

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. About the Author: For more FREE Forex Training Articles, visit: Forex
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.
Successful short term Forex trading is the goal of many new traders who enter the Forex markets each year. For them, life begins and ends on the one or five minute chart. It is important to understand that the trend on a small time frame chart may ...
Read moreThe author, Doug Schaff, has traded the Forex markets for close to 30 years. His website, fx-strategy.com provides trading tools, information and strategies to assist currency traders. The Swing 62 system is available for free download. Doug Schaff ...
Read moreEUR/USD Fails. The EUR failed to push above the former swing high at 1.4140 and has retreated in early trading this week. If support at 1.3980 is broken it places the short term bias downwards with a target of 1.3900 and beyond that 1.3840 ...
Read moreForex trading market volatility continues to decline, and our range trading systems have made the most of smaller currency price moves. Yet recent market conditions have been far less kind to our trend-following and breakout trading algorithms. These ...
Read moreForex trading market seasonality is an effect widely studied as a primary mover of major currency pairs, as long-term studies suggest that certain seasonal patterns may be able to predict forex price moves. The month of July has produced some ...
Read moreIdeal World Forex, a full service foreign exchange broker, announces that there is only one more week in June for traders to take advantage of a US$100 cash bonus for opening and funding a new trading account. This promotion will last until the end ...
Read moreTOKYO, July 3 (Reuters) - The dollar held gains made in the wake of bleaker-than-expected U.S. jobs numbers, hovering near its highest levels in a week against the euro on Friday and pressuring commodity currencies such as the Australian dollar. U.S ...
Read moreTOKYO, July 1 (Reuters) - The dollar steadied on Wednesday, holding gains made the previous day after an unexpected fall in U.S. consumer morale cooled optimism about an economic recovery, prompting investors to seek the safety of the greenback. The ...
Read morepersonal service. Your Account Service Manager works closely with you over the phone, email and our advanced online Chat system. And you can visit your regional office to meet in person. The dealing room services are also offered to you by our expert ...
Read moreTORONTO (Dow Jones)--The dollar is mixed Friday morning as light trading flows due to the Independence Day holiday in the U.S. blunt the greenback's earlier strength. The dollar is currently little changed against the euro and the yen, modestly ...
Read more