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Deposit Currency

Standard Contract Size - Standard Lot

When exchanging one currency for another one, they use the notion of "lot". Lot is the amount of goods bought or sold. A lot can have different values for different currency pairs. At present, the most currency pairs have the lot value equal to 100 000 (One hundred). But 100 000 of what? When we buy, we give money for goods. When we sell, we get money for goods. But with currencies, we buy and sell simultaneously since we get one currency for another one. This is why it is common practice to consider that we get the first currency of the pair when we buy and give, respectively, the second currency. A standard lot for EURUSD is 100 000 euros. If we buy one standard lot of EURUSD, it means that we get 100 000 euros and give a number of US dollars. Since receipts and payments must always be equal, 100 000 euros = X US dollars. How can we calculate the amount of US dollars then? Let's replace euros with US dollars in the expression:

EURO= k*USD
where k is the exchange rate of EURUSD;
100 000 (k*USD) = X USD => X= k*100 000;
if the current exchange rate of EURUSD is 1.25, then X=125 000.

Thus, having bought one lot of EURUSD, we get 100 000 euros and give 125 000 US dollars. They sometimes say - euros were bought and US dollars were sold which means EURUSD was bought. You can get information about the price of a standard lot for a currency pair from the contract specification, as well as using the MarketInfo() function, for example:

MarketInfo(Symbol(), MODE_LOTSIZE);

You can also give the text name of a currency pair, and function

MarketInfo("EURUSD",  MODE_LOTSIZE);

will return 100 000. It is written in the Help files: MODE_LOTSIZE is the contract size in the symbol base currency. The base currency for EURUSD is EUR (*). The base currency for CHFJPY is Swiss franc, and the price of one lot will be expressed in Swiss francs, respectively.

Trade Result

Leverage and Margin

Margin Determination

Example:

MarketInfo("GBPJPY", MODE_LOTSIZE) gives the value of 70 000 (LS).
AccountCurrency() returns "EUR" (AC).
AccountLeverage() returns 50 (AL).
How can we calculate the price of the GBPJPY contract at the present moment (M)?

Base currency is GBP, so
M = 70000 GBP / AL = 70 000*GBPEUR / AL = 70000 / EURGBP / AL.

If the rate of EURGBP is 0.6786 at the moment, then
M = 70000 / 0.6786 / 50 = 2063.07 EURO.

If the leverage is equal to 100, the margin will be two times smaller - 1031.54 euros. For a leverage of ten, the margin will be:

M = 70000 / 0.6786 / 10 = 10315.36.

Thus, the leverage size influences only the margin size necessary to open a position, but does not impact the profit size obtained when trading by one contract. It should also be reminded that the margin size in euros (deposit currency) will fluctuate together with the EURGBP rate since the symbol base currency is British pound. In our example, we replaced GBPEUR with 1/EURGBP since there is only symbol EURGBP available.

Point - The Minimal Price Change

Currency pairs on Forex differ from each other not only by their special movements, but also by the number of decimal places in their rates. For example, the rate of GBPJPY, as of the 29th of December 2006, made 233.18, while the close price of GBPUSD was 1.9587 on the same day. The amount of decimal places (accuracy) can be set using function

MarketInfo(Symbol(), MODE_DIGITS);

For instance, function

MarketInfo("GBPJPY", MODE_DIGITS);

will return 2.

Correspondingly, the minimal price change for different currency pair will differ, too. This value is usually equal to 0.01 for pairs including yens, for EURUSD it makes 0.0001. The value of the minimal price change in the quote currency is named Point, and it can be obtained using function:

MarketInfo(Symbol(), MODE_POINT);

For currency pairs, values of functions

MarketInfo(Symbol(), MODE_POINT); and MarketInfo(Symbol(), MODE_TICKSIZE);

are the same.

Point Price in Deposit Currency

To evaluate risks, the trader must know the size of loss for an open position when price is moving to a certain amount of points. Or vice versa, calculate the acceptable loss size in points on the loss size in money terms. For this purpose, he or she can use function

MarketInfo(Symbol(), MODE_TICKVALUE);

that returns one-point value in the deposit currency.
It must be reminded that one-point price will change for currency pairs, the second value of which is not deposit currency.

