' accounts from falling into a negative balance, even in a highly volatile, fast-moving market.

    You can check the minimum margin requirements for all the pairs and how much each pip movement is worth for a 1K trade (or the minimum trading size on your account) from the simple dealing rates window in the Trading Station platform.

    Take a look at the top left hand corner of the trading station, then click on "Simple Dealing Rates" which is next to "Advanced Dealing Rates". Once there scroll to the right and you will notice "Pip Cost" and "MMR". Pip cost will tell you the value of a pip movement per 1K trade for any pair, and MMR will give you the minimum margin requirement per 1K trade for any pair. If you take a look at the image below, the area highlighted in green illustrates how the Pip Cost for EUR/USD is 10 cents, and the MMR for USD/JPY is $10.


    So if you were to place a 1K trade for EUR/USD, each pip that moves in your favor or against your favor would be worth ten cents. If you were to place a 2K trade for EUR/USD, then each pip that moves in your favor or against your favor would be worth 20 cents, and so forth.

    Now using USD/JPY as an example for margin, from the illustration if you were to place a 1K trade for USD/JPY, then the minimum margin requirement is $10. That means that you have to have at least $10 in your account to be able to hold a 1K position of USD/JPY. If you were to place a 2K trade for USD/JPY, then the minimum margin requirement is $20 and so forth.

    Also keep in mind that when you are placing a trade the "Create Market Order" window will automatically calculate the Pip Cost and MMR for you as you manually type the size of your trade in the Amount(K) field.




    Please keep in mind that your minimum margin requirement will depend on where your account is regulated, and what leverage you have your account set to. For more information please click here.


    If you look in the accounts window on the top right hand corner of the trading station you will see where it says "Usd Mr" and "Usbl Mr".


    Usd Mr is the good faith deposit you put down to hold open positions and Usbl Mr is the rest of the money you have in your account to open more positions, or sustain additional losses. If the market moves in your favor, your Usbl Mr will rise. If your Usbl Mr ever moves down to zero, you will receive a margin call and all your positions will be liquidated. This will ensure that you will never owe FXCM money. Your Usd Mr and Usbl Mr will always add up to your equity.


    Your equity is the most accurate reflection of floating profits and losses (or the balance) in your account.


    Please note that it is the client’s responsibility to monitor their own margin and manage it accordingly. FXCM does not send clients notifications when their margin is running low. FXCM highly advises its clients against over-leveraging their accounts. When an account is leveraged to a high degree, the probability of receiving a margin call dramatically increases.


    Please click here for more information about calculating pip cost on your account. Please let me know either way whether or not you are now about to calculate the P/L on your account correctly. Thank you in advance for your time and I look forward to hearing from you again soon!


    What is the largest trade size that I should open?

    Here at FXCM, there are no trading restrictions. This means that as long as you have sufficient margin in your account, you can open as large or as many positions as you would like. However, we do advise our clients not to over-leverage their accounts. When an account is leveraged to such a high degree, the odds of receiving a margin call dramatically increase. We believe that using 10:1 effective leverage on an account is a good general rule of thumb, or opening no more than a 1K trade for every $100 in the account.


    Why is lower leverage important in order to improves one's chances of being successful in the long term?

    One of the main reasons that new traders lose money is because they over-leverage their account by opening too large of a position, too many positions, or a combination of both. When you use excessive leverage, a few losing trades can quickly offset many winning trades. To clearly see how this can happen, consider the following example:


    Scenario: We have four different traders trading on different levels of effective leverage.

    Question: What happens to Trader A account equity when the USD/JPY price falls 100 pips against him?


    Answer: Trader A loses 41.5% of his / her account equity.


    By using lower leverage, Traders B, C, and D drastically reduce the dollar drawdown of a 100 pip loss. Please keep in mind that it is not uncommon for currency pairs to range at least 100 pips a day. By over-leveraging his account, Trader A has lost almost half of his equity with just one trade. We believe that using 10:1 effective leverage on an account is a good general rule of thumb, or never having more than 1K of open exposure for every $100 of equity in the account.


    Does lower leverage really work?

    FXCM’s experience in Hong Kong, where significantly lower leverage levels are mandated by law, suggests lower leverage results in more successful trading. As another example, many professional traders use up to 8:1 leverage and typically much less. The reason to use low leverage is to make sure that that a losing position does not make a significant negative impact on the overall account.


    How can I use lower leverage?

