Pip Forex Trading

How To Prosper At Forex Trading Using Leverage And K Factor?   by Amuro Wesley

The difference between Forex and other investments boils down to leverage. Leverage can be as high as 400:1 and in most cases you get to decide the amount of leverage and K Factor you want in order to prosper at Forex trading. Here is how.

Super high leverage is a selling point for many Online Forex brokers. How many times have you seen the tout controlling $100,000 of euro for $250? Those numbers are correct and the profit yields of super high leverage can simply be compelling.

I neither encourage nor discourage trading at super high leverage. The decision boils down to you. But unless you have a clear understanding of leverage implications, your chances of succeeding are slim. It is a cruel fact but it is better for me to tell you this rather than fabricating beautiful lies like most so-called experts.

The most fundamental term is PIP. Most XYZ brokers charge around 3 PIP per deal. Each currency pair has an average daily range of 100 PIP. We all know that the PIP has a variable value that differs with each currency pair. But are you aware that each PIP value also varies with base currency and gearing on your account?

For example, with EUR/USD at 1.2723 and leverage at 100:1, each PIP amounts around $7.86. At 200:1 leverage, it could double to $15.72. For traders with different gearing, a 100 PIP move means entirely different things to their account equity.

Here is a new way to look at leverage with the K Factor. The 3 most common leverage ratios available from online forex brokers are 50:1, 100:1 and 200:1. The K Factor is 2 for 200:1 leverage ratio, 1 for 100:1, and 50 for 50:1.

So how can you use it to your advantage?

There are basically 3 ways to do so.

1. Value Of PIP For Currency Pair You Trade

The first is using the K Factor to calculate the value of a PIP for the currency pair you are trading.

Since 100,000 individual currency units – usually dollars or euros – is the normal size of a single lot, you can calculate the value of a PIP with this formula:

(100,000/current price with no decimal) x K Factor = PIP

Here is an example: The EUR/USD current price is 1.2723 and your leverage is 100:1. With these facts the formula is:

(100000/12723) * 1 = 7.86.

The value of a PIP is $7.86. If your forex broker executes your trade at a spread of 4 PIPs, you are paying $31.44 whatever euphemism the broker is using for his commission. If your leverage or gearing is 200:1, that execution will cost you $62.88.

2. Determine Potential Profit

The second way you can use PIP and the K Factor is to quickly determine the potential profit in a trade or to know the extent of actual dollar risk in a stop-loss setting.

For example, if you go long the EUR/USD at 1.2723 and anticipate a move to 1.2850, what profit can you anticipate at 100:1 gearing?

12850 – 12723 = 127 PIP x 7.86 = $998.22 – execution cost.

If you objectively set your stop loss at 1.2715 what amount are you risking in this trade?

12723 – 12715 = 8 PIP x 7.86 = $62.88 + execution cost.

3. Kill But Do Not Dismember Strategy

The third way to use the K Factor is to avoid what the forex brokers call the safety net. But I call it Kill But Do Not Dismember Strategy.

Margin is not a down payment. It is your cash which the broker uses to protect his own capital account from your mistakes. That is all well and good because the global market will continue to work only if all participating brokers have adequate capital to meet their customers’ settlement obligations.

About the Author

Discover how you can make money on Forex easily with these tested and proven Trading Strategies in Trading Currency For Profit.
What’s a Pip? | Forex Trading

Forex Strategy 10: Low Risk/High Return Currency Trading $0.99 It’s the most popular ebook on currency trading ever written – downloaded over 500,000 times over the last 10 years. The ebook describes a simple approach to trading currency that removes the guesswork, and provides an achievable roadmap for trading successfully in the world’s largest and most volatile financial market.This isn’t a book with a set of rules for a trading strategy. The book doesn’t …

Forex Strategy Forex Underground Secret Survival System Turning You Millionaire – Buy Now Can you imagine it, can you almost taste it, can you touch it?No money cares, living the life of your dream. Traveling the world, giving your family the lifestyle they deserve. Driving the car that you always wanted. Are you sick and tired of the same all same all status quo.Forward the tape five years ahead, what do you see if youdon’t take any action. All those people in your office, that you …

Technical Analysis I for the Professional Forex Trader 2010 $44.95 Learn the charting secrets the Pro Forex Traders use! Technical Analysis for Forex offers many insights into how the Currency market works. You will benefit greatly from a good foundation in each type of insight and, perhaps, a specialty in one or two. This course is designed to teach you classic Technical Analysis and form a rock solid decision support program, the foundation for everyone when i…

