How to know how much a “pip” is worth for any pair!

Many times, newer traders ask me how they can find out how much a “pip” is worth for any pair. Some will refer to these as pip “costs”, others will say pip “values”, etc. but it’s all the same thing.

They all want to know, if my pair moves up one increment or down one increment…how many dollars does that equate to?

Here’s the simple answer. It’s automatically calculated for you on your trading station. You can view this on the “Advanced rates” which is the default setting..OR…you can view it on the Simple rates” tab.

See both of them below.

I’ve circled (in each format) where to find the pip cost/value for a pair. Notice that any pair that ends in USD (ex. EUR/USD, GBP/USD, NZD/USD, etc.) all have pip values of $1.00 per standard mini lot. Had this been a micro account, then the pip value would be 10 times less or .10 (10 cents) per pip of movement (since a micro lot is ten times smaller than a standard mini lot).

Remember, that a standard mini lot = 10,000 units of currency and a micro lot = 1,000 units of currency.

So the pairs that end in something other than USD (ex. EUR/CHF, USD/JPY, EUR/AUD, etc.) will have pip values that change slightly over long periods of time.

However, you can easily see what a “pip” is worth in that pair BEFORE you place your trade since it’s conveniently located on your quote screen.

This is important to note because there’s a big difference in EUR/GBP’s pip value of $1.66 and EUR/AUD’s pip value of .84 (84 cents).

So one pip of movement for or against you in EUR/GBP is +/-$1.66. However, in EUR/AUD this same amount of movement is +/-$0.84 (big difference, dollar wise…yet the same amount of pips moved). Click on the charts to enlarge them.

Sean Hyman

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.php

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

Green shoots are smokin!

It’s difficult to ignore that some green shoots are taking root. We may have seen the absolute bottom of the equity markets, but a steep incline is not sustainable, nor is a ‘v’ shaped growth graph. Reality and gut feeling tells us that we need to dredge along the bottom for a period of time before true growth can become sustainable. Perhaps we will get a rude awaking this coming Friday with NFP. There are whispers of a -200k print. Consensus has us at -375k with a +9.6% unemployment rate. Euphoria is always welcome, but the crash from the highs takes a lot of getting use to. Markets are flush with cash and after 5-months of a steep incline, many question ‘have they missed the boat’? Hardly, ‘the less bad is worse’ has occurred because of deep costing cutting and personal sacrifices. This quarter we get to see if it’s sustainable. All we are searching for is the true inherent value! And with US households with less cash to spend, it’s got to be lower not higher…

The US$ is weaker in the O/N trading session. Currently it is lower against 9 of the 16 most actively traded currencies in a ‘subdued’ illiquid O/N session.

Yesterday’s data confirms that the US consumer subtracted from last Q’s GDP growth. To fully understand one must look beyond the ‘nominal’ headline and focus on the ‘inflation’ adjusted print. In reality the consumer remains a drag on the US economy! In ‘Real’ terms spending was down in Mar., April, and June and flat in May. In total, spending was down -1.2% annualized for the Q (2/3’s of the economy remains in defense mode). According to analysts, the 1st Q rise was an anomaly vs. the yearly pattern of declines despite all the Government stimulus packages. Digging deeper, nominal-personal spending advanced in June (+0.4%, m/m) because of the surprising gains in non-durable goods, as durable goods expenditure fell -0.2%. Nominal-personal income fell -1.3% after 2-months of gains. Weakness was reported across most of the sub-categories. It’s worth noting that Government wages and salaries continued to rise despite the private sector depreciation. Social benefits fell -6%, m/m (1st decline in 10-months), despite UI rising in the month. With the ongoing pressures of the private sector wages, one can expect collection of personal taxes to also fall (less income for the Government). It’s fair to say that personal income will deteriorate further or best, remain static! The Core-PCE index (the Fed’s go-to inflation indicator) advanced in line with expectation (+0.2%), indicating that inflation remains well behaved.

US housing is doing its bit to contribute to the ‘green shoot’ theory. Yesterday, pending home sales of existing homes surged last month (+3.6% vs. +0.8%), this was the 5th-consecutive increase and exceed all analysts’ expectations. The main reason, lower prices continued to be backed up by low mortgage rates!