    The DailyFX.com Research and Education team has created a variety of trading videos to help you identify trading opportunities using lower leverage. To learn more about money management and the benefits of trading with lower leverage, log into the DailyFX+ Trading Course. Once you are logged in simply click on "Money Management" on the left.




    For those who don't have a live account with us yet that's ok!


    Please feel free to send me an email at julius@fxcm.com and I will be more than happy to set you up with a trial version of DailyFX PLUS.


    What other resources does FXCM offer that can help me develop a strategy of my own?

    Here at FXCM we always have our clients best interest in mind. That is why we have an abundance of educational resources in hopes that it will eventually help you become a profitable trader. Here are a few resources that I would suggest for you get started with:


    DailyFX PLUS Trading Course

    Live clients are entitled to unlimited access to our DailyFX PLUS trading course which comes complete with:


    • 60 video lessons for you to choose from with information on technical indicators and different strategies.


    • Over 15 hours of live instructor help webinars each week. During these live webinars our instructors will go over a topic (such as how to effectively use stops and limits, for example) for about fifteen minutes and then answer any questions you may have in real time.

    • Community forums to get feedback, ask questions, and share what you're learning.

    • Optional homework assignments to test your understanding and to see how well you are retaining the knowledge.


    I encourage you to go through all of the video lessons if you haven't done so already, and to attend the live webinars whenever possible. You can access the trading course from DailyFX PLUS by clicking here and logging in with the same information that you use to log in to your live account. Please click here for access to the LIVE Trading Room with the course instructors.


    Again for those who don't have a live account with us yet that's ok!


    Please feel free to send me an email at julius@fxcm.com and I will be more than happy to set you up with a trial version of DailyFX PLUS.


    Course Instructors

    Coupled with DailyFX PLUS, clients also have access to our mentorship program. In the program, you can communicate with the team of Trading Coaches 24 hrs per day 5 days per week. Our instructors can help you build a strategy if you need one or fine tune a current strategy you may be using. I highly encourage you to contact the instructors directly and tell them about the strategy you are currently using, what has been working, and what hasn't been working. This will put them in a good position to share their thoughts, and provide you with information/resources that will be beneficial to you.

    You can contact the instructors directly at instructor@dailyfx.com


    Please click here for a complete walkthrough of DailyFX PLUS.

    Please click here for more information regarding our DailyFX PLUS Trading Course and Live Webinars.


    Thank you again for your post thomcooper! Please feel free to post with more questions or send me an email directly at julius@fxcm.com

    Quote Originally Posted by thomcooper View Post
    OK, so from my first week of trading on FXCM I've made the following trades:

    AUD/USD long - 1,000 units - Opened 1.01500 - Closed 0.99896. I have calculated the trade as follows - (£1,000 / 1.01500) * 0.99896 = £984.20 - £1,000 = -£15.80 loss. However a loss of only £10.37 is showing on my account.

    Similarly, I am currently in the following trade:

    AUD/NZD short - 2,000 units - Opened 1.32531 - Currently Trading 1.31077. Again I calculate my current position as follows - (£2,000 / 1.31077) * 1.32531 = £2,022.19 - £2,000 = £22.19 profit, however I am only seeing a profit of £14.25 on my account.

    Can anyone explain where I'm going wrong?

    Thanks


    T
    Last edited by Julius at FXCM; 12-27-2011 at 08:35 PM.
    Thank you for being a part of our trading community!

    Want to discuss how our resources can help you reach your trading goals? Add your post to join the conversation or feel free to contact us directly at help@fxcm.com!

    We look forward to hearing from you!

    FXCM Online Support

  3. #3
    Northern Donkey is offline Registered User
    Join Date
    Dec 2011
    Posts
    3
    Just looking at it is it not simply that you are buying lots in $USD not £.

    So in your example, the profit is $22.19 NOT £22.19 ... so $22.19 actually equates to £14.25?

    This makes the presumption that your account base currency is GBP.

    FXCM/Julius - Is it possible to have the base currency of my account changed to £GBP?

    If it is, how do you calculate the exchange rate, using the live rate?

    At the moment I lose around 300 points depositing/withdrawing funds due to my banks exchange rate and associated charges from converting £ to $ and back again

  4. #4
    Julius at FXCM's Avatar
    Julius at FXCM is offline DailyFX Administrator
    Join Date
    Nov 2010
    Posts
    1,631
    Hello Northern Donkey, and thank you for your post! On behalf of myself and everyone here at FXCM, welcome to the forum community!


