Day trading
What you learn in 3 minutesThis lesson explains what a day trade is: a position opened and closed within one trading session, so it is never held overnight. You will see how a small move on AUD/USD turns into a dollar figure on your account, and why the cost of that trade depends on the size you choose. The worked example uses a 0.10 lot position that is opened, held and closed before the daily rollover, so no swap is charged.
One day, 20 pips, A$132.80
| Step | Amount | Note |
|---|---|---|
| Entry price | 0.6640 | The AUD/USD rate at the moment the position is opened. |
| Exit price | 0.6660 | The rate at the moment the position is closed, 20 pips higher. |
| Position size | 0.10 standard lot | One tenth of a standard lot, so 10,000 units of AUD. |
| Pip value for this size | A$1.00 per pip | One pip on one standard lot is 10 units of the quote currency; at 0.6640 that is about A$6.64 per pip, and one tenth of that is about A$0.664. Your broker's own conversion rate will differ slightly. |
| Gross result | A$13.28 | 20 pips multiplied by A$0.664 per pip, using the conversion rate above. |
| Swap | A$0.00 | No swap is charged because the position is closed before the daily rollover. |
Your broker may round the pip value, apply its own conversion rate, and charge a spread or commission on top. Those amounts vary between brokers, so check the contract specifications before you trade.
The mistake people make here
The common mistake is to treat a day trade as a way to avoid risk, because no swap is charged and the position is closed by the evening. The absence of a swap does not remove the risk of the price moving against you while the market is open. Instead, decide your exit before you enter: a price level where you will close at a loss, and a price level where you will close at a profit. Write both down, and close the position before the session ends as planned.Check yourself
You open 0.20 lots of AUD/USD at 0.6640 and close at 0.6655. How many pips did you gain, and what is the gross result in A$?
The move is 0.6655 minus 0.6640, which is 0.0015, or 15 pips. One pip on one standard lot is 10 units of the quote currency; at 0.6640 that is about A$6.64 per pip. For 0.20 lots the pip value is about A$1.328. Multiply 15 pips by A$1.328, which gives about A$19.92 before costs.
You open 0.05 lots of AUD/USD and the price falls 12 pips. What is the gross loss in A$, using the same conversion rate?
One pip on 0.05 lots is about A$0.332. Multiply 12 pips by A$0.332, which gives about A$3.98 before costs.