Metal Trading / Training Example
The most liquid spot metals are gold and silver.
XAU/USD » referred to as GOLD
XAG/USD » referred to as SILVER
- Buy GOLD at 610.00 (you are buying the GOLD against the USD and hoping the price goes upwards)
- Buy SILVER at 11.50 (you are buying the SILVER against the USD and hoping the price goes upwards)
Metals have standardized lot sizes as follows:
| Currency Pair |
Contract size |
Value of 1 pip |
| GOLD |
100 oz. |
$ 10.00 |
| SILVER |
5,000 oz. |
$ 50.00 |
For each lot you want to open (trade), you must have a minimum of $1,000 in your account.
Therefore if you start your account with $10,000, you can buy or sell up to 10 lots (though not recommended). If you profit $2,000 because you made the right decision, then on the next trade you can open 12 lots. If however you lose $2,000, then on the next trade you can only open 8 lots.
Margin a call:
There is no margin call on the account. However, all positions in the account will be closed when the margin level is at 5% (Equity / Margin ratio).
Example:
Equity $10,000 ÷ Margin required $5,000 = 200%
Equity $5,000 ÷ Margin required $5,000 = 100%
Equity $1,000 ÷ Margin required $5,000 = 20%
Equity $250 ÷ Margin required $5,000 = 5% (all positions will be closed)
Profit and loss calculation:
Buy 3 GOLD at 610.00 / Sell 3 GOLD at 613.00
(3 x 100 x 613.00) – (3 x 100 x 610.00) = $900 profit
Buy 4 SILVER at 11.60 / Sell 4 SILVER at 11.80
(4 x 5,000 x 11.80) – (4 x 5,000 x 11.60) = $4,000
Above examples are all winners. Doing the opposite would have resulted in a loss.
NOTE: The above calculations do not include commissions.
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