Skip to main content

Beginning FOREX - How Are Lots Traded & What The Heck Is A Pip? 





If you are new to Forex, no doubt you are confused by all of the strange and unfamiliar terminology. For example, what is a pip? Also, you are probably already aware that Forex trading can be risky. How can you limit your loss and best protect your funds? This article briefly covers how currency lots are traded to help you better understand how to plan your trading strategy and manage your funds. 

In Foreign Currency Exchange (FOREX), earnings are expressed in "pips". Pip is short for Price Interest Point, also called points. Whereas the smallest denomination in USD is the penny ($.01), in Currency Exchange, funds can be traded in an even smaller denomination, $0.0001. This means that very small movements in currency prices can create large profits. 

So, a PIP is the smallest unit a currency can be traded in. The actual value of a pip is not a set price. If you are trading with a standard account, a pip is worth $10. If you are trading a mini account, a pip is only worth $1. 

The value of a pip changes based upon the size of your account, because the size of your account affects how much currency you can leverage. A standard full size trading account is 100,000 units of the base currency. If you are trading in USD, a standard account has a value of $100,000 USD. 

A mini lot is 10,000 units of base currency. If you are trading mini lots, you can leverage $10,000. This is why a pip in a mini account is worth less than a pip in a standard full sized account. 

While Forex trading allows you to leverage more funds than you actually have, this can be a double edged sword. While you can make profits on funds that you leverage (rather than own), you can also have losses amplified as well. There are several ways, however, to manage your risk when trading Forex. If you are interested in trading Forex, you should have a definite trading strategy. You must educate yourself to know when to enter and exit the market and what kind of movements to anticipate. 

You can also place something known as a stop loss order. Stop-loss orders the typical way traders minimize risk when placing an entry order. A stop-loss order to exit your position if the currency price reaches a certain point. 

If you are taking a long position, you would place the stop loss order below current market price. For a short position, you would place a stop loss order above current market price. This technique allows you to manage your risk and, just as the name suggests, stop your losses at a certain point. 

As you can see, Forex trading can be complex, but once you understand the basic fundamental principals of how lots are traded, its starts to come together for you. Foreign Currency Trading can be quite profitable and and exciting way to invest.



DeAndre Pennington Cashfxgroup.com







































Comments











Post a Comment























Popular posts from this blog





















Ways of Winning Huge Profits In Forex Trading




























The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day, and American stock markets exchange about $100 billion a day.    Currency exchange is the trading of one currency against another. Professionals refer to this as foreign exchange, but may also use the acronyms Forex or FX.   Currency exchange is necessary in numerous circumstances. Consumers typically come into contact with currency exchange when they travel. They go to a bank or currency exchange bureau to convert  their "home currency into , the currency of the country they intend to travel to.  They  may also purchase goods in a foreign country or via the Internet with their credit card, in which case they will find that the amount they paid in the for...




















Post a Comment









Read more






























Accepting Forex Trading Losses With Grace




























      A look into the mind of the loosing trader and the corrective action needed to become a winning trader.   The lack of a proper trading plan which includes precise rules for entering and exiting a trade will most certainly guarantee failure over the long term. Beginners usually suffer from the same common ailments. They abandon trading plans purely on impulse because things are not going exactly as how they had envisioned. Repeatedly they use unreliable methods that fail to produce a profit. Many traders hold on to losing positions telling themselves “it is going to turn” when every indicator says otherwise because they cannot bear the thought of a loss.  Why do they torture themselves? Why don’t they just identify what’s going wrong and make a change? For some people recognizing that a trade or even a trading method is not working and making a change is easy, but for others it’s very difficult. They have to look at their limitations admit that they have made a mistake and that’s ...




















Post a Comment









Read more






























Quick Tips On How To Make Money Online Fast




























 If you want to make money online you need to set up and build a YouTube channel. Your YouTube channel will be home base for all your content. If you already have a Google account for Gmail or Google Drive, then you can use that to log-in to YouTube and start setting up your channel. Pick a username that works for you and is memorable (if you’re using an existing Google account you’ll have to edit your username in Google+).   Swagbucks is another type of ‘get-money-to’ website. Although Swagbucks offers a number of ways to make money, getting paid to watch videos is amongst its easiest gigs. Simply sign up with Swagbucks, then watch and rate videos to earn points and cash. These points can be redeemed for cash back (through PayPal) or through gift cards. Swagbucks: With Swagbucks, there are a number of ways you can make money. You can shop online, watch videos, answer surveys and surf the web. The app gives you both cashback and gift cards as a reward for your efforts. The music indust...




















Post a Comment









Read more