    How can I see the pip cost for an account denominated in British Pounds?

    The example I provided for you in my previous post was using an account denominated in US Dollars, however you are going to find the pip cost in the same place regardless of what currency your account is denominated in.

    Let's look at one of your examples together:

    Long 1K AUDUSD at 1.01500, Closed at 0.99896.

    That is a difference of -160.4 pips. You can check how much each pip movement is worth for the minimum trading size on your account from the simple dealing rates window in the Trading Station platform.

    Take a look at the top left hand corner of the Trading Station, then click on "Simple Dealing Rates" which is next to "Advanced Dealing Rates". Once there scroll to the right and you will notice where it says "Pip Cost". This will show you the value of a pip movement for the minimum trading size on your account for any pair. If you take a look at the image below, you can see the simple dealing rates window for a 10K minimum trading size standard British Pound denominated account. The area highlighted in green illustrates how the Pip Cost for AUDUSD is £0.64.


    So if you were to place a 10K trade for AUDUSD, each pip movement would be worth £0.64. That means that a 1K trade for AUDUSD is worth about a tenth of that, or £0.064.

    In order to find out how much was earned or lost for a trade, simply multiply the size of the trade by the amount of pips earned or lost by the pip cost.


    (Size of the Trade) * (Pips) * (Pip Cost) = Gross P/L

    (1K) * (-160.4) * (.064) = -£10.27


    How do I calculate the value of a pip?

    There is a simple equation that is used to calculate the value of a pip. Please click here for a full explanation.


    How are the rates on the platform calculated?

    Please click here for a full explanation of how to read a forex quote.

    It sounds like you may be new to the forex market, which is great! If you don't mind me asking, what type of trading strategy are you utilizing at this time? I may have some resources that can help you to hone your strategy, or develop new ones. If you click on the link below it will take you to the The Basics of FOREX Trading:

    DailyFX For Beginners

    This is going to be the best place for you to begin acclimating yourself to the forex market. Although this is the best place for new traders to get started, I believe that traders of all levels of experience can definitely take something from this. I highly suggest that you go through all of the articles on that section of DailyFX.com, if you haven't done so already. It will build a strong base for your learning experience. If you are more of a visual person, we also have some getting started videos that can be accessed by clicking on the link below:



    What other resources does FXCM offer that can help me to hone my strategy, or develop a strategy of my own?

    Here at FXCM we always have our clients best interest in mind. That is why we have an abundance of educational resources in hopes that it can eventually help clients become a profitable traders. Here are a few more resources that we have to offer from DailyFX PLUS:


    DailyFX PLUS Trading Course:

    Live clients are entitled to unlimited access to our DailyFX PLUS trading course which comes complete with:


    • 60 video lessons for you to choose from with information on technical indicators and different strategies.


    • Over 15 hours of live instructor help webinars each week. During these live webinars our instructors will go over a topic for about fifteen minutes and then answer any questions you may have in real time.

    • Community forums to get feedback, ask questions, and share what you're learning.

    • Optional homework assignments to test your understanding and to see how well you are retaining the knowledge.


    I encourage you to go through all of the video lessons if you haven't done so already, and to attend the live webinars whenever possible. You can access the trading course from DailyFX PLUS by clicking here and logging in with the same information that you use to log in to your live account. Please click here for access to the LIVE Trading Room with the course instructors.


    Course Instructors:

    Coupled with DailyFX PLUS, clients also have access to our mentorship program. In the program, you can communicate with the team of Trading Coaches 24 hrs per day 5 days per week. Our instructors can help you build a strategy if you need one or fine tune a current strategy you may be using. I highly encourage you to contact the instructors directly and tell them about the strategy you are currently using, what has been working, and what hasn't been working. This will put them in a good position to share their thoughts, and provide you with information/resources that will be beneficial to you.

    You can contact the instructors directly at instructor@dailyfx.com


    Please click here for more information regarding our DailyFX PLUS Trading Course and Live Webinars.


    Do I need to have a US Dollar currency account in order to deposit funds into my FXCM account?

    That is going to depend on whether you have a micro account or a standard account. Micro accounts can only be funded in US Dollars. Standard accounts also have the functionality of trading micro lots (increments of 1K) available and offer many advantages over micro accounts, including the option of having an account funded with a different denomination aside from US Dollars.


