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Forex Trading For Beginners (Full Course) — Transcript

by The Trading Channel (The Trading Channel) · 12,669 words · 1,952 segments · language en · Watch on YouTube

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0:00this video will be an all-inclusive
0:02completely comprehensive beginner's
0:04guide to forex trading if you're someone
0:07who's just starting out in forex trading
0:09then this will give you everything you
0:10need to know to understand the basics of
0:12forex and take that next step down your
0:15path to becoming a profitable trader if
0:16you're someone who's already trading
0:18then chances are you probably skip these
0:20steps right and that's a damn shame
0:22because if you skip these steps then
0:24it's going to be nearly impossible for
0:26you to become a profitable trader
0:27without the things i'm going to show you
0:29in this lesson so whether you're
0:30beginning your forex trading career or
0:32someone who's already been trading let's
0:34make sure that you have a solid
0:36foundation with today's video on the
0:38basics of 4x so with that being said i'm
0:40going to let the intro and disclaimer
0:42roll while i do hit that subscribe
0:43button hit that like button for me go
0:45ahead and follow us over on instagram at
0:46the trading channel and i'll be right
0:48back to share with you the most
0:50comprehensive beginner's guide to forex
0:52on youtube see you in a second
0:58[Music]
1:08what's up and welcome to the complete
1:10beginner forex training course in this
1:13course you'll learn everything you need
1:14to know to begin your journey as a forex
1:17trader the first question we're going to
1:19ask is the most simple question possible
1:21which is
1:23what is forex
1:24so forex is actually the largest market
1:28in the world and what does that mean how
1:30big do you have to be to be the largest
1:32market in the world well on an average
1:35trading day the forex market trades
1:39five
1:40trillion
1:42with a t
1:43dollars
1:45that is a large amount of movement for
1:48one trading day five trillion dollars
1:50that's insane so that's why the forex
1:52market is the largest market in the
1:54world now another thing you need to
1:56realize about the forex market and the
1:58second thing we're gonna go over
2:00is that in the forex market what you're
2:02trading is called a currency pair
2:05a currency pair is nothing more than the
2:07exchange rate between two currency
2:10currencies we've all had to exchange
2:13money before if you've traveled at least
2:14maybe you haven't but if you've traveled
2:16outside of the country you live in
2:17you've probably exchanged money for
2:19another currency for instance if you
2:21live in the united states and you take a
2:22trip to europe then you more than likely
2:25will exchange some of your us dollars
2:28for european dollars and that rate the
2:31rate of exchange is what you'll get back
2:34for instance right now the euro dollar
2:36exchange rate is
2:391.0878 so let's just write this down
2:42the euro
2:44against the dollar right now or the euro
2:46dollar exchange rate
2:48is 1.0878
2:52so that means that if you were to go to
2:54europe right now and you wanted to get
2:56one euro then you would have to give
2:58them
3:001.0878
3:01to get that one euro because right now
3:04one euro is worth 1.0878
3:08dollars now the way we make money in the
3:10forex market remember we're trading
3:13based on the exchange rate between two
3:15different currencies and the way you
3:18actually make money is when this
3:20exchange rate rises and falls so these
3:23exchange rates fluctuate depending on
3:26the strength and valuation of each of
3:28these currencies the euro and the dollar
3:30so if the euro rises in value
3:34then it's going to take more dollars for
3:36you to get one euro the same thing if
3:38the dollar so let's say that euro goes
3:40up in value let's just start here the
3:42euro goes up in value then you're going
3:44to need more than 1.0878 dollars to get
3:47one euro and if the dollar goes down in
3:49value it's the same thing and the
3:51opposite is true if the opposite happens
3:54if the euro
3:55drops
3:57then you're going to need less dollars
3:59in order to get one euro and if the
4:00dollar
4:01rises in value then you're gonna need
4:04less dollars to get one euro so let's do
4:07an example of that right now what you're
4:10actually making money on in the forex
4:12market and what you're trading based on
4:14is this exchanger this exchange rate
4:16fluctuating in value going up and going
4:20down so if this exchange rate goes from
4:231.0878
4:25let's say you buy you put in a buy order
4:28we're gonna go over all of this later on
4:30so don't get confused yet but if you put
4:32in a buy order at 1.0878
4:34and this exchange rate goes to 1.0978
4:38then you make the difference you make
4:41the profit of essentially one cent but
4:44we are trading based on huge amounts of
4:46size in the forex market and with
4:48leverage which we're going to discuss
4:50later on right now
4:51what you need to understand
4:53after the question of what is forex is
4:56what is a currency pair and that's what
4:58we're gonna break into right now now
4:59that you know what the forex market is
5:01and kind of how it how it works let's
5:03break into breaking down
5:06a currency pair and give you a complete
5:08understanding of what a currency pair is
5:11let's do that right now a currency pair
5:13if you look on the chart in front of you
5:15it's what you see to the far red edge i
5:17will actually make this a little bit
5:18bigger so you can see it
5:20as you can see on the side here we have
5:21euro versus dollar pound versus dollar
5:24dollar versus yen aussie versus dollar
5:26and dollar versus swiss those are the
5:28major currency pairs the top five major
5:30currency pairs now with that being the
5:33case
5:34each of these is made up of separate
5:36currencies right so the first thing you
5:38need to understand is what each
5:40three-letter
5:41symbol represents which currency so for
5:45each three-letter symbol we have that
5:47represents a certain currency and i'll
5:48post a screenshot of which currencies
5:50are represented by which three-letter
5:52symbol right now you'll see that on the
5:54screen
5:55so
5:56with that being the case we have
5:58one currency's value against another
6:01currency's value which is what gives us
6:03a better interpretation of the value of
6:05a specific currency so in the case of
6:07the euro dollar let's say this is a
6:10currency pair that we can trade it's
6:12actually the most popular currency pair
6:14in the forex market and the euro dollar
6:17if we write it out here
6:24consists of two currencies right these
6:26two currencies are called
6:28the base currency
6:31and the quote currency now
6:35don't let this sound too confusing
6:37there's nothing confusing about a
6:38currency pair the only thing you need to
6:40know about a currency pair is that
6:41currently
6:43the euro dollar
6:44has a value of 1.0792
6:53so the
6:54fact that the euro dollar has a value of
6:561.0792
6:58is important because you need to
6:59understand that that is the quote pair
7:02valuation so what that means is every
7:04base pair as in the first pair
7:08and this being the second pair every
7:10first pair in a currency pair always has
7:12a value equal to one
7:14you are always exchanging one of that
7:17first pair for whatever the quote pair
7:19is the quote pair is he actually quote
7:21the actual quote you see on the screen
7:23is your quote pair so you're getting one
7:26euro what this means in hindsight is
7:28that if i have one euro i essentially
7:31have one
7:32dollar
7:34seven cents point nine two
7:36or another way to look at this is it
7:38takes 1.0792
7:40dollars to make one euro so therefore
7:43the value of the euro is higher than the
7:46value of the dollar by roughly eight
7:48cents seven nine two cents
7:50so let's look at one more pair and try
7:52to go over this one more time to make
7:53sure that you're getting it and i'll ask
7:55you some questions while i do this to
7:56help you to better learn because asking
7:59questions and having you answer them is
8:00a much better way for you to learn than
8:02for me to just write down right so
8:04let's do that let's go for the
8:06dollar yen right now okay so the usd
8:11slash jpy's the dollar yen
8:15with the dollar yen which one of these
8:16pairs is a base pair
8:19is it the dollar or the yen
8:21hopefully you said the dollar right
8:23because the first pair the dollar is the
8:26first pair in the equation the yen would
8:28be the second pair
8:29in the pair and the currency pair so
8:31with the dollar being the first pair
8:33that means it is the
8:34base currency of this currency pair with
8:37it being the base currency of this pair
8:39what's its value always equal to
8:42one when you're looking at the valuation
8:44of a currency this value is always going
8:45to be equal to one the jpy is what
8:48it's called the quote pair
8:51so if it's the quote pair then that
8:54means whatever the value of the dollar
8:55yen is and it's on the screen now it's 1
8:59100.90 so if the yen
9:02let's say the dollar yen itself is
9:03110.90
9:06so it takes one dollar
