Routes through the courseSix lessons on XAU/USD: contract size, how a pip is counted, and why risk per trade has to be worked out differently.
Trade gold
Lessons on this route
6 lessons
- 1 · Lesson 2.8
Gold (XAU/USD): how it differs from currencies
Different contract size, different pip, wider ranges. The arithmetic of risk per trade changes with all three.
- 2 · Lesson 1.3
What a pip is worth in money
A pip is the smallest standard price step. What it is worth depends on lot size and the pair, so the same twenty-pip move pays differently on different trades.
- 3 · Lesson 1.7
Leverage and margin: how much of the trade is yours
Leverage sets how large a position your deposit can hold. Margin is the part of your money locked against it while the trade is open.
- 4 · Lesson 1.9
Stop loss and take profit
Two instructions you attach to a position: one closes it at a loss you chose in advance, the other at a profit you chose in advance.
- 5 · Lesson 3.2
Working out position size
Risk in money, divided by the stop distance in pips, divided by pip value. Three numbers you already have, in that order.
- 6 · Lesson 2.14
Sessions, news and the calendar
Which hours a pair actually moves in, and which scheduled releases widen spreads enough to matter to a stop.
Check what you already need before the first lesson
This route is for someone who has already met the basics of a chart and a trade, and now wants to look at one instrument properly instead of jumping between many. Two cases show the point. In the first, a reader finishes the currency lessons, then opens a gold position using the same position size they used on EUR/USD, and finds the money moving far faster than they expected. In the second, a reader finishes the same currency lessons, spends one evening on how gold is quoted and sized, and then opens a smaller position than their currency habit suggested. The second reader has not learned a secret. They have simply measured the instrument before using it.
Gold is not a currency pair. It is one metal priced in United States dollars, and that changes the size of a standard contract, the meaning of a pip, and the amount of money that moves when the price moves by one point. A currency pair compares two economies. Gold reacts to different things: interest rate expectations, the strength of the dollar, and demand for a store of value. None of that makes gold better or worse. It makes it different, and difference is what has to be measured.
Before you start, have three things ready. First, a way to place a practice trade without real money, because the numbers in this route are easier to see than to imagine. Second, a calculator or a spreadsheet, since every figure below has to be worked out from the numbers beside it. Third, a written note of how much you are willing to lose on one trade, in KES, decided before any chart is open. If you cannot write that number down, the route will not help you, because every lesson after the first depends on it.
Follow the order because each lesson supplies the next lesson's number
The order is not a difficulty ladder. It is a chain. The contract size of gold gives you the value of one pip, the pip value lets you judge what leverage really does to your money, and leverage and margin together decide where a stop loss can sit without risking more than your written limit. Position size is the last calculation, not the first, because it needs the stop distance and the pip value. Sessions and news come last because they change how far a stop needs to sit, and you cannot judge that until you know what a stop costs.
If you skip ahead, the later lessons lose their inputs. A reader who tries to work out position size before knowing the pip value will guess, and a guessed position size is the same as no plan. A reader who studies sessions before understanding margin will widen a stop for no measured reason. The sequence exists so that every number you write down comes from a number you already worked out, not from a feeling about the market.
Expect the route to take about a week of short sessions rather than one sitting. The ideas are not difficult, but each one needs to be applied to a live price before it sticks. Use EUR/USD around 1.0850 as a comparison point when a lesson asks how gold differs, because the contrast is the lesson. Write your answers down. A number you have calculated once and kept is worth more than a paragraph you have read twice.
Know what the route gives you and where people go wrong
Finishing this route gives you a repeatable calculation, not a forecast. You will be able to take a gold price, a stop distance and your own loss limit, and produce a position size in a few minutes. You will know why a gold position is usually smaller than a currency position for the same money at risk, and you will know which costs vary between brokers, such as spreads, swap charges and margin requirements. Those costs vary, so check them with whoever holds your account rather than assuming a figure from any course.
The most common mistake is carrying a currency habit into gold. A reader who has traded EUR/USD for months has a feel for what a normal move looks like, and that feel is wrong for gold. The second mistake is treating leverage as free buying power. Leverage does not increase the amount you can safely risk; it increases the amount you can lose quickly. The third mistake is moving a stop loss after the trade is open, which turns a measured loss into an unmeasured one.
A fourth mistake is following the route without a practice account and then blaming the lessons when real money behaves differently. A fifth is checking the economic calendar once at the start of the week and never again, even though gold reacts to scheduled releases and to changes in rate expectations. None of these mistakes come from a lack of intelligence. They come from doing the steps in the wrong order or skipping the writing down. The route is short. The discipline of writing the numbers is the part that takes practice.