    What advantages do standard accounts have over micro accounts?

    Some of the advantages to holding a standard account include but are not limited to:




    • Different account denominations.

    • Different account types and platforms.

    • Plus much more!

    Please click here for more information on the advantages of having a standard account.


    The minimum starting balance for a standard account is $2000. Please let me know if a standard account would be something of interest to you, and I will be more than happy to put you in touch with a specialist that can go over all your options, including methods of deposit. If you already have a standard account, the best way to change the denomination of your account, such as from US Dollars to British Pounds, is going to depend on a couple of factors. Normally the easiest way to do this is to open a new British Pound denominated account, and then transfer funds from your old account to your new account. If you would like more information on what the easiest process would be for your account specifically, please send me an email directly at julius@fxcm.com in order to best assist you.

    Thank you in advance for your time and I look forward to hearing from you again soon.


    What happens if I try to deposit funds into a micro account with a currency denomination other than US Dollars?

    As you now know, micro accounts can only be funded in U.S. Dollars. However, if the debit /credit card or bank account you're using to make the deposit is denominated in another currency, deposits are still made in the same fashion.


    Please click here for more information about how you can deposit funds by debit or credit card.

    Please click here for more information about how you can deposit funds by bank wire.


    When you're making the deposit via MyFXCM.com you will be prompted to enter the amount you wish to deposit.


    When you enter the amount of your deposit, this is the amount you are going to deposit in U.S. dollars. If your debit / credit card or bank account is denominated in another currency, your debit / credit card company or bank will convert the amount of currency needed to deposit the amount you enter in U.S. Dollars.

    For example, if your account is denominated in British Pounds, and you enter the number 100 for a deposit, your debit / credit card company or bank will charge you the amount of British Pounds needed in order to make a deposit for $100 U.S. Dollars.

    FXCM does not charge a conversion fee for this service. However, your debit / credit card company or bank may charge a conversion fee. This also applies to deposits by bank wire. Please contact your debit / credit card company or bank directly for more information.


    Thank you again for your post Northern Donkey! Please feel free to post with more questions or send me an email directly at julius@fxcm.com

    Quote Originally Posted by Northern Donkey View Post
    Just looking at it is it not simply that you are buying lots in $USD not £.

    So in your example, the profit is $22.19 NOT £22.19 ... so $22.19 actually equates to £14.25?

    This makes the presumption that your account base currency is GBP.

    FXCM/Julius - Is it possible to have the base currency of my account changed to £GBP?

    If it is, how do you calculate the exchange rate, using the live rate?

    At the moment I lose around 300 points depositing/withdrawing funds due to my banks exchange rate and associated charges from converting £ to $ and back again
    Last edited by Julius at FXCM; 01-02-2012 at 08:04 PM.
    Thank you for being a part of our trading community!

    Want to discuss how our resources can help you reach your trading goals? Add your post to join the conversation or feel free to contact us directly at help@fxcm.com!

    We look forward to hearing from you!

    FXCM Online Support

  5. #5
    thomcooper is offline Registered User
    Join Date
    Dec 2011
    Posts
    3
    I've figured this out. I have been calculating correctly, but the quoted pip cost gets rounded to the nearest penny.

    If you open up a trading ticket & put an order size of say 1,000,000 per pip, your pip cost has a load of numbers behind it.

    If you use this figure (divided down to your trade size) you actually end up with a more realistic result.

    For example, the trade that I provided back in my initial example was as follows:

    AUD/USD long - 1,000 units - Opened 1.01500 - Closed 0.99896. I have calculated the trade as follows - (£1,000 / 1.01500) * 0.99896 = £984.20 - £1,000 = -£15.80 loss. However a loss of only £10.37 is showing on my account.

    First off I was calculating them wrong. The calculation should read as follows (as per the above guidance):

    AUD/USD long - £1,000 - Opened 1.01500 - Closed 0.99896 (160.4 pip loss) - £0.06/pip. I should have calculated the trade as follows - 160.4 * £0.06 = £9.62 loss.

    However the actual price per pip using the million figure as above is £0.06443361244. Therefore the trade would be calculated as follows:

    160.4 * £0.06443361244 - £10.34 loss

    This is a lot closer figure. Presumably if you could add billions, the figure goes longer & more accurate. So if you're trying to work out your potential losses if a deal goes foul, then this is probably the best way. Of course you need to build in extra to account for Rollover Charges & stop loss overshoots.

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