9:09to have if you have one dollar
9:11essentially that means you have 110.90
9:16euro yen excuse me not euros yen so at
9:19this point we can see that one dollar is
9:21equal to
9:22110.90 euros or if you have 110
9:26110.90
9:28yen not euros i keep doing that if you
9:30have 110.90
9:33yen then you essentially have one dollar
9:37and vice versa so this is a currency
9:39pair
9:40and this is how you're always going to
9:42look at it the first pair is always the
9:43base pair with a value of one the quote
9:46pair is what you're seeing as a quote
9:48that's what the value of the second
9:50currency is compared to the first
9:52currency the quote pair is always the
9:55value compared to the first currency the
9:57first currency is always the
9:59currency being compared to and it always
10:02equals one so in this case again the
10:04dollar would be one the yen means i need
10:06one dollar and when i have one dollar i
10:08essentially have
10:11110.90 yen so that was a look at what
10:14forex is itself and also what is a
10:17currency pair in case you were
10:18struggling with that or didn't know or
10:20essentially in case you were coming into
10:22the market as a brand new trader and
10:24needed this lesson i hope it was
10:25valuable for you and i'll see you guys
10:27in the next lesson where we're going to
10:29talk about what a pip is and how you can
10:31actually
10:32count pips tens of pips hundreds of pips
10:35how do you know where a currency pair
10:36actually sits in terms of the valuation
10:38that's what we're going over in the next
10:39video and i can't wait to see you guys
10:42there talk to you soon
10:44next up in the all-inclusive beginner
10:47forex trading course is what is a pip we
10:51have to understand what a pip is because
10:53this a pip is how the forex market moves
10:57a pip is the smallest amount of movement
11:00we can see in a currency pair that
11:02actually matters to us whenever we're
11:04placing orders a pip is how we make
11:06profit or get stopped out depending on
11:08how our trade goes so it's very
11:10important that we understand what this
11:11is again a pip is the smallest number
11:14that moves in a currency that we care
11:16about as traders there's one number
11:18below this called a fractional pip that
11:20we're not even going to talk about other
11:22than me saying don't pay attention to it
11:24because it does not matter at all to us
11:26as traders so what is a pip we know that
11:28a pip is the smallest
11:30number that moves in a currency pair but
11:33how do we identify pip well look at the
11:35euro dollar right now right now you can
11:37see the euro dollar last price is
11:40107.87 1.0787
11:44so let's write that down we have the
11:45euro dollar
11:51at a price of
11:53107.87
11:561.0787
12:00and you can see on that currency as well
12:03that there is a smaller number as a
12:06fifth decimal a smaller number that's
12:08two right now in red that's a fractional
12:11pip we're not going to worry about those
12:12at all what you need to understand is
12:14the way you identify a pip is the fourth
12:17place away from the decimal so the
12:19fourth decimal point meaning if this is
12:21the decimal point we count over
12:23one
12:24two
12:25three
12:26four
12:27this is a pip and let me clarify that
12:30really quickly right now we are talking
12:32about a pip on every currency pair
12:35except currency pairs that end in jpy
12:40any currency pair with jpy in it is
12:42going to be slightly different than this
12:44and we're going to go over that next so
12:45this is going to be what is a pip and
12:47i'm going to put non jpy here so that no
12:49one's confused this is a pip on every
12:52currency pair
12:53except yen pairs which we're going to
12:55discuss what a pip is in a yen pair in
12:58just a second but for every other
12:59currency this is what you're going to
13:01use so this is what is a pip
13:04non-jpy for every currency pair that
13:07doesn't have jpy in it the fourth
13:09decimal place is what is known as one
13:11pip so we have the euro dollar at a
13:13value of 1.0787
13:17what if the euro dollar goes to one
13:181.0786
13:22how much have we dropped the euro
13:24dollars went down now but by how much
13:27well the math here is pretty easy if we
13:29went from seven to six on our fourth
13:31decimal which is a pip we dropped by one
13:34pip and here's how i want you to look at
13:36this this is the way i looked at the
13:38beginning and it really helped me to
13:40understand this a little more clearly
13:41not that it's a super complicated thing
13:43understanding this if you watch this
13:44video a couple times will be extremely
13:46easy but the way i look at this is let's
13:48write out our value of the euro dollar
13:51and space it out a little bit to give us
13:53a little bit of room and that's what i'm
13:55really trying to do here i want to give
13:56myself a little bit of room so we have
13:57one
13:58decimal
13:590
14:007
14:01eight
14:02seven right
14:04so with this being the case the way i
14:06look at this if i if i count my numbers
14:08one two three four decimal places a pip
14:11i like to look at it like this
14:14this is our ones meaning every time this
14:16moves it's gonna be one this is our tens
14:19every time an eight goes up or down in
14:22this specific case that's going to be
14:24tens and this is our one hundreds that
14:27makes it so easy to say okay if the euro
14:30dollar went from
14:321.0787 what it's at right now to 1.0797
14:39how much did we move well let's look
14:41down here at our chart where that's the
14:42tens that column is the tens that
14:45decimal point number three is the tens
14:47so therefore this went down and actually
14:49in this case since we went up from eight
14:52to nine hopefully you caught that before
14:54i did then obviously that means that the
14:57euro dollar went up
14:5910
15:00pips
15:01because it was in our third decimal
15:02point now let's do one more number to
15:04make sure you understand this and we'll
15:06go through one more currency pair to
15:07really make sure you have a good grasp
15:09on this this is the foundation of any
15:11trading career so let's do 1.0887
15:18can you tell me
15:20at this point how many pips did the euro
15:22dollar rise well let's look at our
15:24column or graph we have our ones the
15:26seven it stayed the same we have our
15:28tens which was eight it stayed the same
15:30we have our one hundreds that was seven
15:32and is now eight that means that the
15:35euro dollar went up not by ten but by
15:38one hundred pips
15:40so that's the way you recognize
15:43a pip a pip is the fourth decimal place
15:45is the smallest amount of currency moves
15:47that we care about as traders let's do a
15:50completely different currency pair that
15:51is not a yen pair and go over one more
15:54and again just like in the last lesson
15:55i'm going to ask you a lot of questions
15:56as we go through this
15:58i'm going to ask you a lot of questions
15:59as we go through this and i want you to
16:02actually answer those questions on the
16:04other end where you're sitting or
16:05standing depending on whether or not
16:07you're trying to get exercise in and
16:09now what we're going to do again is go
16:11over a different currency pair let's go
16:13over the aussie new zealand let's just
16:14pick a random pair so aud
16:19nzd
16:21i do my ends back i'm slightly dyslexic
16:23i literally just drew an end backwards
16:25because i cannot
16:27ever remember which way they go and in
16:29my head it's always backwards so
16:31we have the aussie new zealand right the
16:32aussie new zealand has a current
16:35value
16:36of 1.0248
16:391.0248
16:43tell me what would be the case okay
16:46let's go over a scenario if the aussie
16:48new zealand went from 1.0248
16:51to 1.0348
16:58how many pips did this currency pair
17:00move
17:01i'll give you a
17:02second hopefully you were able to say
17:05100 pips let's draw out our table one
17:08more time to make this very easy one
17:10decimal
17:11oh
17:13two
17:14four
17:15eight okay
17:16here we have our little table that i
17:19like to make
17:20at this point we have our ones our one
17:22pip which is the fourth decimal our tens
17:24which is the third decimal we'll write
17:26this out to one two three four decimals
17:29we have our one hundreds
17:31and the zero would be the one thousands
17:33you don't really have to know that
17:34that's kind of irrelevant unless we have
17:36some kind of super crazy market moves
17:38but in this case of the aussie news then
17:41from
17:421.0248 to 1.0348
17:45which currency excuse me
17:47which
17:49stop my phone here which one of these
17:51numbers changed it wasn't our ones at
17:54all was it our ones was an eight it's
17:56still an eight it wasn't our tens it was
17:58a four it's still a four was it our one
18:00hundreds it was a two it is a three so
18:02therefore this market moved
18:05100 pips going from two to three would
18:07mean that we moved a total of 100 pips
18:11here on the aussie new zealand so in
18:13order to
18:15be absolutely sure that you understand
18:17all this give yourself a little test
18:20look at a currency pair and look at all
18:21the numbers on that pair's value and
18:24then ask yourself what would change
