Gold (XAU/USD): how it differs from currencies
What you learn in 3 minutesGold is quoted as XAU/USD, and its contract size is not the same as a currency pair. On EUR/USD one standard lot is 100,000 units, so one pip is 10 units of the quote currency. On gold, one standard lot is usually 100 troy ounces, so a one-cent move in the price is 1 unit of the quote currency per lot. That single difference changes what a stop costs you in naira.
One pip on 0.10 lots of gold against a 30-pip stop on EUR/USD
| Step | Amount | Note |
|---|---|---|
| Gold contract size | 100 troy ounces per standard lot | This is the common size; it varies between brokers, so check your own contract specification. |
| Gold position size | 0.10 lots | 0.10 of a standard lot, so 10 troy ounces. |
| Gold price move used | 0.01 (one cent) | Gold is usually quoted to two decimal places, so the smallest common step is 0.01. |
| Value of that move on 0.10 lots | 0.10 units of the quote currency | 10 ounces x 0.01 = 0.10. The quote currency is USD. |
| Same figure in naira | ₦0.10 x the USD/NGN rate | At a rate of ₦1,600 to USD1, that is ₦160. The rate moves daily, so use the rate your broker shows. |
| EUR/USD position size | 0.10 lots | 0.10 of 100,000 units, so 10,000 units. |
| One pip on EUR/USD at 0.10 lots | 1 unit of the quote currency | 10,000 x 0.0001 = 1. The quote currency is USD. |
| Same figure in naira | ₦1 x the USD/NGN rate | At ₦1,600 to USD1, that is ₦1,600. |
| A 30-pip stop on EUR/USD | ₦48,000 | 30 x ₦1,600 = ₦48,000. |
| A 30-cent stop on gold, 0.10 lots | ₦48,000 | 30 x ₦160 = ₦48,000. The arithmetic matches because the lot sizes differ by the same factor. |
Brokers may round the pip value, add a spread, charge a commission, or apply a swap for positions held overnight. Gold spreads are often wider than EUR/USD spreads, and gold ranges are often larger, so the same number of steps can cost more in practice. Check the contract specification and fee schedule on your own account.
The mistake people make here
The common mistake is to carry a pip value across from a currency pair to gold without recalculating. Someone who knows that one pip on 0.10 lots of EUR/USD is about ₦1,600 may assume the same for gold, then set a stop that is far too wide in naira terms. The fix is to look up the contract size for the instrument you are actually trading, work out the value of one price step, and only then choose the stop distance. If the naira risk is larger than planned, reduce the position size rather than widening the stop.Check yourself
On 0.20 lots of gold, one cent of price movement is worth how much in the quote currency?
0.20 lots is 20 troy ounces. 20 x 0.01 = 0.20 units of the quote currency, which is USD.
At a USD/NGN rate of ₦1,600, what is that 0.20 units worth in naira?
0.20 x ₦1,600 = ₦320.
If you risk ₦32,000 on gold at 0.20 lots, how many cents of stop distance does that allow?
₦32,000 divided by ₦320 per cent = 100 cents, or 1.00 in price terms.
On EUR/USD at 0.20 lots, one pip is worth how much in naira at ₦1,600?
0.20 lots is 20,000 units. 20,000 x 0.0001 = 2 units of the quote currency, so 2 x ₦1,600 = ₦3,200 per pip.
In Nigeria
- Regulator
- The Securities and Exchange Commission (SEC Nigeria) is the regulator for investment services in the country.
- Funding methods
- Bank transfer, USSD and cards are common ways to move money into a trading account.
- Currency
- The naira, written ₦ (NGN), is the local currency, so USD profits and losses are converted at the rate your provider uses.
- Rate risk
- The USD/NGN rate used in this lesson is an example only; it changes daily and differs between providers.
- Costs to check
- Spreads, commissions, swap charges and conversion fees vary between brokers, so compare the published fee schedule before funding.