Category: 2.How Do You Trade Forex?

Forex is commonly traded in specific amounts called lots, or basically the number of currency units you will buy or sell. A “lot” is a unit measuring a transaction amount. When you place orders on your trading platform, orders are placed in sizes quoted in lots. It’s like an egg carton (or egg box in British English). When you buy eggs, you usually…

The final question to ask when figuring out the pip value of your position is, “What is the pip value in terms of my trading account’s currency?”After all, it is a global market and not everyone has their account denominated in the same currency. This means that the pip value will have to be translated to…

As each currency has its own relative value, it’s necessary to calculate the value of a pip for that particular currency pair. In the following example, we will use a quote with 4 decimal places. For the purpose of better explaining the calculations, exchange rates will be expressed as a ratio (i.e., EUR/USD at 1.2500…

There are forex brokers that quote currency pairs beyond the standard “4 and 2” decimal places to “5 and 3” decimal places. They are quoting FRACTIONAL PIPS, also called “points” or “pipettes.” If the concept of a “pip” isn’t already confusing enough for the new forex trader, let’s try to make you even more confused and…

The unit of measurement to express the change in value between two currencies is called a “pip.” If EUR/USD moves from 1.1050 to 1.1051, that .0001 USD rise in value is ONE PIP. A pip is usually the last decimal place of a price quote. Most pairs go out to 4 decimal places, but there are…

What’s a pip? You’ve probably heard of the terms “pips,” “points“, “pipettes,” and “lots” thrown around, and now we’re going to explain what they are and show you how their values are calculated. Here is where we’re going to do a little math. Just a little bit. Take your time with this information, as it…

For positions open at your broker’s “cut-off time” (usually 5:00 pm ET), there is a daily “rollover fee“, also known as a “swap fee” that a trader either pays or earns, depending on the positions you have open.If you do not want to earn or pay interest on your positions, simply make sure they are…

“But I don’t have enough money to buy 10,000 euros! Can I still trade?” You can! By using leverage. When you trade with leverage, you wouldn’t need to pay the 10,000 euros upfront. Instead, you’d put down a small “deposit”, known as margin. Leverage is the ratio of the transaction size (“position size”) to the actual cash (“trading capital”) used…

In this example, the U.S. dollar is the base currency and thus the “basis” for the buy/sell. If you think the Swiss franc is overvalued, you would execute a BUY USD/CHF order. By doing so you have bought U.S. dollars in the expectation that it will appreciate versus the Swiss Franc. If you believe that the U.S.…

Forex trading involves trying to predict which currency will rise or fall versus another currency. How do you know when to buy or sell a currency pair? In the following examples, we are going to use a little fundamental analysis to help us decide whether to buy or sell a specific currency pair. The supply and…