Margin per Lot

The last function considered,

MarketInfo(Symbol(), MODE_MARGINREQUIRED);

returns the amount of free assets necessary to open a one-lot buying position, i. e., one standard lot price at the Ask price.

Exemplary Use of Functions Considered Above

Below you can see the script that shows data for functions considered above on twelve currency pairs. It must be noted that custom function MarginCalculate() of this script returns the price of one standard lot at the Bid price (selling price). The script below allows one to learn how to apply MQL4 functions to use in Expert Advisors algorithms of Money Management and Risk Management.

//+------------------------------------------------------------------+
//|                                          SimplySpecification.mq4 |
//|                      Copyright © 2007, MetaQuotes Software Corp. |
//|                                       http://www.metaquotes.net/ |
//+------------------------------------------------------------------+
string SymbolsArray[13] = {"","USDCHF","GBPUSD","EURUSD","USDJPY",
"AUDUSD","USDCAD","EURGBP","EURAUD","EURCHF","EURJPY","GBPJPY","GBPCHF"};
//+------------------------------------------------------------------+
//| string SymbolByNumber                                            |
//+------------------------------------------------------------------+
string GetSymbolString(int Number)
  {
//----
   string res = "";
   res = SymbolsArray[Number];   
//----
   return(res);
  }
//+------------------------------------------------------------------+
//| A very simple function to calculate margin for Forex symbols.    |
//| It automatically calculates in the account's base currency and   |
//| does not work for complicated rates that do not have direct      |
//| recalculation into the trade account's base currency.            |
//+------------------------------------------------------------------+
double MarginCalculate(string symbol, double volume)
  {
   string first    = StringSubstr(symbol,0,3); // the first symbol, for example,  EUR
   string second   = StringSubstr(symbol,3,3); // the second symbol, for example, USD
   string currency = AccountCurrency();        // deposit currency, for example,  USD
   double leverage = AccountLeverage();        // leverage, for example,          100
// contract size, for example, 100000
   double contract = MarketInfo(symbol, MODE_LOTSIZE);
   double bid      = MarketInfo(symbol, MODE_BID);      // Bid price
//---- allow only standard forex symbols like XXXYYY
   if(StringLen(symbol) != 6)
     {
      Print("MarginCalculate: '",symbol,"' must be standard forex symbol XXXYYY");
      return(0.0);
     }
//---- check for data availability
   if(bid <= 0 || contract <= 0) 
     {
      Print("MarginCalculate: no market information for '",symbol,"'");
      return(0.0);
     }
//---- check the simplest variations - without cross currencies
   if(first == currency)   
       return(contract*volume / leverage);           // USDxxx
   if(second == currency)  
       return(contract*bid*volume / leverage);       // xxxUSD
//---- check normal cross currencies, search for direct conversion through deposit currency
   string base = currency + first;                   // USDxxx
   if(MarketInfo(base, MODE_BID) > 0) 
       return(contract / MarketInfo(base, MODE_BID)*volume / leverage);
//---- try vice versa
   base = first + currency;                          // xxxUSD
   if(MarketInfo(base, MODE_BID) > 0) 
       return(contract*MarketInfo(base, MODE_BID)*volume / leverage);
//---- direct conversion is impossible
   Print("MarginCalculate: can not convert '",symbol,"'");
   return(0.0);
  }
//+------------------------------------------------------------------+
//| script program start function                                    |
//+------------------------------------------------------------------+
int start()
  {
//----
   for(int i = 1; i < 13; i++)
     {
      Print("Symbol=",GetSymbolString(i),"  spread=",MarketInfo(GetSymbolString(i),
      MODE_SPREAD),"  margin at 1 lot=",MarginCalculate(GetSymbolString(i),1),
      "  MODE_TICKVALUE=",MarketInfo(GetSymbolString(i),MODE_TICKVALUE),
      ", MODE_TICKSIZE=",MarketInfo(GetSymbolString(i),MODE_TICKSIZE),
      " MODE_MARGINREQUIRED=",MarketInfo(GetSymbolString(i),MODE_MARGINREQUIRED));
     } 
//----
   return(0);
  }
//+------------------------------------------------------------------+

* In most cases, the symbol's base currency is the first currency in the currency pair, but there can be different server settings, of course.