Doing it once, step by step
Work through the six lessons in the order given, writing one number from each before moving to the next. By the end you will hold a single position size calculation that you can repeat for any gold trade.
- 01
Compare gold with a currency pair
Open the gold lesson and note the contract size and how the price is quoted. Put it beside EUR/USD around 1.0850 and write down two differences that affect money, not opinion. Keep that note; the next lesson uses it.
- 02
Calculate the pip value in shillings
Use the contract size from the first lesson and a shilling exchange rate you can check yourself. Work out what one pip of gold is worth in KES, showing the arithmetic beside the answer. Do not move on until the figure recomputes from the numbers you wrote.
- 03
Test leverage against your own loss limit
Take the loss limit in KES you wrote before starting and see what leverage and margin would do to it if the price moved against you. Compare the result with the same calculation on EUR/USD. The point is to see how quickly the money at risk grows, not to find a maximum.
- 04
Place a stop and a target on a practice chart
Choose a gold price, set a stop at a distance you can justify, and set a target at a distance you can also justify. Write both distances in pips. A stop without a written reason is a guess, and a guess cannot be sized.
- 05
Work out one position size
Combine the pip value, the stop distance and your loss limit into a single position size. Check it by reversing the calculation: does the stop distance multiplied by the pip value and the size come back to your limit. If it does not, correct the arithmetic before trading anything.
- 06
Check the calendar and the session
Look at the economic calendar for the days you plan to trade and note the scheduled releases that affect the dollar and gold. Decide in advance whether you will hold through them or stand aside. Then repeat the position size calculation once more with the wider stop that news might require.
Questions that come up next
How long does this route take to work through?
Most readers get through the six lessons in about a week of evenings. The first two lessons are short because they are mostly definitions. The position size lesson takes longest, because you have to run the calculation several times with different stop distances before it feels routine. There is no fixed pace, and nothing on the page depends on how fast you go.
Can I follow the route using only a phone?
Yes, for the reading and the arithmetic. A phone handles the calculator or spreadsheet without trouble. What a phone makes harder is watching a chart while you also write numbers down, so many readers keep a notebook beside them. A practice account can be opened on a phone, and the amounts in this route are small enough to check by hand.
Why is gold measured differently from EUR/USD?
Gold is one metal priced in dollars, not two currencies compared against each other. That changes the standard contract size, so the money value of a one-point move is not the same as it is on a currency pair. The pip is counted in a different place on the price. If you carry a currency habit into gold, your position will be larger than you intended.
What if I do not have a fixed amount I am willing to lose?
Then the route will not work for you yet, because the later lessons need that number as an input. Write down a figure in KES that you could lose on one trade without it changing anything else in your month. It does not need to be large. It needs to be real and written before you open a chart.
Does the route tell me which direction gold will move?
No, and nothing on this page should be read that way. The route is about measuring an instrument and sizing a trade, not about predicting price. Sessions and news are covered because they change how far a stop needs to sit, not because they point to a direction. Anyone offering a direction is offering something this course does not.
Where does the broker fit into all this?
The route does not name one, because contract size, margin rules and spreads vary between brokers, and the figures you calculate have to come from your own account terms. Read those terms before the leverage lesson, since they set the numbers you will use. Payment methods such as M-Pesa and bank transfer also vary in speed and cost from one provider to another.
The words used on this page
- contract size
- The fixed amount of the underlying asset that one standard trade represents. On gold it is not the same as on a currency pair, which is why the money value of a price move differs. Your broker's terms state the size you are actually trading.
- pip
- The smallest standard step in a quoted price, used to count how far a price has moved. On gold the step sits in a different place on the price than it does on EUR/USD. Its money value depends on your contract size.
- leverage
- The arrangement where a broker lets you control a position larger than the money you set aside for it. It multiplies both the gain and the loss on the same price move. It does not change the size of the move itself.
- margin
- The portion of a position's value that is yours and must be held with the broker while the trade is open. It is not a fee and it is not a limit on your loss. A falling balance can require more margin or close the trade.
- stop loss
- An instruction to close a trade at a chosen price so the loss stays at a level you decided in advance. The distance between your entry and that price is what position size is calculated from. A stop that sits too close can be reached by ordinary movement.
- position size
- The amount you actually trade, worked out from your written loss limit, the stop distance and the pip value. It is the last calculation in the route, not the first. Getting it wrong undoes the care taken in every earlier lesson.
What to take away
- The route is a chain, not a ladder: contract size feeds pip value, pip value feeds the leverage judgement, and both feed position size.
- Decide your loss limit in KES in writing before you open any chart, because every later lesson uses that number.
- Gold is one metal priced in dollars, so a currency habit carried across will size your trade too large.
- Sessions and news come last because they change how far a stop needs to sit, and a stop's cost is only known once the earlier numbers are settled.