The USD$ currently is lower against the EUR +0.03%, JPY +0.28% and higher against GBP -0.06% and CHF -0.06%. The commodity currencies are weaker this morning, CAD -0.12% and AUD -0.32%. Yesterday was a time to reflect, the loonie treaded water in the morning session after its aggressive gains across the board this week. The greenback has managed to print new yearly lows and by default, apart from the MXN, most currencies have strengthened against the buck. The world covets commodity currencies as risk appetite increases and green shoots root. For the loonie per-se, nothing has changed, the currency managed to print its strongest level in 10-months yesterday. Last month it was the biggest G10 winner vs. the greenback, and this month like all its commodity traded cousins, it’s starting off on the same foot. This on-again, off-again recession is bringing risk takers back into the market. With US corporate earning’s beating expectations, this has prompted investors to seek riskier assets such as stocks and commodity-linked currency’s. By default, higher yielding assets like the loonie do much better. The strength of the currency continues to get ahead of fundamentals. Even the Finance Minister Flaherty said ‘there are some steps that could be taken to dampen it’. This would imply some kind of intervention in the market to weaken the CAD. This week we get to see North America’s employment numbers. Are we in for more surprises? Let’s see if the domestics want to cash in on the recent surge this morning and sell their own currency or are they about to take on the BOC?

Earlier this week the RBA kept O/N borrowing costs on hold for a 4th-consecutive month (+3.0%). Governor Stevens said that the Australian economy is stronger than their original predictions a few month’s ago, ‘with both consumer spending and exports notable for their resilience’. Last week Stevens indicated they may not wait for unemployment to peak before hiking rates again. This has heightened speculation that Australia will increase borrowing costs faster than most other nations. After touching its highs, its strongest level vs. the greenback in 11-months, the currency has managed to pare some of the gains after the RBA comments and Asian equities are off their highs (0.8424).

Crude is lower in the O/N session ($71.04 down -38c). It’s not surprising to see crude pare some of its 13% gains over the past 3-trading session. The fear of over extending the euphoric nature is just. Demand destruction remains intact, and there are no fundamental reasons to suggest otherwise at this point. Analysts are expecting another weekly gain in this morning’s EIA report. Reality tells us that inventories are high, demand is still really weak and the risk is increasing that we will see a bigger correction towards $60. We tried last week briefly, but the ‘Bulls’ went on a rampage, pushing prices briefly over the $72 a barrel on Monday. This was the 1st time in over a month and all of this on the back of stronger US fundamental data. Even gas prices surged, as increasing US industrial activity has boosted optimism and swayed investors that fuel consumption will rebound. This is a tall order on the back of recent crude fundamentals, where we continue to experience healthy ‘demand destruction’. The recent appreciation of the black-stuffs prices has been too rapid. There is no denying that with growth comes a commodity price increase. We are not seeing growth, but indicators are showing us a ‘less bad is good’ scenario. Investors are getting ahead of themselves. One of the major factors has been the amount of cash that has been left idle in this downturn. Money managers are aggressively trying to put some of it to work. It’s worth noting that OPEC increased their output levels for a 4th consecutive month in July (agreed compliance is slipping as some members states take advantage of the stronger prices).Their output averaged +28.39m barrels a day (up +45k, m/m). The key to this recent rally will be the US economy ability to continue this pick up or if it limps along! Last week crude prices plummeted on the back of a staggering surprise in the weekly EIA inventory numbers. They reported a whopping +5.1m barrel increase to +347.2m, w/w. The market had anticipated an average decline of -1.2m barrels. Refiners cut operations by -1.2% to +84.6%, relative to capacity, while imports climbed +8.9% to +10m barrels a day last week (the highest since Jan.). Gold prices are following other commodities, the yellow metal advanced to a new 2-month high as the greenback faltered, printing 10-month lows and equities climbed, thus boosting the appeal of the commodity as an alternative investment ($967).

The Nikkei closed at 10,252 down -122. The DAX index in Europe was at 5,418 up +2; the FTSE (UK) currently is 4,673 up +3. The early call for the open of key US indices is lower. The 10-year Treasury’s backed up 5bp yesterday (3.68%) and is little changed in the O/N session. Despite the plethora of US product last week (a record $150b), treasuries managed to grind higher. But yesterday we witnessed a 2nd-consecutive day of price declines as pending sales of existing homes in the US advanced more than forecasted last month. This is further evidence that the deepest US recession in 50-years is easing. On Monday, Treasuries prices declined the most in more than 2-months, as reports on manufacturing and construction spending topped analyst’s original estimates. Recent US data suggests that the 2nd Q may prove to be the final ‘negative’ US GDP number. If true, there is no reason to see lower yields in the short term. This Friday’s North American employment reports could provide some support for the freefalling FI asset class!