Technical Analysis 2 for the Professional Forex Trader- 2010 $44.95 This Course is part of the “Professional Forex Trader Library” that includes the entire Forex trading education in one package! Learn the Technical Analysis secrets the Forex pros use! Part 2 Technical Analysis offers many insights into how the market works. You will benefit greatly from a good foundation in each type of insight and, perhaps, a specialty in one or two. This course is designed to t…

Forex Trading: Uncut $7.99 Forex Trading: Uncut

The Book on Forex Trading $87.2 In Forex trading, as in business or in life, you need a plan. In The Book On Forex Trading, Stephen Margison, a professional Forex trader, reveals his Forex trading plan and two little known methodologies he uses successfully as his own personal ATM machine. He explains his own version of financial freedom and shares with the reader how he feels that Forex trading is a life experience; an expression of your own personality. This needs to be understood before you can make money trading Forex. Stephen also provides his proprietary indicators and templates to help ensure your success. Author: Margison, Stephen Binding Type: Hardcover Number of Pages: 200 Publication Date: 2011/01/20 Language: English Dimensions: 9.10 x 6.30 x 1.00 inches

The FX Bootcamp Guide to Strategic and Tactical Forex Trading $54.99 A straightforward guide to trading today’s dynamic Forex market Written by Wayne McDonell, the Chief Currency Coach at FX Bootcamp, this book shows readers how to successfully trade the Forex market on their own. FX Bootcamp’s Guide to Strategic and Tactical Forex Trading skillfully explains how to combine popular technical indicators to formulate a comprehensive market strategy. Readers will then learn how to focus on using this information to create a tactical trading plan–one that will help them pull the trigger to get in and out of a trade. Along the way, McDonell takes the time to discuss the various challenges a Forex trader faces, such as greed, fear, loss, and isolation. As a Forex trader and educator of traders, Wayne McDonell knows what it takes to make it in the competitive world of Forex. And with FX Bootcamp’s Guide to Strategic and Tactical Forex Trading he shows readers how.

The Fx Bootcamp Guide To Strategic And Tactical Forex Trading $44.99 A straightforward guide to trading today’s dynamic Forex market Written by Wayne McDonell, the Chief Currency Coach at FX Bootcamp, this book shows readers how to successfully trade the Forex market on their own. FX Bootcamp’s Guide to Strategic and Tactical Forex Trading skillfully explains how to combine popular technical indicators to formulate a comprehensive market strategy. Readers will then learn how to focus on using this information to create a tactical trading plan–one that will help them pull the trigger to get in and out of a trade. Along the way, McDonell takes the time to discuss the various challenges a Forex trader faces, such as greed, fear, loss, and isolation. As a Forex trader and educator of traders, Wayne McDonell knows what it takes to make it in the competitive world of Forex. And with FX Bootcamp’s Guide to Strategic and Tactical Forex Trading he shows readers how.

Forex Trading Secrets : Trading Strategies for the Forex Market $29.11 No Synopsis Available

Forex Scam $58.94 High Quality Content by WIKIPEDIA articles A forex (or foreign exchange) scam is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading has become the fraud du jour as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission. But the market has long been plagued by swindlers preying on the gullible, according to the New York Times. The average individual foreign exchangetrading victim loses about 15,000, according to CFTC records according to The Wall Street Journal. The North American Securities Administrators Association says that offexchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud. Author: Miller, Frederic P./ Vandome, Agnes F./ McBrewster, John Binding Type: Paperback Number of Pages: 70 Publication Date: 2010/09/09 Language: English Dimensions: 6.00 x 9.02 x 0.17 inches

All About Forex Trading $16.82 No Synopsis Available

The Forex Options Course: A Self-Study Guide To Trading Currency Options $42.99 The Forex Options Course is a practical, hands-on guide to understanding and trading forex options. Designed to build a trader’s knowledge base in a step-by-step manner, this reliable resource moves from the straightforward to the more sophisticated with discussions of everything from basic plain vanilla calls and puts to intriguing first-generation exotic binary options. Written in a straightforward and accessible style, The Forex Options Course will help you develop the skills and strategies needed to succeed in today’s dynamic forex market.