18:27right down another random number but
18:28lower above it and what would change if
18:30price went from where it is now to that
18:32number that you wrote down that's a
18:33great exercise to do here in this case
18:36and remember the way we're looking at
18:37this is
18:39our
18:41pip our one pip is the fourth decimal
18:43place away from the decimal okay so if
18:46we have our
18:48just as a final review here on non yin
18:50pairs if we have
18:53the fourth decimal place here this would
18:55be four right one two three four after
18:58the decimal this is one pip
19:01this is the tens
19:03this is the one hundreds so if we move
19:05to 1.0258
19:09then we have moved up
19:10ten pips that's how you need to be
19:12looking at it
19:14in terms of what a pip is and how it's
19:16valued now we've just talked about every
19:19non-yin pair any pair that does not have
19:22jpy will be calculated like this and
19:24will be
19:26evaluated like this with four decimal
19:28places
19:30now what about yen pairs something very
19:33slight changes on any pair with the
19:36letter j p y attached to it so let's do
19:38an example of that right now if we look
19:40at the value right now of
19:43the dollar yen which is usd
19:48jpy
19:51the dollar yen currently has a value of
19:54110.90
20:00with this being the case and own only
20:02pairs with jpy attached to them we go
20:06two decimal places instead of four what
20:09do i mean by that let's actually draw
20:11the graph right now so that we can make
20:14this as easy as possible we have one
20:17one
20:18o
20:19point
20:21okay if we draw our same graph
20:24this is what it looks like now now our
20:27one pip is the second decimal place so
20:29what do we have to do we see our decimal
20:32right there we go one two on the second
20:35decimal place is one pip so this is our
20:37ones what does that mean for the nine in
20:40this specific case that means the nine
20:43is going to be our tens and the zero is
20:45going to be our one hundreds okay
20:48so with this in place let's go ahead and
20:51ask ourselves a very familiar question
20:53for this video which is
20:57if this market moved from
20:59110.90 to one
21:01ten
21:03point
21:04nine
21:05six
21:06how many pips did it go up
21:08if the market moved this amount how many
21:11pips is that that this market just rose
21:15well if we look at the once it goes from
21:16zero to six therefore this market would
21:19have risen
21:20or rose not sure which one to use there
21:23by six pips
21:26let me turn this on silent sorry guys
21:27okay so now let's go over a couple of
21:29other examples so instead of
21:33us rising by six pips i want you to tell
21:36me how much we are rising in this case
21:38let's go with
21:41one
21:42one 12.90
21:47if price of the dollar yen
21:51goes from 110.90 to 112.90
21:54then how much has that
21:56value risen how much is the price went
21:58up
21:59this my friends would be 200 pips
22:02because this column that was zero is the
22:05hundreds column so this would be a plus
22:08200 on the dollar yen now to make sure
22:11that you understand yen pairs as well as
22:14you do the other every other currency
22:16pair i'm going to go over one more yen
22:17pair that doesn't have the dollar in it
22:19just a completely different pair to make
22:20sure you're completely comprehending how
22:23to read pips
22:24let's go ahead and do that right now and
22:27again in this section i'll be asking a
22:29lot of questions and i want you to try
22:31to answer them at home so that you get a
22:33better grasp of this before i answer
22:35them here even if you have to pause the
22:37video so let's go that all rhymed wow
22:41that's pretty good let's go into another
22:44yen pair let's try out the pound yen so
22:47gbsp
22:50jpy
22:53and the value of this currency pair
22:55right now if i find it on the chart and
22:57i'll show you a screenshot of it
22:58somewhere the value of the pound yen is
23:00130.70
23:06as you'll notice
23:07because this pair has jpy in it we only
23:10move two decimals from the decimal right
23:13so if we have
23:14130.70
23:16then decimal one would count as how many
23:18pips
23:19this is our tens remember and then
23:22this our second decimal right this is
23:24decimal two is going to be one pip so if
23:27this market and this are zero on the 130
23:30our zero is going to be 100 pips so if
23:33this market goes to
23:35three
23:37seven oh what do we have how much of a
23:40move did we have in the pound yen we had
23:43a
23:44300 pip move a plus 300 pip move if we
23:47go from 130
23:490.70 to 130.85
23:54how many pips did we move we moved up
23:5815
23:59pips
24:00because 70 to 85 is 15. if we go to
24:04130.72
24:08how many pips did we move
24:09up
24:10to pips and if we go from 130.70
24:14to
24:15129 point
24:19how much did we go down
24:22100 pips we went down 100 pips
24:27so i hope that now you have a really
24:29good grasp of what a pip actually means
24:31and how to calculate a currency's value
24:33against another one this is a very
24:35important foundational step to beginning
24:38your foreign currency trading career so
24:40it's definitely necessary to have in the
24:42arsenal and up next we're going to talk
24:44about what is the actual value for each
24:46pip how to calculate order size and a
24:49little bit about leverage so i hope to
24:50see you there in the next video or i
24:52will see you there in the next video and
24:54i'll talk to you then see you soon
24:57hey guys just wanted to record this
24:58really quickly before we start the next
25:00video for anyone who is trading with a
25:03brokerage
25:04that requires you to trade in either
25:08standard lots
25:10mini lots or micro lots which you're
25:12going to learn about in just a second
25:14then you're going to be required to
25:15watch this next portion of the video for
25:18instance if you trade with mt4 as your
25:20platform for the most part mt4 will only
25:24allow you to trade in either standard
25:25lots
25:26mini lots or micro lots which you're
25:29going to learn about again in just a
25:30second and if that's the case then you
25:32definitely need to watch the first part
25:34of this video but if you want to learn
25:36the way that i personally use risk
25:38management and calculate the value of a
25:40pip which is what we're talking about in
25:42this video then that's going to happen
25:44towards the end of the video i'm going
25:45to go over the way i actually do it my
25:47brokerage allows me to
25:50make trades place positions based on a
25:53random lot size it does not matter if
25:55it's a hundred and twenty two thousand
25:56units if it's twenty two thousand it
25:59doesn't matter it's completely random
26:00and that's okay with my brokerage and
26:02with the platform that i use for that
26:04reason i personally
26:06calculate the value of a pip a little
26:08bit differently but the first part of
26:09this video is definitely for you if
26:11you're using mt4 or a platform
26:14that requires you to trade based on a
26:16certain lot size which is a lot of
26:18brokerages out there which is why i
26:19wanted to record this video just for you
26:22if you're someone who is more interested
26:24in learning exactly how i use what i use
26:26in order to calculate the value per pip
26:29then i'll have a time stamp on the
26:30screen somewhere where you can go to
26:32that portion of the video and skip this
26:34first portion but it would probably be
26:36beneficial to watch this first part
26:37anyway i did want to clarify that though
26:40in the beginning so now let's jump into
26:42how to calculate the value of a pip this
26:44next lesson talk soon
26:48welcome to lesson number three on the
26:50basics of forex in this lesson we're
26:53going to talk about what you actually
26:55want in terms of trading how to
26:57calculate profits and what you don't
26:59want in terms of trading how to
27:01calculate your losses and what i mean by
27:04this is what
27:07that's a terrible w we're going to
27:08restart this whole thing just kidding we
27:10are going to restart with that w though
27:12what
27:14is the
27:17value
27:19of a
27:21pip
27:21so we know what the foreign exchange
27:23market is we know about currency pairs
27:25we know what a pip is but what is the
27:27actual value of that pip to you in your
27:30trading because
27:32well you probably know this by now if a
27:34market moves up in pips if you buy and
27:37the market moves up in pips then you're
27:38going to make money if you sell and the
27:40market goes down in pips you're going to
27:42lose money but how do you calculate how
27:44much money that is this is a question i
27:45get all the time how do i calculate my
27:48wins and my losses in forex and today in
27:50this video it's going to show you how to
27:52do is determine
27:53the value of a pip so how do we do this
27:56well for starters the value of a pip
27:59depends highly on the amount of currency
28:03you're trading what that means is the
28:05amount of units that you're trading so
28:07in currency markets we're trading a set
28:09of units and these units normally come
28:12in four
28:13major
28:15lot sizes four major sizes so if you're
28:17trading
28:18units of currency then what you want to
28:20what you want to actually look at
