Forex Academy:
Middle School
5 minutes
Lesson 10
How much should I trade?
- What does this decimal mean?
- How much is 0.01 lot?
- Well, if it is only required 12$ per trade, I can place more orders with my fund… Isn’t that okay?
- What is Margin? What is the difference between Equity and Free
How much should I trade?
You have deposited money and started trading.
When you open the order screen, what do you do?
You don’t see the general amounts, but instead you see strange decimal numbers.
What are these numbers? How much money do they represent?
What does this decimal mean?
How much should I trade?
First of all, these decimal numbers are the units used in Forex trading, 1 lot = 100,000 currency units.
At Hirose, we recommend that you trade with a minimum transaction size of 0.01 lots (1,000 currency units).
We also do not recommend placing multiple orders at the same time.
We suggest that you first close any orders you still have open, then placing a new order.
We recommend the above for beginners who have deposited $50.
You can start with small lots and once you get used to trading,
You can gradually increase the number of lots and the number of trading orders.
*You can see more detailed explanation about lot here: https://hiroseag.com/help-center/academy/lesson1-6/
How much is 0.01 lot?
*Depending on the currency pair, this amount will vary.
Specifically, you need about $12 as a “deposit” to place a 0.01 lot trade order.
I will explain more about the deposit in the next section, please continue reading.
Well, if it is only required 12$ per trade, I can place more orders with my fund… Isn’t that okay?
You can, but if you use up all your capital, the risk of loss increases.
As you know, one of the advantages of Forex is that even if you are losing right now,
if you continue to wait, the loss can turn into a profit.
“Wait” = “hold the position”, but you need more money to do that,
If you don’t have money, you will end up with a loss.
Therefore, having additional funds beyond the required amount to place a 0.01 lot order can help you profit. It is a safer option if you can maintain an account balance of over $50.
What is Margin?
What is the difference between Equity and Free Margin?
They are completely different concepts.
To make it easier for you to understand, I’ll use an example with a capital of $100.
If you have deposited money but have not yet made any transactions:
Account Balance = Equity = Free Margin
Since you have not placed a trade order, there is no margin involved yet.
On Android Devices
Trên máy tính
Now, you have placed on order of 0.01 lot.
After a while, you have earned $10 in profit. The account balance information will change as shown in the image below.
On Android Phone
Trên máy tính
①
Margin is the “Required Margin”,
this is the amount you need to place an order as I explained above.
A deposit of $12 is required to place a 0.01 lot order.
②
Equity is the current balance including the profit and loss of open positions.
Profit and loss always change according to the market changes, so the equity will also change.
Account Balance ± Profit/loss of open positions = Equity
100 + 10 = 110
③
Free Margin is the amount of money that can still be used to place new orders,
it will be equal to equity minus deposit.
Equity – Margin = Free margin
110 – 12 = 98
In addition, there is a term related to Margin called Margin Level,
this number is related to Automatic Stop Loss. This is very important information,
you can see more details in the following lesson: https://hiroseag.com/help-center/academy/lesson1-8/
Conclusion
How much should I trade?
When you are new to trading, you should place an order of 0.01 lot.
You need about $12 deposit to place a 0.01 lot order.
The lesson on ”How much should I trade?” ends here.
Let’s check to see if you understand the lesson!
In the next lesson, we will guide you about Swap fee. Please continue to follow.
If you have any questions, please contact us.