Begin Forex

Start Forex - Forex, Forex Trader, Finance

Pip:

A pip is the smallest possible variation on a motto. On the eur / usd, the lowest variation is 0.0001. Indeed, if the EUR / USD moves from 1.2850 to 1.2851, there is a change of 1 pip on the rise. If the GBP / USD moves from 1.9000 to 1.8999, there is a change of 1 pip down. If the USD / CHF 1.2235 to 1.2335 from happening, there is a change of 100 pips.

A pip is slightly different on the usd / jpy, it is 0.01 pip.

When you make a trade on Forex, you have a purchase price (ask) different from the selling price (bid). The difference between purchase price and the selling price is called the spread, it is usually the only remuneration the broker or the price maker. Indeed, the Forex, there is no generally not care expenses, commissions.



Spread:

It's the difference between purchase price and the selling price on an exchange rate. If the price of the EUR / USD is 1.2850 - 1.2853, the purchase price is 1.2853 and the selling price is 1.2850. As a result when you perform a transaction on the forex, it is directly losing 3 pips (more or less depending on your broker).

If you buy the euro at 1.2853 dollars (loser because you are directly selling price is 1.2850) and that the price rises to 1.2863 - 1.2866, 10 pips, you win because you bought at 1.2853 and cut your position with the sale price to 1.2863.



Novice Forex - Forex, Forex Trader, Finance

Sales at 1.2863 (1.2863 Bid - Ask 1.2866)

Buy at 1.2853 (1.2850 Bid - Ask 1.2853)

It is possible to complete a transaction in reverse order starting with selling and cutting its position with a purchase.

If you sell the eur / usd at 1.2850 (you are losing directly because the purchase price is 1.2853) and the price falls to 1.2837 - 1.2840, 10 pips, you win because you sold at 1.2850 and cut your position with the purchase price at 1.2840.



Novice Forex - Forex, Forex Trader, Finance



The volatility is low on forex brokers allow you to use leverage.



Leverage:

The leverage allows the trader to make trades more important than if it used only its initial margin deposit. The broker offers its customer a margin greater than the trader's margin deposit.

If the trader has opened an account with a deposit of 10,000 euros (10 k), and that the broker provides the trader a leverage of 50, then the trader has a margin of EUR 500 000 (500 k). This leverage allows the trader to transact a higher amount. Indeed, the volatility on the foreign exchange market is relatively low, brokers are available to traders leverage.

Without leverage, the trade up would be 10 000 (10k), so with a long position of EUR 10 000 (10k) on the eur / usd at 1.2800 (1.2800 Ask - Bid 1.2797), a change of 103 pips that will take the course at 1.2900 (1.2903 Ask - Bid 12900) would earn the trader $ 100 ($ 1 = 10k/trade / pip).

With a leverage of 50, if the trader goes up purchasing a transaction on the eur / usd 500 000 (500 k) 1.2800 (1.2800 Ask - Bid 1.2797), a change of 103 pips who take her course to 1.2900 (Ask 1.2903 - 1.2900 Bid) would earn the trader $ 5000 (500k/trade = 50 $ / pip).



The trader is of course not obliged to use the maximum leverage offered by his broker! It is the trader to manage risk as leverage can increase its earnings in case of winning trades but also to increase its loss in case of losing trades. So the trader to choose the size of his positions depending on the risks it wishes to take on his portfolio.



Margin deposit margin with lever ---- 50 ---- ---- Trade maximum gain / pip

EUR 2 500 EUR 125 000 ---------- ----------------- --------------- 125K ----- 12.5 $ / pip

EUR 5 000 EUR 250 000 ---------- ----------------- --------------- 250K ----- 25 $ / pip

10 000 500 000 --------- Euro Euro 500 k ---------------- ----------------- --- 50 $ / pip

EUR 50 000 EUR 2 500 000 --------- -------------- ------------------ 2.5 m - $ 250 / pip

EUR 100 000 EUR 5 000 000 -------- -------------- ------------------- 5 m ---- $ 500 / pip