28:22and i'm going to do a graph for this is
28:24the lot size in order to come up with
28:26the amount of value per pip the amount
28:29of value each pip is worth it depends on
28:32your trading lot size or the amount of
28:34units that you're trading and those
28:36units again are broken down into
28:40most of the time it's actually three
28:43major types but we're gonna do a fourth
28:45just in case the fourth one is one
28:47that's used very rarely but you'll
28:48understand more about that in just a
28:50second don't get confused nothing
28:51confusing about this what we're gonna
28:53have in this column is the name
28:55of whatever lot size you're doing what
28:57we're going to have in this column is
28:59the size and what we're going to have in
29:01this column is the value
29:03per pip
29:05so value pp value per pip in this in
29:08this last column and this is going to be
29:11the case for every pair that ends in usd
29:15it's going to be very similar this is a
29:17generalization every pair in the that
29:19ends in usd is going to be exactly to
29:21this scale
29:23other currency pairs are going to vary
29:25but not by much there's a generalization
29:28this is a generalization but
29:31other currency pairs are not going to
29:32vary that much from this table the name
29:34of the first
29:35size that is very common is a standard
29:39lot so we're going to label this s
29:42l that stands for a standard lot now if
29:45you're trading a standard lot that means
29:48you're trading
29:49100
29:51000
29:52units of currency so for trading 100 000
29:56units of currency on any pair that ends
29:59in usd then this is the exact value per
30:03pip if you have one standard lot that
30:05you're trading or if you're trading
30:07every 100 000 units you're trading you
30:09are trading at a value
30:12of 10
30:13dollars per pip
30:15so if you're trading a standard lot on
30:17the euro dollar that means that every
30:20pip is dollars every pip that it moves
30:22is ten dollars let's go through the rest
30:24of the types of or size of units that
30:27you can do first and then we'll break
30:29into
30:30more about what they mean and how you
30:31can utilize them the second one is
30:33called a mini lot a mini lot means that
30:37you're controlling or holding
30:4010 000
30:42units of a certain currency and with
30:45this being the case
30:47with 10 000 units of a currency you have
30:50a value per pip
30:53of one dollar
30:54so for every ten thousand units of a
30:56currency that you hold there is a value
30:59of one dollar per pip that's exactly
31:01right on dollar pairs it's a
31:02generalization that is very similar on
31:04other pairs as well and the last lot
31:06we're going to take a look at
31:07is the micro lot the micro lot means
31:10you're controlling 1 000
31:13units of a certain currency and that
31:15means that you are
31:18losing or gaining 10 cents per pip so
31:20every pip that the market moves is going
31:22to be 10 cents up or down in your
31:24account if you're trading a micro lot
31:29and the last one that we're going to
31:31take a look at that we're not going to
31:32dive deep into it all is called a nano
31:35lot a nano lot means that you're
31:37controlling 100 units of currency and
31:40every
31:41movement of a pip is worth a penny the
31:43value per pip is a penny which is
31:45something that we're not even going to
31:46worry about so
31:48in the case of the other lots let's now
31:50break into let's do let's get away from
31:52this little section here and what we're
31:54going to do is break into looking at the
31:56difference in prices between currency
31:58pairs and figuring out how much we
32:00gained or lost based on that difference
32:02in price so for instance if you bought
32:04the euro dollar
32:07eur
32:08at 1.00802
32:14and it went to 1.0902
32:18if you were trading a standard lot and
32:21this happened how much would you gain
32:23on that position how much money is that
32:26actually worth and that's what we're
32:28going to determine and talk about up
32:29next so let's go ahead and do that
32:32all right so let's move into this on the
32:33euro dollar trade here if we have the
32:35euro dollar at
32:371.0802 we trade one standard lot a
32:40hundred thousand units of this currency
32:42and we do so at
32:451.0802 and this market moves to 1.0902
32:52going up we bought we wanted the market
32:54to go up and we take profit at 1.0902
32:58how much money did we make see if you
33:00can calculate how much money we made
33:02based on this trade remember a standard
33:05lot is 100 000 units of currency and
33:08with that 100 000 units of currency
33:11on any pairs ending in usd we're making
33:14and losing exactly ten dollars the value
33:17of a bip is exactly ten dollars so let
33:20me share with you the equation you need
33:22to figure this out what you need first
33:24is the amount of pips so we're going to
33:26look at the amount of pips which is 100
33:28we went up 100 pips in this
33:31particular case right so we have 100
33:34pips
33:35times the amount or the value per pip in
33:40this situation based on your lot size so
33:43if we use the standard lot of 100 000
33:45units and we know that a standard lot on
33:48the euro dollar is equal to 10 dollars
33:50per pip then we would have our amount of
33:53pips
33:54times ten dollars per pip because we're
33:56using a standard lot
33:58and that we have to multiply by the
34:00amount of standard lots in this case we
34:03just traded one standard lot
34:06so with this being the case
34:09how much money did we make on this 100
34:12pip move on the euro dollar
34:15well the money would translate to 100
34:17times 10 because we're using a standard
34:19lot and with a standard lot we are
34:22making and losing 10 dollars per pip the
34:24value per pip is 10
34:26we only traded one standard lot so
34:28therefore 100 times 10 is 1
34:31000
34:32is what you made or what we would have
34:34made on this 100 pip move out of the
34:37euro dollar now let's change things up
34:40for a second and say we wanted to trade
34:42three standard lots in this case what
34:45would change what number in the equation
34:47would we need to change if this was the
34:49case and we were trading three standard
34:51lots instead of one
34:53well if that was the case we would have
34:55to change the third number in this
34:57equation we still have a 100 pip move
35:00right pips is right here
35:03we still are trading standard lots so
35:05standard lot is right here now we need
35:07number of
35:09lots
35:10so what's the number of lots well we're
35:12trading three so that would mean that
35:14this 100 pip move if you were trading
35:16three standard lots would equal a three
35:19thousand dollar gain
35:21now let's look at this in a different
35:23way that always helped me to better
35:25understand what's actually going on
35:26whenever i place trades so let's move
35:28back to placing a buy order with one
35:31standard lot on the euro dollar if
35:33you're doing this essentially you are
35:36telling your broker that you are going
35:38to
35:39want 100 000
35:42euros not one million euros what am i
35:45doing 100 000 euros so if you're going
35:48to purchase 100 000 euros
35:52your brokerage is going to charge you
35:55the exchange rate that the market it
35:57currently has which is
35:591.0802 100 000 times 1.0802 would be
36:03they will charge you 108
36:060002
36:08so that's what you're being charged to
36:10get 100 000 euros your broker gives you
36:12that 100 000 euros they get 108 000 and
36:16two dollars from you from your account
36:18then you are holding that 100 000 euros
36:21waiting on the market to either rise or
36:24fall waiting on the euro dollar to
36:25either rise or fall in this case you
36:27bought the euros
36:29and the market went up from 108.02 to
36:32109.02 meaning that you still have the
36:35same
36:36100 000 euros that you are holding but
36:39now instead of them having a value of
36:41one hundred and eight thousand and two
36:43dollars they now have a value because of
36:45the difference in the exchange rate the
36:47exchange rate has went up they now have
36:49a value
36:51of one hundred and nine thousand and two
36:53dollars and that's where you're getting
36:54that one thousand dollars if you're
36:56trading a standard lot so that's the way
36:58a pip works if you're trading a standard
37:00lot let's go into the way a pip works if
37:03you're trading a mini and a micro lot
37:05just to make sure you have a solid grasp
37:08on this
37:09we'll keep the math easy with a 100 pip
37:11move except now instead of trading one
37:14standard lot
37:16we're going to assume that you when you
37:18do a little bit of a difficult thing
37:19here a little more difficult as we go
37:21let's assume you want to trade two
37:24mini lots
37:26so you're trading two mini lots and do
37:28you remember what a mini is a mini is
37:30you holding
37:3110 000 units of currency so if you're
37:33trading two minis you're holding 20 000
37:36units of currency a mini
37:38is worth one dollar per pip meaning the
37:41value of a pip if you're trading a mini
37:43lot is one dollar so in this case the
37:46market goes up by 100 pips so our
37:50equation would still be pips would be
37:52100
37:54times the value per mini lot
