Thanks there Jason.
Ah, the CFD NGAS amounts baffle me - I need to convert what 1 unit as 1 million brit units equates to in $usd. I need to read up on this somewhere, just need to figure out the search terms to use. "CFC contract size value" maybe.
The amounts used to measure natural gas trades can be confusing at first. The lot size for NGAS is 1k. Natural gas quantities are measured in units of mmBtu which stands for 1 million British thermal units.
If you place an order for 1 lot of NGAS on Trading Station, you are actually trading 1k mmBtu or 1,000 million British thermal units. Technically, that's 1 billion British thermal units, but people don't say it that way. It's similar to how people say 1,000 kilometers instead of 1 million meters, because kilometers are the commonly used unit of measurement.
Suppose NGAS is trading at 3.740. That's means the price of natural gas is $3.740 per mmBtu. If buy 1 lot of NGAS, then your trade has a face value of $3,740.00. That's why the used margin you have to set aside for the trade is 40.00 which is approximately 1% of the face value.
re: CoT. Yes, the CFTC reports are not being issued due to the US gov shutdown. There are still EU/UK ICE futures by AFAIK they only cover oil and gas. This is a major problem for me as the CFTC CoT report was a central compass for me helping me establish ballpark figures to go from both for price and also for scaling. I'm dead in the water now. There are hundreds of countries in the world, surely there must be similar disclosure reports from other countries?
I asked Jamie Saettele this question, since he uses COT extensively in his articles for DailyFX. He says the only other source he knows of for this kind of sentiment data on futures markets is a survey of floor traders called the Daily Sentiment Index (DSI). Unfortunately, that report isn't free. Of course, this shutdown reminds us that COT isn't free either.
So if:
GBPJPY-Sell 21k
NZDAUD-Sell 5k
=equals=
GBPJPY- £2100 at risk
NZDAUD- £500 at risk
then
1k = ~£100?
The amount of money you are risking on a trade is actually based on 2 factors: the trade size and the pip cost. The pip cost for 1 lot (1k) of GBP/JPY is approximately 6 pence as you can see from the table below. (It's actually closer to 6.4 pence based on the current GBP/JPY exchange rate, but the Pip Cost column on shows 2 digits past the decimal point. You will still get credit for the full unrounded amount on trades.)
That means on 21k GBP/JPY you are risking approximately £1.35 per pip. Consider how many pips you want to risk on this trade. For example, if you want to set your stop 100 pips away, then you would lose approximately £135 if you got stopped out.
Also, it's important to remember that the currency symbol is AUD/NZD, never NZD/AUD. If you feel NZD will fall in value relative to AUD, then you would want to buy AUD/NZD.
"In a live account, if you enter the JPY - Buy currency basket, then you will have the ability to close out the individual component trades of the basket separately."
I think you could be wrong there? In MirrorTrader I tried this and automatically all pairs were closed for me. Might be different in a different interface.
You are correct. This was my mistake and I apologize. It used to be the case that you could close individual components of the currency baskets using Trading Station. That was changed with an update last month.
I'll test with a demo account. In fact, I better do some more testing in general with a demo account, might help me get my head round the amounts by clearing out all other symbols and then just entering NGAS.
That's a good idea. A demo account will help you get comfortable with the numbers. Experiment by placing trades of different sizes. See how those changes affect your used margin, usable margin and Gross P/L. Also, I encourage you to read the CFD FAQs section on our site and CFD Product Guide.
Ok, I price of NGAS is currently 3.645, spread is 10. I buy one in the demo account, p/l is instantly -10, gross: -6.22
^ so that's the margin coming into pay right?
What you saw was that you were losing 10 pips, and the pip cost must have been 62.2 pence at the time. That's why your Gross P/L was £6.22. Gross P/L is the amount you are making or losing in British pounds based on your P/L in pips and the pip cost.
And in order to avoid margin I would just have to remove those bigger CFD contracts - in the example the currency amounts make this so right?
But if I wanted to be more exact in getting the amounts at risk exact to £10 that's not possible - I need to scale in and out in £100 jumps?
The larger the trade, the more used margin you have to set aside to maintain the position. Your usable margin is what's left of your equity after subtracting this used margin. Your usable margin will go up if your trades are making money and will go down if your trades are losing money. If your usable margin were ever to fall to zero, then all your open trades would be liquidated to prevent further losses.
Keep in mind that this is a safety mechanism of last resort to prevent you from ever having a negative balance. However, you should never place such big trades that your usable margin is ever in danger of falling to zero in the first place. I mentioned earlier to consider how many pips you want to risk on a trade.
Personally, I try never to risk more than 2% of my equity on a single trade. With £5000 in your account, that would mean risking no more than £100 on a trade. Since you're risking about £1.35 per pip on a 21k GBP/JPY trade, that would mean you could risk about 74 pips on the trade. If you wanted to risk more pips, then you would have to reduce your trade size accordingly.