It appears the Swiss keep “raising the floor” on the EUR/CHF trade!

Okay, I realize that this isn’t the only pair out there. However, it is likely the ideal candidate right now as it likely has much more upside potential than downside due to the constant intervening of the SNB - Swiss National Bank (Switzerland’s central bank).

Also, keep in mind, the trend is now upward recently…and no longer downward. Being that the EUR/CHF is one of the more widely watched/traded pairs by institutions (which produce such enormous volume for a “cross pair”), it won’t be long before their automated “trend following” programs kick in and aid the central bank’s efforts.

And…it appears that the SNB keeps going into the market and selling francs “sooner and sooner” all the time. See how it continues to “raise the floor” for the EUR/CHF pair. Click on the chart to enlarge it.

Sean Hyman

www.forextradingblog.com

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

At the “Economic Turning Point”?

If we’re at the “economic turning point” as I believe we are…then that will be bad for the dollar, yen and Swiss franc but will be particularly good for those currencies that tend to be influenced by inflation, commodities and risk taking…which would be the Aussie dollar, New Zealand dollar, Canadian dollar and British pound…and arguably in that order.

As an additional note, if this is true…then the natural course of “Swiss franc weakness” may kick in and help the Swiss central bank out with a weaker franc. They’ve been proactively “selling francs” but there may come a time (and we could be there now) that the market actually kicks in and “aids” their intervention efforts for a weaker franc to the euro in particular. If so, between their collective “franc selling” and the market’s turning point…it could bode well for those that are long (buyers of) EUR/CHF. The Swiss are attempting to put in a floor on the EUR/CHF pair around 1.50-1.51. So anytime it gets to around the 1.51 region, one could go long the pair with a wide stop and low number of lots and probably experience a good “upside to downside” risk ratio.

I’ll also note that, so far, the Swiss have been able to reverse the daily downtrend on the EUR/CHF pair and have “held the line” quite well so far. You can look at it from most any aspect you wish and it still holds true. The pair is technically above its downtrend line, 50 SMA, 200 SMA, etc…all of which are bullish for the EUR/CHF pair. See the chart below. Click on it to enlarge it.

Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

Sean Hyman

www.forextradingblog.com

British Pound “Pauses for Breath” [Part 1 of 2]

After a nearly 20% rise against the Dollar, the British Pound has been rangebound for nearly the entire month of June, with one columnist likening the situation to a “pause for breath.” For him, this amounts to a temporary cessation on the Pound’s inevitable upward path: “Compared to long term levels, the pound was still better value than its peers. He said: ‘It’s still cheap - about 10% below it’s trade-weighted average at present.’ ” For others analysts, however, the picture is not so cut-and-dried.

Forgetting about purchasing power parity for a minute, there are numerous factors which could halt the Pound’s rise. First and foremost is the British economy, which is still struggling to find its feet. “The U.K. economy will recover ‘mildly’ next year, according to the OECD, compared with a previous projection of a 0.2 percent contraction. Gross domestic product will drop 4.3 percent this year, versus a March forecast of 3.7 percent.”

Some economic indicators have begun to stabilize, but the two most important sectors, housing and finance, are still wobbly. Economists warn that “any recovery could be slow and uneven because banks are still unwilling to pump loans into the economy.” In the latest month for which data is available, mortgage lending slowed to a record low, with consumer lending not far behind. With regard to housing,”The annual fall in house prices in England and Wales slowed for a third consecutive month in June, according to property data company Hometrack, but prices were still 8.7 percent lower than a year ago.”

There is the possibility that the BOE’s quantitative easing plan and the government’s fiscal stimulus will provide the economy with the boost it needs. At the same time, both programs will have to be reined at some point, sooner rather than later in the case of government spending. With UK national debt predicted to reach 90% of GDP by 2010, “Most people - the prime minister excepted, apparently - believe that taxes will have to rise and/or public spending fall after the next election. This would at least threaten to hold back economic activity.” Not to mention that both QE and government spending could actually backfire and generate inflation without economic growth (i.e. stagflation). BOE Governor Mervyn King captured this overall sentiment, when he said, “I feel more uncertain now than ever. This is not the pattern of a recession coming into recovery that we’ve seen since the 1930s.”

In short, from a purely economic standpoint, it doesn’t look good for the Pound Sterling. But of course forex is about much more than GDP…stay tuned for Part 2, in which I’ll elaborate on this point, and bring interest rates and inflation into the discussion.