37:56per pip when you're trading a mini lot
37:58which is one dollar times the amount of
38:01mini lots you're trading which is two
38:04meaning
38:05that your your profit on this trade if
38:08you were trading a mini lot would be 100
38:10times one which is 100 times two which
38:13is the amount of mini lots you're
38:14trading so you would have a profit of
38:17two hundred dollars on this particular
38:19trade now let's go through the other way
38:22of looking at it on a mini lot as well
38:24what you're saying is broker i want
38:2720 000 euros
38:30and they are going to
38:33math is going to get a little more
38:33difficult here hold on they're going to
38:35charge you let's bring a calculator over
38:391.0802
38:43times 20
38:45thousand
38:46when they do that they're gonna be
38:47charging you twenty one thousand six
38:49hundred and four dollars so when they're
38:51charging you twenty one thousand six
38:52hundred and four dollars you're holding
38:55twenty thousand units of euro
38:57so while you hold that twenty thousand
38:58units of euro just as in our last
39:00example the euro goes up a hundred pips
39:03so you still have that same
39:06twenty thousand
39:07euros except now you have to multiply
39:10that twenty
39:12thousand
39:13units that you're holding
39:15times the new exchange rate of 1.0902
39:20which means when you give them
39:22that 20 000 units back they owe you
39:2621 thousand eight hundred and four
39:29dollars giving you
39:31that two hundred dollar profit so that's
39:34the way profit and loss works in a mini
39:36lot no matter how many it is we have our
39:38equation right pips times the amount per
39:41pip the value per pip times the amount
39:44of lots you decide to trade one more
39:46example of this and then i'm going to
39:47show you how i personally calculate pips
39:49and how i use risk management in my own
39:51trading but let's go through
39:53this last example first on a micro lot
39:56so let's say you want to trade one
39:58micro lot
40:00and you're doing that while the you buy
40:03that one micro lot the market's at
40:051.0802 just as with the other examples
40:07we go up 100 pips what's our equation
40:11look like what we have to do
40:13our 100 pips
40:15times 10 cents
40:17times the amount of micro lots we're
40:19trading which in this case is one
40:22what does that equal that means that you
40:24would have made 10
40:27on this 100 pip move trading one micro
40:30lot so as we do
40:32with every other
40:34lot size let's go ahead and look at it
40:36in a different way so you're telling
40:37your broker i want 1
40:40000 units of the euro and they're
40:43telling you if you want 1 000 units of
40:44the euro we're going to charge you 1080
40:51and then you say okay i'm fine with that
40:53you exchange it you hold that 1000 euros
40:55until the price rises by 100 pips and
40:58when it does you're saying 1
41:01000 euros is now worth
41:05and ninety 1990
41:06because of that rise in price
41:08so that's exactly how
41:11the value of a pip works when using a
41:14certain lot size now for my own personal
41:16trading as i said the beginning of the
41:17video
41:18i actually trade based on a certain
41:20percentage of my account value so the
41:23the
41:23lot size is always a random number and
41:26that's an extremely simple thing to do
41:28if you have the right platform so i'm
41:30gonna show you my platform and show you
41:31how i actually determine the value per
41:33pip myself this was for anyone using mt4
41:37or a brokerage that doesn't allow you to
41:39have random lot sizes so i hope that was
41:41helpful let's break into the way i
41:43actually prepare have risk management
41:45the way that i calculate value per pip
41:47on my own personal trading right now
41:50okay so now let's talk about how i
41:52personally calculate the value per pip
41:54and first let's talk about why you even
41:56need all this information why do you
41:58need to understand how much
42:00every pip is worth depending on the lot
42:02size that you're trading well the reason
42:05is because of risk management you want
42:06to understand
42:08that so that you can know how much of
42:10your account you're risking per trade
42:12whatever your stop loss is and and also
42:14how much you can make per trade but the
42:16more important part of this equation is
42:18how much you can lose so with that being
42:21the case the reason we want to
42:22understand the value of the pip is
42:24because we want to understand how much
42:26we're risking on each trade with that
42:28being the case the way i use risk
42:30management and calculate the value per
42:32pip is a lot different than what i just
42:33showed you because my brokerage as we've
42:36discussed in the beginning and my
42:37platform allow me to trade completely
42:40random unit sizes so for me it's a lot
42:43easier than having to do any of that
42:45math i learned that at the beginning and
42:46i know that's something a lot of you may
42:48have to use but for those of you who
42:49have the same brokerage as me or for
42:51those of you who have a brokerage that
42:53allows you to use random units to place
42:55orders this is what i personally do i
42:58want to share this with you as well so
43:00all i do if i want to place a trade
43:01let's say i wanted to buy the euro the
43:03new zealand dollar right now which is
43:05the currency pair we're on i would go to
43:06create a new order
43:08i would have a market order in and i
43:10would set my stop stop-loss and let's do
43:11this first let's go ahead and do say i
43:13want to buy
43:14the new zealand dollar right now
43:17i want to have a stop-loss below
43:20this red candle
43:22so that's my stop-loss and i have a
43:24target at a two to one risk reward so if
43:26this is the case i now have my trade set
43:30up so what i'll do is go to trade create
43:32new order it's gonna be a buy order on
43:35the new zealand dollar and i know where
43:36my stop-loss is it's at 100 pips so 100
43:40pips is my stop loss i know my target's
43:42at 200 pips around a two to one risk
43:44reward
43:45with this being the case my units
43:48for me
43:49are completely irrelevant and this is
43:50the reason i'm trading based on a
43:53certain risk
43:55of my account with every position that i
43:57take out the certain risk for me is
44:00between one and two percent so for me
44:02the easy way that i do this is i go here
44:04to trading view i place my order and i
44:07put in what amount of risk i want to use
44:10as you can see right here on the order
44:11form it says percent risk when i put in
44:14two percent risk you can see that it
44:16shows me the size and units that i'm
44:18actually purchasing and this number is
44:20completely random again some brokerages
44:23may only allow you to place trades based
44:26on standard lots in that case you would
44:28need to trade two standard lots and it
44:29would be completely different for you
44:31but for the way i trade for my brokerage
44:33and my platform i'm allowed to trade
44:35based on a certain percentage of my
44:37account value which is what i like to do
44:39for every trade i place therefore the
44:41lesson we just went over is kind of
44:43irrelevant for me at this point in my
44:44trading considering the technology that
44:46i use here over on the tradingview
44:48platform in order to determine the
44:50amount of risk i'm going to use in my
44:53personal trading account with every
44:55trade that i place so i wanted to give
44:57you both of those
44:59so that you now at least understand how
45:02to
45:03calculate the value of a pip based on
45:05your order size and also you know now
45:08that you can go over to trading view and
45:10you can see the amount of units you need
45:12to purchase based on the percentage risk
45:14of your account we're going to go over a
45:16lot more of that later on in the course
45:17in terms of how to calculate risk per
45:20position and things like that is going
45:21to be later on right now i just want you
45:22to understand how to calculate the value
45:24of a pip and i wanted to show you how i
45:26personally calculate the value of a pip
45:29later on and in the next lesson we are
45:32going over
45:34what leverage really means so in that
45:36video in the next video we're going to
45:37talk a lot about leverage i really hope
45:39you enjoyed this video and i hope that
45:41you got value out of it hopefully now
45:43you understand exactly how to calculate
45:45the value of a pip and i'll talk to you
45:47in the next video see you soon
45:51what's up and welcome to lesson number
45:53four in our all-inclusive beginner forex
45:56trading course that is going to be
45:57everything that you need in order to
45:59start your forex trading journey this
46:01video
46:02you read it right folks is all about
46:05leverage so by the end of this video
46:07you're not only going to know what
46:09leverage is but you're also going to
46:11understand why a lot of traders end up
46:13blowing accounts because of it how to
46:15avoid that and the proper way to
46:18actually use leverage by the end of the
46:20video so let's go ahead and get started
46:22with what is leverage and the way we're
46:24going to do that is by using an example
46:27of the housing market so let's go ahead
