How many lots you trade?

[gangoo]

Hi all,

I started trading in forex about a year ago...I m wondering how many lot people trade...How people approach stratergy in terms of lots (buying or selling). Lets say I have 50K account.

I m giving one example. Last month GBP/USD broke 1.44 level first time (except 1985) I knew it is going to come back at 1.45 sooner or later so I enter following
10K - 1.43
20K - 1.42
10K - 1.4
20K - 1.39
10K - 1.38
10K - 1.36

What is best stratergy for tackeling this kind of situation. From my experience i found out i always enter into trade early but by trading like above chances of loss are less as compare to trading 100K at one price but then profits are also less.

Initially i was greedy and impatient and used to trade in lots like 100K and it cost me a lot as my account was wiped out completely two times due to lack of margin requirement. So want to know how experience traders approach situation like above.

 

[Directional]

dont you think you might have been better off shorting at 1.43 and reversing long at 1.36?

 

[gangoo]

yea but i was scared as i have seen GBP/USD at 2.01 levels. And i never imagined it can go upto 1.36...I thaught it will be either a short sqeeze and bounce bank when New yorkers returns....

 

[only1abhi]

Guys,

I'm an absolute newbie and have some basic questions (any help would brighten the intelligence of this gentleman twofold!)

1. What are lots? Are they the size of the margin you trade? What is the value of a lot (£1000?) Does it even have a value? I hear lots everywhere but I seem to be struggling to get a definition of a lot.

2. What are contracts? How is this different to a lot? 1 contract = how many lots?

3. How can a day-trader make their money their money from spreads (I'm assuming this is making money from the difference in ask-bid price).. I don't seem to understand this.

Much appreciated fellow members! I'm here to stay

 

[Rhody Trader]

1. What are lots? Are they the size of the margin you trade? What is the value of a lot (£1000?) Does it even have a value? I hear lots everywhere but I seem to be struggling to get a definition of a lot.

Lots are trade size measurements in forex. A standard lot is 100,000 units of the base currency in the pair traded (that's the first one in the XXX/YYY). A mini lot is 10,000 units, and a micro lot is 1,000 units.

2. What are contracts? How is this different to a lot? 1 contract = how many lots?

Contracts are sometimes used in equivalent fashion as lots, so mini contract means 10,000 units.

3. How can a day-trader make their money their money from spreads (I'm assuming this is making money from the difference in ask-bid price).. I don't seem to understand this.

The only traders making the bid/ask spread are the market makers. Day traders do not make their money from spreads. They are focused on price movements.

 

[only1abhi]

Lots are trade size measurements in forex. A standard lot is 100,000 units of the base currency in the pair traded (that's the first one in the XXX/YYY). A mini lot is 10,000 units, and a micro lot is 1,000 units.

So for £ sterling, a lot is: £100,000?
Trading firms talk about trading 10 and even 100 lots.. surely they can't have that much exposure can they?
Or are we talking pennies? In which case 100,000units = £1,000

The only traders making the bid/ask spread are the market makers. Day traders do not make their money from spreads. They are focused on price movements.

So a company like Schneider Trading, how do they make money from spreads trading, as it's discussed in the forums?

Thanks for the help!

 

[NetTecture]

They easily can have 100 lots exposure. That is a paltry 10 million. Not exactly that much for larger accounts, even retail.

 

[Calinor]

There is a difference between spreads trading, and making money from the bid-ask spread.

Spreads trading is taking a long and a short position in two related instruments, for example the same underlying but different maturities.

 

[only1abhi]

They easily can have 100 lots exposure. That is a paltry 10 million. Not exactly that much for larger accounts, even retail.

£10m is not that much for a retail account?

If anyone had £10m why would they even want to trade?

 

[only1abhi]

There is a difference between spreads trading, and making money from the bid-ask spread.

Spreads trading is taking a long and a short position in two related instruments, for example the same underlying but different maturities.

Aaah.. I see.. Schoolboy error!

Any links (either here, trade2win, or on the WWW) you can recommend that gives me a through explanation of spreads trading?

 

[NetTecture]

10 million pound may not require more than 100.000 pound to control (1% of capital). Now, risk management is another element. But I can see somoene with a million pound account going that high sometimes.

Not all retail traders are that small. Not saying it is common, but it is not uncommon.

If anyone had £10m why would they even want to trade?

Why would anyone with 10 million pound trade ONLY 10 million in currency?

Proper risk management would allocate 1% to 2% LOSS to his position. Given a proper setup, his risk may be below 1% of the value. The result would be a much higher than 10 million market exposure.

Can you imagine that I - a paltry 20.000 usd account - regularly control nearly 140.000 usd in stocks (trading YM on a day trade basis) and STILL risk less than 2% per trade - actually just a tad more than 1%. Controlling a 10 million (USD) face value would require "only" an account of about 1.4 million usd Not that big. Sure not everday trader stuff, but not out of the question (my trading system would be though - one can not enter 1500 YM contrats easily