Is Risk Aversion Back?

At the end of last week, I posed a question: what will be the next theme to dominate forex markets? Perhaps the answer can be found in Monday’s massive market selloff (”Triple-M Monday” anyone?), the worst day for stocks in over two months. Commodities and currencies- both of which have taken their cues from stocks of late- also trended downwards.

While I would be the first to caution against reading too much into one day (especially since the early indications are that some of these losses will be erased today), it’s possible that yesterday marked the breakout that many technical analysts have called for over the last few weeks. Asked one such analyst last week, “Taking a step back to look at the daily price action of the EUR/USD, we can clearly see that the currency pair is consolidating and a sharp breakout is imminent. The big question is, will it be an upside or downside breakout?”

What was the catalyst for Monday’s selloff? Perhaps it was my blog post on uncertainty: “The World Bank said Monday that prospects for the global economy remain ‘unusually uncertain,’ and it cut its 2009 growth forecasts for most economies” from 1.7% to 2.9%. But really, the World Bank was only echoing what every investor already knew- that the stock market rally rested on a house of cards, and that in fact the arguments in support of an economic recovery are still quite tenuous. In other words, “Some of the buying since early March was been based on a conclusion by many investors that government intervention had forestalled the threat of a doomsday scenario, such as another Great Depression…expectations were so low that stocks rose merely on news that indicators such as manufacturing activity or the service economy were shrinking less than had been feared. Investors didn’t require signs of actual growth.”

From trough to peak, stocks rallied 34%, pushing P/E levels back to normal levels. Now that all of the temporary pricing inefficiencies have been “corrected,” investors are taking a step back and looking to see whether the data supports further buying. Until there is solid proof that the “green shoots” are real, it’s my prediction that markets will trend either sideways or downwards.

What does this mean for forex markets? Investors will probably shun riskier currencies in favor of the Dollar and the Yen, which are still perceived as relative safe-havens. “Risk aversion has resurfaced as market participants take profits on riskier exposures. There are “renewed concerns about the extent of the ongoing global recession and the sustainability of the ‘green shoots’ of recovery,” said one analyst.

Of course, some would argue that that the emerging markets forex rally was built on a more solid foundation than US stocks. If this is the case, then perhaps the correlation between stocks and currencies will break down in the coming weeks. For now, at least, risk-averse investors will probably start to unwind carry trades and pile back into the mainstays of forex. Those with the highest interest rates will suffer the most. Until the day comes that bad economic news in the US doesn’t paradoxically buoy the Dollar, we can be certain that the current narrative is once again one of risk aversion.

6 principles when playing gold forex

Play Forex is like observing a fish out swimming.Fishs when the fish swim very regularly, at the swimming amuck. So when we look at swimming, you are sure you can guess the first is our direction? What impact the way people move in? Why have them at very disciplined and by now every victory, there was not time them in a certain direction at all? You can not know unless you can guess what they feel when swimming. Fish have a natural instinct to identify the circumstances and conditions surrounding environment, from which a response accordingly hop.Vi that, if understand the instinct that you can pool the judgments them a more accurate.

Not only on fish, or go back to it .That forex forex game is similar in that view: we need to develop the ability to recognize what is happening around us. Certainly we can not predict everything will be all on the forex market can be based on understanding of market circumstances, to prepare the secret in time to the principles including 6 gold (will show later) , to make selection more accurate in the business. Once training is pho know this time, you have certainly become more common in chốn market and can start with a business plan completely.

Here are 6 principles forex gold while playing, with 6 of the pronouns is very familiar: Who What When Where Why and How ( "Who," "Why," "Where," "What", "When" and "As is"

Who trades forex?
These objects do play forex?
"Know who you know, hundred percent match win." Need to know who is participating in foreign exchange markets, why they are successful and how to compete with them?

? Why trade forex?
Why play forex?
Forex These bring very large profits, but not investors can obtain the benefits that number. You can be one of the investors make profits or not? It’s up to you

? Where should you trade?
Should start in business?
Select service providers that match the style of your business

? What should you trade?
Should business of any?
Select currency pairs, the penetration and leave the market, the methods managed money works best for you, help you can get the highest profit

? When should you trade?
When should the transaction?
Transaction when the situation seems favorable to the system of your business.

? How should you trade?
Transactions like?
Use the media to help maximize the ability to compete with your competitor another potential.