L1.1 — Why Gold Behaves Differently from Forex Pairs

XAUUSD is priced in US dollars per troy ounce. One pip on gold is a $0.01 move — but because one standard lot represents 100 ounces, one pip equals $1.00 (versus $10 on EURUSD). One dollar of movement on gold equals 100 pips in gold terms. A 30-pip stop on gold has a very different dollar value than a 30-pip stop on EURUSD. This arithmetic difference alone causes significant position sizing errors when traders apply forex parameters directly to gold.

The spread on gold is also typically much wider than major forex pairs — often 20-30 pips in normal conditions and significantly wider during low-liquidity periods. This spread must be factored into your minimum R:R requirements. A setup with a 20-pip structural target but a 25-pip spread is negative expectancy before market movement.

The volatility profile is the most important characteristic. Gold moves quickly and often overshoot levels that would hold on a major forex pair. This makes stop placement especially important — structural stops must be placed with enough buffer to survive gold's characteristic wicks, while not being so wide that the R:R is destroyed.