Forex Course: Lots, Pips and Leverage


WHAT ARE AND WHY ARE THERE?

Forex trading involves a significant risk of loss and is not suitable for all investors. Increasing the leverage of a trade increases the risk of losing it. In this section, we will explain some concepts you need to know before negotiating your first
Pair of coins.

PIPS
Normally in the forex market, currency pairs display their prices with
four decimal places. Some, like the Japanese yen,
display two decimal places. No matter what currency
you are trading, the second to last (last big) number represents a pip.
While trading, you can track your profit / loss through pips

Forex Pips

LOTS
In forex, the LOT (batch) is a standard unit of measurement. In most forex traders, a LOT default is usually equal to 100.000 units of
Currency value You can trade at ranges of 1.000 units, but you are not required to invest $ 1.000 to do this because the forex is leveraged.
Whenever you place a trade, it starts with the desired volume.
Eg
1 LOT = 100.000 Currency Units
0.1 LOT = 10.000 Currency Units
0.01 LOT = 1.000 Currency Units

Lot Size Forex

LEVERAGE
One of the benefits of the Forex Market is the ability to trade with leverage. You do not need 100.000 € in your account to
trade EUR / USD pair. Currency pairs can have a leverage ratio of up to 1: 1000. That means you can control a large
position (100.000 €) with a small amount of money (100 €).
Many traders find the leverage that most Forex traders offer very attractive. However, you should know that
Trading with very high leverage is very risky.

Leverage Forex

HOW DO THEY WORK TOGETHER?

Let's just imagine that buy 100 thousand EUR / USD to 1000: Leverage 1
As we discussed in the previous example about leverage. Bought 1,30000 and then closed the trade selling 1.30200. That means you won xnumx pips. 0,0001 X 100.000 € = 10 € per pip For your 20 pip trade, would have earned 200 €. Not all pips you earn will be worth 10 € per pip, the value of a pip depends on the lot size of your trade, how many lots you are trading, the currency pair and your account currency.
You can also use forex calculators to get information faster.

 

 


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