I am new to forex and I am trying to understand things well before I trade with lvie accounts. I understand how profits/losses are calculated but I don't seem to get why profit/losses with USD/JPY pair differ from other pairs such as EUR/USD.
For example, when testing strategies in Demo Account. A buy of 2500 Size (.25 lots) gives me a a higher profit/loss ~between $50-$500 for USD/JPY pair. But, when I test the strategy against EUR/USD with same position size -2500, I get a lower profit loss range ($5-$50). Two Questions:
Q1.If profit/loss depends on pips then why so much difference in $ amount ? Is it that USD/JPY pair is much more volatile and there is a greater opportunity for profits or risk for loss?
Q2. Does entering a Position(long) of 2500 USD/JPY mean I need to have greater than $2500 in my account? Conversely, does entering a Short position with a size 2500 means selling $2500 USD to buy JPY? The math would say-
To put it in mathematical terms , here is how I am calculating profit when buying
Buying- 0.25 lots @114.50
Enter Long Calculation : 2500 X 114.50 = 286250 YEN
Selling -.25 Lots @114.70
Exit Long Calculation : 2500 X 114.70 = 286750 YEN
Difference =500 YEN . Applying current conversion rate results in 500/114.70 = $1 Profit @ 20 Pips
In the demo account however, I get a much higher profit amount ~$1000. What am I not getting???
Thank you for your help!!