Smart money: order blocks, FVG, liquidity
What you learn in 3 minutesA reader asked: 'I keep seeing videos about order blocks and liquidity. What are they actually, and do they change what I pay in rand?' This lesson gives you the vocabulary and, more importantly, the assumption underneath it. All three terms describe places on a chart where large orders are assumed to sit. The assumption is the part to understand. The chart does not label them for you.
20 pips on 0.10 lots: the rand maths
| Step | Amount | Note |
|---|---|---|
| Instrument | USD/ZAR | example price around 18.4100 |
| One pip | 0.0001 | standard for this pair |
| Position size | 0.10 lots | 10,000 units of the base currency |
| Value of one pip | R0.10 | 0.10 lots x 0.0001 x 10,000 units |
| Move marked on the chart | 20 pips | from the block to the sweep |
| Gross result | R2.00 | 20 x R0.10 |
| Spread cost | varies | brokers quote different spreads on USD/ZAR |
Your broker may round pip values, charge commission, apply a wider spread at certain times, or add swap if the position is held overnight. Check the contract specification before you trade.
The mistake people make here
The common mistake is treating an order block or fair value gap as a promise. A block is just a zone drawn after the fact, and a gap can be filled or ignored. People also assume liquidity means free money, when it only means orders are likely resting there. Instead, mark the zone, write down what would prove the idea wrong, and size the position so a loss of that size is acceptable. If you cannot state the invalidation level in rand, you are not ready to place the trade.Check yourself
USD/ZAR moves 35 pips against a 0.10 lot position. What is the gross loss in rand?
One pip is R0.10 on 0.10 lots. 35 x R0.10 = R3.50 gross. Spread, commission and swap are added on top and vary by broker.
A reader marks a block at 18.4100 and a sweep at 18.4130. How many pips is that, and what is it worth on 0.10 lots?
18.4130 - 18.4100 = 0.0030, which is 30 pips. On 0.10 lots that is 30 x R0.10 = R3.00 gross.