[How To] Don ´t forget the point value!

I´ve noticed many times that when people post their strategy results here that they are not taking into the account the actual point value SQ allows to set. The point value (a multiple of the tick value) needs to be set correct in relation to your account base currency.

For example: your account is USD based and you trade the EURUSD. EURUSD is nominated in USD, so any profit / loss coming from it is already in USD by nature and if your account is USD based, the conversion of the profit from this pair to your account base currency would be “1”. However, the fun begins if you start trading the EURAUD on your USD based account. On EURAUD, any profit / loss is given in AUD and that needs to be converted to your account base currency into USD. As of right now this would mean that for your USD based account:

EURUSD 1 lot, 1 pip movement = 10 USD

EURAUD 1 lot, 1 pip movement = ~8 USD

Your broker does this automatically in realtime when you trade and showing your profits, but when you backtest in SQ and create strategies, this is a whole different story and is NOT taken into account if you don´t account for it in SQ in the Data Manager.

So how do we address this problem in SQ? Via the “Point Value in $” field of each pair in the Data Manager!

As an example, here is a screenshot of my current setup for USD based accounts, using rates from May 2015:

Remember that this is for a USD based account. For EUR based accounts, these values are completely different, as for example if EURUSD is being traded on a EUR based account, the profit / loss of that pair that is expressed in USD, needs to be converted to your account base currency EUR.

Again, your broker does this all in realtime with the current rates, SQ does not, and you need to adjust it steadily (I update the point values once a month) as they are just as fluctuating like any currency pair, since it is nothing else than a steady currency conversion from the currency each pair is nominated in to your account base currency.

So how do you obtain these point values for your account base currency? It´s easy, go to http://www.xe.com/currencyconverter/#and in the first row you selected the currency the pair you want to trade is denominated in. For EURUSD that = USD. For GBPAUD = AUD. For EURAUD = AUD. For USDCHF = CHF, for GBPCHF = CHF. I think you get the idea. In the second row simply select your account base currency. Now press the “Play” button and you will get the current exchange rate. Multiply that by 100000 and enter it into the “Point Value in $” field in the SQ Data Manager.

Let´s go through setting up the point value for EURAUD for a USD based trading account:

1) Go to: http://www.xe.com/currencyconverter/convert/?Amount=1&From=AUD&To=USD

2) Current rate is

1.00 AUD = 0.782890 USD

3) Multiply 0.782890 by 100.000

4) = 78289 which is the point value you enter for EURAUD in the SQ Data Manager!

Voila, now your backtests will reflect the reality a lot better. As you see using the correct point value can make a HUGE difference in your backtests as some pairs like EURAUD like in the example above, which is traded on a USD based trading account, has a tick value of just 0.78, which means your backtests that possibly are using a tick value of 1 (or a Point Value of 100.000 in that case) will in reality just have 78% of the values in terms of Net Profit and Drawdown if the corrent point value for your account base currency is used. This is ESPECIALLY important if you create portfolios as the relations between the pairs, Net Profit and total portfolio Drawdown can change a lot if you use the correct point value.

Good luck:)

What settings for pip size and pip step should be for MXN? Point value I’ve calculated and it’s 5625 currently.

Same question for RUB.

check with your broker. It can be 4 or 5 digits for both

Tomas: the point value is not the amount of digits. Read again:)

Tomas: the point value is not the amount of digits. Read again:)

So what pip size and step should be for MXN and RUB? 

Where can I obtain those numbers?

So what pip size and step should be for MXN and RUB? 

Where can I obtain those numbers?

The same as any other normal 5 digit pair.

pip = 0.0001, step = 0.00001

If the data is 4digit data then both are 0.0001.

The same as any other normal 5 digit pair.

pip = 0.0001, step = 0.00001

If the data is 4digit data then both are 0.0001.

Why JPY pairs are 0.01/0.001 then?

Because they are 3 digit pairs.

Normal FX pair format- X.YYYYY

JPY PAIR- XX.YYY

Look at the market price.

Has Mark seen this issue yet? The fix is built into MT4 and wouldn’t add any extra development time, simple fix. Definitely needs to be part of SQ4.

So what pip size and step should be for MXN and RUB? 

Where can I obtain those numbers?

Sorry, but no one is going to babysit you if you are not able to read the post completely. It is demonstrated several times there by me and others how to come up with the point value for any currency pair. Just read the damn thread and especially post #1 and that´s all you need to come up with the values you need.

Sorry, but no one is going to babysit you if you are not able to read the post completely. It is demonstrated several times there by me and others how to come up with the point value for any currency pair. Just read the damn thread and especially post #1 and that´s all you need to come up with the values you need.

I was not asking about point value, and pip size “discovery” process was never explained.

How about you use the search function then? This thread is about the point value. The pip / tick size was discussed X times in this forum already:

Sure I did.

But it’s still doubtful and hard to get and calculate.

Look:

If the price moves by 1 pip:

– 1 pip = 0.01 point for USDJPY, because Pip Size = 0.01.

But WHY a hell pip size is 0.01?!

Sure I did.Look:

But WHY a hell pip size is 0.01?!

if currency has 2 decimals(or 3 at some brokers)–> x,xx than pips size is 0.01. (eurjpy, usdjpy, audjpy…..) when curency has x.xxxx (4 decimals / or 5 at some brokers) pip size is 0.0001 (eurusd, gbpusd..)

What is a ‘Pip’
A pip is the smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point(investopedia.com)

 

Look:

But WHY a hell pip size is 0.01?!

http://www.babypips.com/school/preschool/how-to-trade-forex/pips-and-pipettes.html

Have you not traded a JPY pair ever before?

If you buy 1.0 lots and make 1 pip (0.0001 or 0.01 for JPY), the profit is ~ 10$ on most pairs.

if currency has 2 decimals(or 3 at some brokers)–> x,xx than pips size is 0.01. (eurjpy, usdjpy, audjpy…..) when curency has x.xxxx (4 decimals / or 5 at some brokers) pip size is 0.0001 (eurusd, gbpusd..)

 

What is a ‘Pip’

A pip is the smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point(investopedia.com)

Edit: I misread it as “smallest interval” (thinking pipette)
 

The investopedia definition is WRONG.

Going by their definition 0.00001 is a pip in EURUSD and 0.001 is a pip in USDJPY. These are not pips, they are *PIPETTES*. Their definition was true 15 years ago when brokers weren’t using pipettes. Today their definition is wrong.

Many brokers STILL dont use pipettes.

so pipette is the smallest movement? the smallest possible tick is same size as pipette?

I misread your quote. I thought they said “smallest interval” which would be a pipette.