46:29and get started with that right now
46:30let's say by the way in the housing
46:32market when you want to get a loan for a
46:34house you actually need 20
46:36down on that property in order to
46:38purchase that property so let's say you
46:41find a property
46:43that you want to invest in
46:45and this property is one
46:47hundred thousand dollars
46:51in the case of this property property
46:53being one hundred thousand dollars how
46:54much do you need to deposit how much of
46:57a down payment do you need in order to
46:59buy this house
47:00or invest in this house you need 20
47:03000 right
47:05so let's say you come across the
47:06greatest bank in the world and they come
47:08up to you and they say hey we know you
47:10want this property what we're going to
47:12do is we're going to take your twenty
47:14thousand dollars
47:16and we're gonna give you this one
47:17hundred thousand dollar piece of
47:19property you can hold it as long as you
47:21want you don't have to make any payments
47:23on this property but when you decide to
47:26sell it
47:27you still owe us one hundred thousand
47:29dollars so that means if the market
47:31crashes and this house's property drops
47:34like crazy you still owe us a hundred
47:36thousand dollars whenever you decide to
47:38sell and if the housing market goes up
47:40vice versa you still owe us a hundred
47:42thousand dollars so let's do this
47:43scenario
47:45let's say you say okay yeah great deal
47:47that is an amazing deal so let's do it
47:49and you buy this hundred thousand dollar
47:50property with a twenty thousand dollar
47:52down payment and you have no payments
47:54and then throughout the course of twelve
47:56months the housing market drops
47:58fifty percent
48:00oh no right so now your property that
48:02was worth one hundred thousand dollars
48:05is now only worth
48:08fifty
48:09thousand dollars but guess what that
48:11bank already told you whether the market
48:13goes up or down you owe us our hundred
48:14thousand dollars back so in this case
48:16you decide to sell for a loss how much
48:19did you lose on this house
48:21you lost
48:22that 50 000
48:27that sucks right so this is the power of
48:29leverage in terms of how it can hurt you
48:31you lost more than your initial down
48:34payment more than your deposit maybe
48:36more than you had if twenty thousand
48:37dollars is all you had to invest
48:40is this sounding familiar kind of like
48:42leverage in the forex market and some of
48:44the horror stories you've heard so
48:45that's how leverage can hurt you right
48:48and in terms of helping you we can do
48:50this other scenario because guess what
48:52just as bad as it can hurt you it can
48:54help you make ridiculous returns as well
48:56when you use it correctly so let's say
48:58the same scenario
49:00you pay twenty thousand dollars they say
49:02here's this one hundred thousand dollar
49:04property to hold
49:06this time
49:08instead of the market dropping by fifty
49:10percent
49:11we go up fifty percent over the next
49:14twelve months so with the housing market
49:17going up 50 you now
49:20have this property that was worth 100
49:22grand that is now worth
49:24150
49:26000 and guess what the bank says the
49:28same thing whenever you sell at that 12
49:31month period the bank says okay you've
49:33sold you owe us 100k
49:35in that case you give them
49:37their 100k back and you end up with a
49:40plus
49:4150 000
49:43profit
49:44so in this case you made
49:47more than your initial down payment that
49:49is the power of leverage leverage can
49:51allow you to make ridiculous returns and
49:54also
49:55unfortunately
49:57can cause you to lose even more than you
49:59initially invested now forex is a little
50:01different because there's a thing called
50:02margin call but now that you know what
50:04leverage is let's relate it back over to
50:07forex and by the way this bank the
50:09twenty thousand dollars and we'll let
50:11you hold 100k property it's the broker
50:14so let's jump into an actual forex
50:17scenario with this being the case let's
50:19go ahead and delete all of this
50:22so in 4x i'm going to draw out a little
50:24graph here
50:25we have about four different types of
50:27major leverage that people or brokers
50:29allow you to have and we have one
50:32to ten leverage
50:34one to twenty
50:35one to fifty
50:37and one to one hundred leverage
50:40now
50:41each of these means that you have
50:44your account times the leverage you get
50:47in buying power so let's say you have a
50:481
50:49000 account
50:51just to make math super simple that
50:53means with one to ten leverage you have
50:5410k buying power one to twenty you have
50:5720k buying power this is
50:58self-explanatory but i'm gonna write it
51:00down anyway 50k buying power at one to
51:02fifty and 100k
51:04buying power at one to one hundred now
51:07here is the reason most traders blow
51:10their entire accounts using leverage
51:13most traders say i have a thousand
51:15dollar account but
51:17but i have 10k in buying power
51:20so what do i need to do obviously i need
51:23to buy 10 000 units of the euro dollar
51:26and hope that that goes up
51:28that's not how you want to use leverage
51:30that is the worst way to use leverage
51:32and let me help you understand why we're
51:34going to use one thousand dollars
51:36account size as an example and we're
51:38going to use the 50 to 1 leverage
51:40because in the united states
51:43that is the maximum amount of leverage
51:45they allow you to have and personally 50
51:47to 1 leverage is what i use so
51:50with a one thousand dollar account
51:53let's look at this as if you don't have
51:55any leverage you have a thousand dollar
51:56account we've talked about order sizes
51:58right how many units can you purchase
52:00with a one thousand dollar account and
52:02no leverage at all 1000 units right
52:05self-explanatory 1000 units what is 1000
52:08units that is a
52:10micro lot
52:11one micro lot on most pairs
52:14means that you
52:15are
52:16the value of a pip for your position
52:19stay with me if you haven't studied lot
52:21sizes and stuff we have another video on
52:22that that you've probably just watched
52:24hopefully this 1000 1000 unit micro lot
52:28is worth 10
52:30cents per
52:33pip
52:34okay so if you have a one thousand
52:36dollar account that means you can trade
52:38at maximum if you are all in on a trade
52:41you can have 1 000 units of a currency
52:43let's say you have 1 000 units of the
52:45euro dollar
52:47and you say cool i have one thousand
52:49units these this micro lot means that
52:52every pip the euro dollar moves is ten
52:54cents per pip
52:56in this case i want you to look at risk
52:58as how many pips you can lose
53:00how many pips could you lose at 10 cent
53:02a pip
53:03if you have a thousand dollar account
53:05and no leverage
53:06you could lose 10
53:08000
53:09pips
53:10before you blow your account that's
53:12awesome this is why not using leverage
53:15at the beginning is a pretty good idea
53:17if you're just now starting out you're
53:18gonna have a lot of losses but if you
53:20have 10 000 pips of room before you blow
53:24your account then you would have to lose
53:26a lot of trades to actually blow your
53:27account here's where leverage
53:30actually can really hurt you because
53:33let's take this same same one thousand
53:34dollars
53:36and we'll actually keep all this on the
53:37screen we have this one thousand dollars
53:39sorry if it gets a little messy here
53:40guys i'll color this a different color
53:43to make it a little bit easier let's go
53:46with
53:47blue i like blue so we have this 1 000
53:50account but now
53:52separate this now you have your 1 000
53:57account with a 50 to 1 leverage
54:00which means you have 50
54:03000 in buying power now here's what you
54:05need to understand the brokerage is not
54:07going to let you lose 50 grand before
54:10you lose the one grand that you have
54:12they are going to do something called
54:14margin call this number your capital is
54:17called margin 50 to 1 on leverage means
54:21that you have for every one dollar of
54:23margin
54:24you have 50 dollars that you can put
54:27into a position
54:28so in this case let's say you maxed it
54:30out and you said i have 50 000 units to
54:32trade the guy that we were talking about
54:34on the euro dollar right i got my 50 000
54:36units let me just buy the euro dollar
54:39right now so you buy euro usd same
54:41example
54:44and
54:45with this euro usd trade you have spent
54:47your full 50 000 units what is 50 000
54:49units remember 10 000 units
54:53is a mini lot
54:56and a mini lot has a value per pip of
54:59one
55:00dollar so if we have five
55:03mini lots how much is our value per pip
55:06on this trade our value per pip which
55:08we're gonna label with v p p on our euro
55:12dollar trade
55:13is five
55:14dollars
55:16you see the difference here this
55:18was 10
55:19cents per pip but because we're using
55:21leverage over here we have five dollars
55:24per pip now can this work for you
55:27absolutely yeah you can make a lot more
55:29money at five dollars per pip than at 10
55:31cents per pip no one is doubting that
55:33i'm not saying you can't do that but as
55:35a beginner do you think it's more likely
