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Fractional Pips

Fractional Pips

Richard Krivo, Trading Instructor
Instructor's Response:
 
Your thought process regarding Moving Averages is correct. When the faster MA crosses the slower MA a trade can be taken in the direction of the cross. If that happens to be in the direction of the Daily trend, the entry will have a greater likelihood of success associated with it.
 
chart 4 08 10
 
Regarding stop placement...
 
Keep in mind that the 5th number to the right of the decimal on this pair is a fractional pip...its value is one-tenth of a pip and is not used in the calculation of stops and limits.  (Fractional  pips allow price providers to bring spreads down even further as they are not restricted to quoting in full pip increments.)  This extra digit may have affected your calculation of the stop placement on your example since it was placed only 3 pips above the entry.  Since the ATR (Average Trading Range) on the EURUSD on a Daily chart is 111 pips, a stop that tight is more than likely going to be triggered by normal price action.
 
The link below is to the area on DailyFX.com that offers additional insight regarding pips and fractional pips.
 
http://www.dailyfx.com/forex/education/learn_forex/the_basics/making_a_forex_trade/2/2009-10-14-0011-What_is_a_Pip_.html
 

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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