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Buying 1 lot GBPUSD: Is it 1 lot GBP or USD?

  • Post #1
  • Quote
  • First Post: Jan 28, 2011 5:37am Jan 28, 2011 5:37am
Hi, Everyone,

If I buy 1 lot GBPUSD, is it 1 lot GBP or 1 lot USD? Could someone give me a quick and correct answer?

Many thanks!
The way I understand it is the first currency in the pair is the base currency and is the currency denomination you are buying the lots with.

So in GBPUSD 1 Lot you are buying £100,000 worth of currency

and in USDJPY 1 Lot will be $100,000 worth of currency
The Only Limit, is the One that you Set Yourself - Felix Baumgartner
It seems answer in this post is different. I am confused.

http://www.forexfactory.com/showthre...85#post2285285


Quoting Shabs19
The way I understand it is the first currency in the pair is the base currency and is the currency denomination you are buying the lots with.

So in GBPUSD 1 Lot you are buying £100,000 worth of currency

and in USDJPY 1 Lot will be $100,000 worth of currency
  • Post #4
  • Quote
  • Edited 9:57am Jan 28, 2011 9:56am | Edited 9:57am
I can see the confusion here.
currency markets are traded in US denomination,
1 lot = 100,000 US dollars worth of currency,

Where it gets complicated, If your account is in GBP:
you are buying 1 lot of GBPUSD you are buying $100,000 of GBP, selling the same amount of USD and so you will be purchasing 100,000 divided by the current rate (1.5906) total cost to you of £62,869 .

pip value is calculated as 100,000 divided by 0.0001 ( 1pip) = in dollars is $10 or £62,869 divided by 0.0001 = £ 6.286 GBP
The Only Limit, is the One that you Set Yourself - Felix Baumgartner
Quoting dogberry
It seems answer in this post is different. I am confused.

http://www.forexfactory.com/showthre...85#post2285285
Quoting hanover
xxxUSD pairs
1 lot = USD100,000 contract for any xxxUSD pair. 1 pip = 0.0001 dollars (i.e. 0.01 cents) movement. Hence each pip moved results in a gain or a loss of 100,000 x 0.0001 = USD 10.00
I can't remember my thoughts when I posted that more than 2 years ago. But here is an example that hopefully clarifies any misunderstanding:

Let's say GBPUSD is currently at 1.6100, and I decide to buy 1 lot. What I'm doing is buying GBP 100,000 with USD 161,000.

Now let's suppose GBPUSD rises to 1.6200, and I decide to sell. Hence I sell my GBP 100,000 back to the market, and receive USD 162,000.

The gain is 100 pips (1.6200 minus 1.6100), or USD 1,000 (USD 162,000 minus USD 161,000). Hence GBPUSD (or, by the same logic, any xxxUSD pair) trades at USD 10.00 per pip.

The balance of my trading account will rise by USD 1,000, or the equivalent in whatever currency my account is denominated in.

When I read my original post now, the part about USD 10.00 per pip is correct, but the implication that the contract was for USD 100,000, is not. I apologize for the confusion.

So, to answer your original question: When you buy 1 lot GBPxxx, it is GBP 100,000.
  • Post #6
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  • Last Post: Feb 3, 2011 9:42am Feb 3, 2011 9:42am
You are buying 1 currency vs 2
May the Force be with You
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