55:36you're gonna hit home runs or swing and
55:39miss most the time
55:41swing and miss you're right a lot of
55:43times as beginners you're expected to
55:44lose right so it's okay to lose but if
55:47you have your entire account balance
55:50your 1 000 in margin which gives you 50
55:53000 in buying power on this position
55:56how many pips do you have that you can
55:58lose before your account goes to
56:00absolutely zero
56:02where it was ten thousand pips
56:05now the math we have to do is your five
56:07dollars per pip and your account balance
56:10so now what we need to do is take your
56:12account balance
56:13of one thousand dollars
56:15because again they're not gonna allow
56:17you to lose more than a thousand dollars
56:19and if you're risking five dollars per
56:20pip that means you
56:22divided by five dollars let's do this
56:23let's finish the math
56:25that means you only have
56:27200
56:30pips because 200 times five is a
56:33thousand dollars that takes your account
56:35away so instead of ten thousand pips of
56:38risk the reason most traders blow their
56:40accounts using leverage is because they
56:43only have 200 pips of risk and guess
56:45what you don't really have 200 pips of
56:47risk because they are going to margin
56:50call
56:52this is the weirdest looking pin let me
56:54change that sorry margin call you
57:00at somewhere
57:01around 80
57:04to 90
57:06so instead of 200 pips it's more like
57:08you have about
57:10160
57:11pips
57:12maybe 170 pips of risk before you get a
57:17margin
57:18call which is when they take all of your
57:19trades away and you're left with a
57:21balance of about 10 of your original
57:24capital so you would be left with a
57:26hundred dollar account after 160 pips of
57:29movement out of the euro dollar if you
57:31just had one wrong guess
57:33so let's say you do this and you guess
57:35wrong on the euro dollar and you're new
57:37so you don't understand stop losses and
57:39the euro dollar moves at 160 pips which
57:41is doing
57:43multiple times every day at this point
57:44because the volatility we're seeing in
57:46the market
57:47you could lose your whole account
57:48balance in one day
57:50doing this
57:51that's what that's the danger and the
57:53reason that most beginners using
57:56leverage end up
57:58blowing their account before they have a
58:00chance to make any money at all
58:02that's the danger of leverage and that's
58:04what you need to understand and there's
58:06a correct way to use leverage as well
58:08this would be the wrong way to use
58:10leverage
58:11you don't want to max out you don't want
58:12to max out and be trading with leverage
58:16and trading your entire account value
58:18because that gives you a very small
58:20margin of error again we're talking
58:22about that 200 pips is all you have
58:24probably closer to about 160. so if you
58:26only have 200 pips that you can lose
58:29that's a pretty easy amount to lose it's
58:32easy to lose 200 pips and in a day in
58:35the way the markets are moving right now
58:36again the danger of leverage is that you
58:38have way less risk
58:41that way less pips you can lose before
58:44you blow your entire account 200 against
58:46the 10
58:48000 with no leverage at all so that's
58:50the wrong way to use leverage what's the
58:52proper way to use leverage that's how
58:54you blow an account using leverage how
58:56do you use leverage to your advantage to
58:58actually make more than your initial
59:00deposit let's go over that right now
59:02so here is the proper way to use
59:04leverage one
59:05lesson number one always use a stop loss
59:07if you're using a leveraged account if
59:09you're not you're putting yourself in
59:11this
59:12ridiculous risky situation and as
59:14traders avoiding risk is half the battle
59:17so always and i mean always use a stop
59:20loss with leverage but let's talk about
59:22the power of leverage and what it can
59:24actually help you do same scenario we've
59:26been discussing thousand dollar account
59:30with fifty to one leverage
59:35so if you have a one thousand dollar
59:37account and fifty to one leverage what's
59:39the correct way of using that leverage
59:41well it's first to decide what your risk
59:43management plan is gonna be how much are
59:44you going to risk per trade for me and
59:47only for me i'm not suggesting anything
59:48to you this is for entertainment i hope
59:50you're entertained for me
59:52i risk between 1
59:56and 2
59:58of my total account balance
1:00:00per trade so in this case that would be
1:00:02ten to twenty dollars let's keep it
1:00:04simple with ten dollars so if i want to
1:00:06risk ten dollars
1:00:09let's say i want to risk
1:00:11two percent of this which is ten dollars
1:00:14on a trade
1:00:15i need to know the amount of pips i'm
1:00:18going to lose
1:00:19or could possibly lose in order to
1:00:22create this ten dollar loss and how do
1:00:24we do that well let's say that we have a
1:00:27100 pip stop loss okay the euro dollar
1:00:30100 pip trade the same one we've been
1:00:31discussing during the entire video so
1:00:34this euro usd trade
1:00:36has a maximum loss of 100 pips
1:00:41now in order to create this scenario
1:00:43where i'm possibly losing ten dollars on
1:00:46a 100 pip loss i have to figure out my
1:00:49price per pip in terms of the 100 pips
1:00:51stop loss and the way you do that is
1:00:53with an equation the equation is the
1:00:55amount of dollars
1:00:57you want to risk which is ten dollars i
1:01:00don't know why i put percent right there
1:01:02ten dollars
1:01:05and this ten dollars has to be divided
1:01:08by the amount of pips we're going to
1:01:09lose 10 divided by 100 pips equals
1:01:1310
1:01:14cents per pip
1:01:15this is where it gets a little bit
1:01:16easier now we know that we need a value
1:01:19of 10 cents per pip on this trade why
1:01:22because we have a 100 pip stop loss and
1:01:25i want to risk one percent of my account
1:01:28which means i need
1:01:3010 cents per pip times that 100 to give
1:01:33me that 10 dollar risk with 10 cents per
1:01:36pip we've talked about this already that
1:01:38means you need
1:01:39one
1:01:40micro lot
1:01:43now one micro lot would cost you
1:01:471 000
1:01:49because you are controlling 1 000 units
1:01:51of currency with a micro lot so
1:01:54if you had no margin
1:01:56this would be your entire account but
1:01:58with margin
1:01:59the power of margin and the way to use
1:02:01it correctly after you have all of this
1:02:03calculated you know your stop loss is
1:02:05putting you at a ten dollar risk which
1:02:07is one percent of your account value
1:02:08your one micro lot that would cost you a
1:02:10thousand dollars no longer cost you a
1:02:13thousand dollars now it's coming out of
1:02:15something called margin which is your
1:02:17capital so you have this full capital of
1:02:19margin
1:02:20that they are giving you 50 to one on
1:02:23this full capital of margin means you're
1:02:25getting 50
1:02:26for every one dollar you invest into a
1:02:28position so if i'm investing 1 000 into
1:02:31a position what do i have to do i have
1:02:33to divide that one thousand dollars by
1:02:36my fifty to one leverage which gives me
1:02:39twenty
1:02:40dollars what this means is that instead
1:02:42of costing me my full account of one
1:02:44thousand dollars in order to place this
1:02:47trade
1:02:48instead of 1 000
1:02:51this now only cost me
1:02:5420
1:02:56so instead of a thousand dollars on this
1:02:58trade i've only had to put up the
1:02:59deposit
1:03:01of twenty dollars
1:03:02so this is like the bank in the
1:03:04beginning of this video the scenario we
1:03:06talked about houses this is a very
1:03:09similar situation you're giving your
1:03:11broker twenty bucks they're saying
1:03:12here's a thousand units you hold on to
1:03:14that thousand units as long as you want
1:03:16but when you decide to sell that
1:03:18thousand units we want that thousand
1:03:20dollars back no matter what if if your
1:03:24investment goes up or down we want that
1:03:26thousand units back so when this
1:03:29investment goes up you make money but if
1:03:31it goes down you still owe them a
1:03:33thousand bucks but instead of losing a
1:03:36thousand dollars you've only lost ten
1:03:38dollars and here's that math so this is
1:03:40going to be very familiar math we're
1:03:41looking at euro this is the actual trade
1:03:44itself this is what it looks like
1:03:46euro
1:03:47and dollars what you said
1:03:50is i want
1:03:511 000 euros let's do the price of the
1:03:53euro dollar right now price of euro
1:03:55dollar right now is 1.1
1:04:00you said i want
1:04:011 000
1:04:03euros this is the actual trade what it
1:04:05looks like in your brokerage i want 1
1:04:07000 units
1:04:08of euro and they said okay in order to
1:04:10give you 1 000 units of euro
1:04:12the exchange rate right now is 1.1042
1:04:17they say okay if you want 1 000 euros
1:04:20we're going to need 1
1:04:23100 and 4 from you but then the bank
1:04:26goes i've got you at a 50
1:04:29or the broker to one leverage which
1:04:30means we really only need twenty dollars
1:04:33on margin for you to do this because
1:04:35your twenty dollars
1:04:37is equal to a thousand units so you say
