How to Determine Point Value: Using the "Contract Specification" Tool
In the fast-paced world of Forex and CFD trading, the most common reason for catastrophic account failure isn't a bad strategy—it is a lack of mathematical awareness. Many traders enter a position on a new instrument (like Oil, a minor currency pair, or an Index) assuming the point value is the same as EUR/USD.
When the price moves just a few inches on the screen and their account balance drops by 20%, they realize too late that they didn't know the "Point Value."
The secret to avoiding this trap lies in a single, often overlooked feature in your trading platform: The Contract Specification Tool. This guide will teach you how to master this tool to calculate risk with surgical precision across all asset classes.
1. What is the "Contract Specification" Tool?
The Contract Specification tool is the "DNA" of a financial instrument. It is a window within platforms like MetaTrader 4 (MT4), MetaTrader 5 (MT5), or cTrader that lists every rule governing that specific asset.
How to Find it:
Ctrl+M on your platform.
2. Decoding the Key Metrics
To determine point value, you only need to look at three specific rows in the Specification window:
How many units of the asset make up 1.00 Lot.
How many decimal places the price has (4, 5, 2, or 3).
The smallest possible price increment.
The Universal Point Value Formula:
Point Value = Contract Size х Tick Size
3. Forex Majors & Minors: Applying the Spec Tool
For most Forex pairs, the "Contract Size" is standard (100,000), but the "Digits" vary, which changes the point value.
Table: Using Specification Data for Forex
| Pair Type | Contract Size | Digits | Tick Size | Point Value (per 1 Lot) |
|---|---|---|---|---|
| Majors (EUR/USD) | 100,000 | 5 | 0.00001 | $1.00 per point ($10/pip) |
| Yen Pairs (USD/JPY) | 100,000 | 3 | 0.001 | $100 per point ($10/pip approx) |
| Exotics (USD/MXN) | 100,000 | 5 | 0.00001 | $1.00 per point |
4. Why the "Contract Size" Changes Everything
The "Contract Size" is where most traders make mistakes, especially when moving from Forex to Commodities or Indices.
Case Study: Gold (XAU/USD) vs. Silver (XAG/USD)
If you look at the Specifications for Gold and Silver, you will see a massive difference in the contract size.
| Asset | Contract Size | Tick Size | Point Value (1 Lot) |
|---|---|---|---|
| XAU/USD (Gold) | 100 | 0.01 | $1.00 |
| XAG/USD (Silver) | 5,000 | 0.01 | $50.00 |
The Lesson: Trading 1 lot of Silver is 50 times more expensive than trading 1 lot of Gold, even though they are both metals. You would only know this by checking the Specification tool.
5. Comprehensive Examples: 20 Trading Scenarios
Below is a detailed table showing how to read the Specification tool for 20 different instruments to find the dollar value of a move.
| Instrument | Contract Size | Move Type | Price Change | Profit/Loss (1 Lot) |
|---|---|---|---|---|
| EUR/USD | 100,000 | 10 Pips | 0.0010 | $100.00 |
| GBP/USD | 100,000 | 50 Pips | 0.0050 | $500.00 |
| USD/JPY | 100,000 | 20 Pips | 0.20 | $133.00 (variable) |
| XAU/USD | 100 | $5.00 move | 5.00 | $500.00 |
| XAG/USD | 5,000 | $0.10 move | 0.10 | $500.00 |
| NAS100 | 1 | 100 Points | 100.00 | $100.00 |
| SPX500 | 1 | 10 Points | 10.00 | $10.00 |
| GER40 | 1 | 50 Points | 50.00 | €50.00 (~$54) |
| US Oil (WTI) | 1,000 | $1.00 move | 1.00 | $1,000.00 |
| UK Oil (Brent) | 1,000 | $0.50 move | 0.50 | $500.00 |
| Bitcoin (BTCUSD) | 1 | $1,000 move | 1,000.00 | $1,000.00 |
| Ethereum | 10 | $100 move | 100.00 | $1,000.00 |
| USD/CAD | 100,000 | 30 Pips | 0.0030 | $220.00 (approx) |
| AUD/USD | 100,000 | 15 Pips | 0.0015 | $150.00 |
| Natural Gas | 10,000 | $0.10 move | 0.10 | $1,000.00 |
| Apple (AAPL) | 100 | $2.00 move | 2.00 | $200.00 |
| Tesla (TSLA) | 100 | $5.00 move | 5.00 | $500.00 |
| USD/ZAR | 100,000 | 1,000 Pips | 0.1000 | $520.00 (approx) |
| EUR/GBP | 100,000 | 10 Pips | 0.0010 | $127.00 (approx) |
| Copper | 10,000 | $0.01 move | 0.01 | $100.00 |
6. The "Digits" Trap: Pips vs. Pipettes
When you look at the "Digits" section of the Contract Specification, it tells you how precise the pricing is.
You are looking at "Points" or "Pipettes." A move in the 5th decimal is worth 1/10th of a pip.
For JPY pairs, the 3rd decimal is the Pipette.
Table: How Digits Affect Calculation
| Digits in Spec | Price Example | 1 Pip Movement |
|---|---|---|
| 5 Digits | 1.08502 | 1.08512 |
| 4 Digits | 1.0850 | 1.0860 |
| 3 Digits | 149.501 | 149.601 |
| 2 Digits | 149.50 | 150.50 |
7. Practical Step-by-Step Position Sizing
Using the Specification tool, here is how you should calculate your trade before you click buy:
8. Summary Checklist
Conclusion: The Contract Specification tool is your most loyal ally in Forex. By spending 30 seconds checking these numbers before trading a new asset, you can ensure your risk management remains unbreakable.
