Become a Forex trader expert by following through with our education package. We are available 24/7 to assist you at every step of the way.
Over the years, professional forex traders have come up with some shorthand to make forex trading easier so you can quickly make decisions about your trading without needing to take out a calculator every time.
"A currency’s value will fluctuate depending on its supply and demand, just like anything else."
A pip is the unit you count profit or loss in. Most currency pairs, except Japanese yen pairs, are quoted to four decimal places. This fourth spot after the decimal point (at one 100th of a cent) is typically what one watches to count “pips”. Every point that place in the quote moves is 1 pip of movement. For example, if the EUR/USD rises from 1.4022 to 1.4027, the EUR/USD has risen 5 pips.
Some currency pairs will have different pip values.
FOR EXAMPLE: The EUR/JPY pips are valued in Japanese yen. USD/CAD pips are in Canadian dollars, and so on. Once again, your trading station makes it all easier by doing the math for you.
The monetary value of a pip can vary according to the size of your trade and the currency you are trading. FXCM demo accounts typically trade in increments or "lots" of 10,000. A pip in a standard demo account in EUR/USD is worth $1.00 per lot. If you were trading 3 lots, you would have 3 pips of profit or loss per pip the EUR/USD moves, and, therefore, $3.00 of profit or loss.
As mentioned before, all trades are executed using borrowed money. This allows you to take advantage of leverage. Leverage of 200:1 allows you to trade with $10,000 in the market by setting aside only $200 as a security deposit. This means that you can take advantage of even the smallest movements in currencies by controlling more money in the market than you have in your account.
While leverage can be advantageous in increasing your profits, it can also significantly increase your losses when trading, so it should be used with caution. Start trading in small sizes so that you don’t take on too much risk.
Used Margin (Usd Mr) is how much money you have set aside to secure your open trades. Usable Margin (Usbl Mr) is money left in your account to open new trades or to absorb losses. Always make sure that you have plenty of usable margin, otherwise you may get a margin call. If your usable margin gets low, you should close some trades or deposit money into your account.