1:04:38cool here's my 20 hold on to it i'll
1:04:40hold this thousand units until the price
1:04:42fluctuates either up or down you still
1:04:44have your same 1
1:04:46000 units of euro
1:04:48but now let's say the price drops from
1:04:50the euro from
1:04:521.1042 we have a decrease in value
1:04:56down to 1.0942
1:05:00which would be
1:05:02a drop of 100 pips which is what our
1:05:04stop loss was set at so when it drops
1:05:07down to 1.0942
1:05:09your stop-loss gets hit and you say
1:05:11here's your 1000 euros back but now the
1:05:13exchange rate is lower so even though
1:05:16your investment dropped in value they
1:05:18still expect that same 1000 euros in
1:05:20order to give them one thousand euros
1:05:23you now have to hand them one thousand
1:05:27and ninety four dollars
1:05:29so therefore because of that
1:05:31your investment dropped
1:05:34ten
1:05:34dollars and that's the actual math on
1:05:38this specific trade now in the other
1:05:40scenario let's say that the market goes
1:05:42up uh 200 pips let's say you had a two
1:05:45to one risk reward so let's delete this
1:05:48and do the math on this as well
1:05:51to make sure you fully comprehend
1:05:52leverage this is going to be extremely
1:05:54helpful let's say you had a 2-1 risk
1:05:56reward on this trade
1:05:58so
1:05:59instead of going down 100 pips now we go
1:06:01to 1.1
1:06:04two four
1:06:06two or we rose
1:06:08by two hundred pips a two to one risk
1:06:10reward so now
1:06:12your bank said twenty dollars and will
1:06:14let you hold one thousand euros at the
1:06:17price of 1.1042
1:06:19or 1 104
1:06:21and we'll let you hold this thousand
1:06:22euros as long as you want as long as
1:06:24whenever you pay us back you give us
1:06:26that same 1000 euro value so we say okay
1:06:30cool
1:06:31but this time the euro
1:06:33dollar goes up by two hundred pips so
1:06:36now instead of your investment being
1:06:37worth one thousand one hundred and four
1:06:39dollars your investment is now worth one
1:06:42thousand
1:06:43one hundred and twenty four dollars
1:06:46meaning that instead of losing ten
1:06:48dollars your investment actually went up
1:06:51twenty dollars
1:06:52and the power of having leverage means
1:06:55that instead of spending remember in
1:06:57order to get this position size
1:06:59originally you would have had to spend
1:07:01your entire one thousand dollar account
1:07:03but instead of having to spend your
1:07:04entire one thousand dollar account to
1:07:06make
1:07:08this twenty dollars over here you now
1:07:11have made twenty dollars on an initial
1:07:14twenty dollar investment because of the
1:07:16power of leverage so you've made a
1:07:17hundred percent gain on this specific
1:07:19trade because you have leveraged the
1:07:21point you only spent twenty dollars of
1:07:23your actual capital in order to make
1:07:25twenty dollars
1:07:26on the other side of that so that is the
1:07:29power of leverage and the way of using
1:07:31it correctly so what does leverage
1:07:34really allow us to do
1:07:36in a nutshell if you use leverage
1:07:38correctly it's not going to allow you to
1:07:40trade with this massive size and risk
1:07:42all this money and essentially gamble it
1:07:44doesn't allow you to get rich in three
1:07:46days it doesn't allow you to triple your
1:07:48account this week leverage
1:07:50allows you to be in more trades at one
1:07:52time and to put an initial deposit down
1:07:55of a small amount in order to purchase a
1:07:58larger position
1:07:59when you have a stop loss the stop loss
1:08:01is so important when you have a set risk
1:08:03management plan if you have that set
1:08:05risk management plan you have a 1 000
1:08:08account
1:08:09and you're doing
1:08:10risk management correctly you're only
1:08:11risking 10 dollars per trade leverage
1:08:14just allows you to be in
1:08:19more
1:08:21trades
1:08:24long as you have this 10 risk it's okay
1:08:26to be in a bunch of trades you can be in
1:08:2720 trades and you're still only risking
1:08:30200 bucks so you're not at all putting
1:08:33your account in jeopardy as long as you
1:08:35have this risk management in place
1:08:37so that's how you combine risk
1:08:38management with leverage and that's the
1:08:39only way you should be using leverage i
1:08:42hope this video has taught you
1:08:43everything you need to know about
1:08:44leverage i know it was a long one but
1:08:45leverage is kind of a complicated
1:08:47subject that takes a while to understand
1:08:49if you had any doubts or for any reason
1:08:52or confused about leverage i would
1:08:54suggest going back and watching this one
1:08:55more time you will be surprised at the
1:08:57amount of stuff you pick up on again
1:08:59hope this was helpful and i will see you
1:09:01in the next video don't over leverage
1:09:03and don't risk at all
1:09:06all right so i really hope you enjoyed
1:09:09that beginner lesson but if you are
1:09:11ready for some more advanced training
1:09:13then we just had a few graduates come
1:09:15out of the eap training program our
1:09:17flagship program here at the trading
1:09:19channel i'll post some of their
1:09:20testimonials on the screen and that is
1:09:23incredible news for them
1:09:25and that's also incredible news for you
1:09:27because that means that we finally have
1:09:29some spots available in the eap training
1:09:32program
1:09:33and while you glance through some of the
1:09:35comments on the screen i want to tell
1:09:37you that if you're struggling to profit
1:09:39right now
1:09:41then i've been where you are too
1:09:42i struggled for over a year before i
1:09:45found a way to be consistently
1:09:46profitable i made every mistake you can
1:09:49think of i moved stops i used poor risk
1:09:52management i traded strategies that
1:09:53didn't work i followed a signal service
1:09:56that ended up with me almost blowing my
1:09:59entire account but after that first year
1:10:02and after nearly blowing an entire
1:10:04account i found the real path to trading
1:10:07success
1:10:08and consistently profitable trading
1:10:10became as easy as counting to six
1:10:14and that is what i teach in the eap
1:10:16training program i created a strategy
1:10:19that only uses six simple rules to
1:10:22create an edge over the market so once
1:10:24you memorize these rules trading becomes
1:10:27as easy as counting to six
1:10:30these rules are completely objective and
1:10:32easy to follow and although just having
1:10:34a strategy is only one part of the
1:10:36equation it is a very large part of that
1:10:39equation in the eap training program we
1:10:42also have lessons on risk management and
1:10:44discipline to make sure that you have
1:10:46everything you need to get on the right
1:10:48track to becoming a consistently
1:10:50profitable trader and here's a look at
1:10:53some of the things that are included in
1:10:55the course as you can see we have
1:10:56beginner lessons that teach you
1:10:58everything you need to know about
1:10:59technical analysis in terms of what
1:11:01you're going to learn in the course we
1:11:03have a transition course which is meant
1:11:04to take you from where you are to
1:11:06becoming consistently profitable and
1:11:08after that we have an advanced course
1:11:10that is meant to take your trading to
1:11:12that next level we also send out three
1:11:14to five email alerts every week these
1:11:16are not minus signals let me clarify
1:11:18that but instead me to show you exactly
1:11:20how i am looking at the market and we
1:11:23also do a review video at the end of
1:11:25every couple of weeks to show you how
1:11:27the strategies are performing and you
1:11:29can check those out right here so if
1:11:31more advanced training is something that
1:11:33you are looking for then we do have a
1:11:35few spots available in the eap training
1:11:37program this program also comes with
1:11:39priority email meaning you can email me
1:11:41at any point that you have questions and
1:11:43i will answer you asap so if a trading
1:11:46mentor is something you are looking for
1:11:48then look no further go ahead and click
1:11:50the link in the description for the eap
1:11:52training program and it would be a
1:11:53pleasure to have you aboard and to have
1:11:55you join us in the eap training program
1:11:58if not that's totally fine too make sure
1:12:00you're subscribed here on youtube make
1:12:02sure to click that like button for me if
1:12:03you enjoyed this video follow us on
1:12:05instagram at the trading channel and i
1:12:08will see you in the next video
1:12:24[Music]
1:12:33you

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Use the transcript to take notes, quote the speaker, build a study guide, generate a summary with ChatGPT or Claude via the YouTube Summary tool, or export it as a timed subtitle file with YouTube to SRT. You can also re-open it in the transcriber to choose a caption track available on the video.

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YouTube2Text is a free YouTube transcript generator — no signup, no daily limit. Paste any YouTube link and get the full transcript instantly, with timestamps, click-to-jump, caption language selection, AI prompts for ChatGPT, Claude, and Gemini, and exports to TXT, SRT, VTT, or Markdown.