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Lesson 7: What is a pip worth in forex? Trade sizes and more ... - YouTube
Channel: Financial Wars
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hey everybody I'm Rob Booker inventor of
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the paperclip that's not actually true
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welcome back to our FX trading 101
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lessons I'm happy to be here thanks to
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our sponsor Forest Park FX pip value
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it's the question on everyone's mind how
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much is a pip worth we talked about it
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earlier we talked about the spreads we
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talked about the Commission's we talked
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about the quotes we talked about buying
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and selling a little bit let's say Nate
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that you made 10 pips is that a lot of
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money is it not a lot of money how much
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money is it if you make 10 pips well it
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all depends there are in the world of
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currency trading 3 different primary
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trade sizes and this applies to 99% of
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all of you that are going to be doing
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trading the first trade size is the
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smallest and it's called a micro lot
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this is what we use when we first start
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trading and it's the smallest trade size
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possible now inside of your trading
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account you might see when you open up
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an order window the word volume this
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refers to your trade size okay so it
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might say volume but it refers to trade
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size and there's a bunch of numbers with
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decimals and I want to break those down
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as I mentioned starting with if I can
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anyway starting with the micro lot so
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this is referred to as a micro lot I
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don't know why they use the word lot but
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it's a lot size or it's just trade size
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lot size micro a lot whatever a micro
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lot represents 1000 units of currency so
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1000 units of currency and it is
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generally shown in your trading account
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as 0.01 as the volume or as the trade
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size so I'm going to use the word volume
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here because most of you are going to
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use Metatrader and that's the word
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you're going to see so that would be the
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volume this is worth 10 cents
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or ten pennies or what's the fraction in
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in pounds fraction of a pound is pence
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ten pence or whatever currency that
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you're dealing with in your country the
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trade size is a micro lot it's the
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smallest one you can probably trade it's
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a thousand units of currency it's a
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trade size of 0.01 or a volume size of
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0.01 Lots and for every pip moved it's
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ten cents so going back to our original
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question if you made 10 pips trading one
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micro lot name if you made 10 pips what
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would that be worth and if you're
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playing along at home let me know if you
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made 10 pips what would that be worth
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and you can shout it at your computer
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screen a dollar so 10 pips great job
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name 10 pips equals $1 or if you're
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trading in the UK one pound or if you're
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trading in a euro denominated account
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one euro or if you're trading in a yen
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account it would be 100 yen if you're
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trading in Australia with Australian
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dollars it would be one Australian
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dollar because you made 10 pips each one
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was worth 10 cents now these numbers are
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these numbers are approximate for most
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currencies this is exactly what it will
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look like if you're trading the Japanese
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yen it might be 7 cents per pip or 8
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cents per pip if you're trading the
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British Pound Australian dollar it might
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be 13 cents a pip or some other number
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close to this number that makes sense
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name so it's close to this number that's
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a general range the next trade size that
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you can trade is a mini and it's 10
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times larger than a micro what's 10
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times larger than a micro Nate so point
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one is the volume excellent that's the
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volume and you would be trading in this
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case
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10,000 units of currency instead of
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1,000 so if every micro lot was worth 10
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cents what's every mini lot worth
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approximately one dollar one Australian
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dollar 1 pound 1 euro 100 yen and so
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forth on down the line depending on
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where your account was initiated one
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dollar per pip now this is a general
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number if it's if you're trading the US
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dollar Japanese yen in the United States
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it might be worth 79 cents
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might be worth 80 cents if you're
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trading the British Pound Australian
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dollar it might be worth a dollar 20 or
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something along those lines it's it's
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gonna change but it's gonna be in this
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range so if you make 10 pips on a mini
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lot Nate how much money have you made 10
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pips on a mini lot would be it would be
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$10 because 1 pip is worth $1 and 10 of
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them would be worth $10 now what if you
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made 10 pips but you traded two mini
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Lots $20 how many units of currency
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would have mini lot be worth 20,000
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units of currency
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what would the volume number look like
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point to and what would the dollar value
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per pip be 2 dollars if you traded what
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have you traded 5 mini lots play along
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with me at home what's your value per
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pip on 5 mini lots $5.00 there you go
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the mini lot is one of the most commonly
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traded units when I started trading in
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the year 2000 you couldn't trade a micro
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or a mini you had to trade what is
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called a standard standard lot was the
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original largest trade size well it was
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the original trade size everything was
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quoted in standard
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if a standard lot is ten times larger
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than a mini lot ten times larger than a
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mini lot what's a standard lot in units
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of currency 100,000 units of currency
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okay so you're controlling the euro
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dollar for example if you trade one
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standard lot you're controlling a
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hundred thousand dollars worth of euro
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US dollar it sounds crazy it sounds big
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it's not really that big stand a lot is
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a hundred thousand units of currency and
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how would you quote that with volume it
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would be a 1 a 1.0 volume or trade size
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1 lot that was what they used to call it
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they didn't have to call it a standard
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lot because it was just the only one
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available and what's the value per pip
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ten dollars per pip so if you made 10
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pips with a standard lot how much money
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have you made you've made $100 now we're
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going to talk later on about how much
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money you need in your trading account
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to trade these sizes but now you have a
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good idea of what each of these is worth
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so we're gonna do a little quiz here and
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you can play along at home using the
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stuff that you learned inside of this
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lesson if ma if you made seven pips
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with no if you made 10 pips with seven
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mini Lots how much money have you made
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you know you've made seven dollars I got
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to write slower here or else the board
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really dislikes me if you have made 10
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pips on 5 micro Lots how much money have
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you made 50 cents or 50 pence or
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whatever this is great if you have made
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10 pips with 20 standard Lots
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how much money have you made - so you've
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made twenty times ten which would be 20
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standard Lots
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10 pips $200 okay so now you know about
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trade sizes and pip values remember
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these numbers are approximate if you're
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trading the euro US dollar these are
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exactly correct and if you're trading
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the pound Japanese yen these numbers
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slightly change but stay in a range that
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is very similar the best way to
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experiment with this is to open up your
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demonstration trading account and to
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play around with taking orders and
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taking trades and whatever else then
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we're going to talk about that a little
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bit later on but the best way to find
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out what each thing is worth is to open
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up your your trading platform and start
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playing around with this and start
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taking a few trades to wrap things up I
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want to thank our sponsor Forest Park FX
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interested in FX trading contact Forest
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Park FX to open an account and receive
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cashback rebates on every trade you
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place you can go to forest park FX com
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forex trading carries a substantial risk
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of loss and is not suitable for everyone
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terms and conditions will apply we'll
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see you on the next lesson
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