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Forex Trading Terms Explained

FX beginners may find the task of learning new terms and phrases a little bit daunting. The terms explained below are the most basic ones you need to know before you start trading on a real account.

Lots

The size, or volume, of a trade, is often calculated in “lots”. In FX trading, one lot represents 100,000 units of the base currency of the pair you are trading.

Lot Number of units FX Gold Silver Oil
Standard 100,000 100 oz 5,000 oz 1000 barrels
Mini 10,000 10 oz 500 oz 100 barrels
Micro 1,000 1 oz 50 oz 10 barrels

At FxPro, the minimum lot size for MT4, MT5 and cTrader is 0.01 (1000 units).

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Trading CFDs involves significant risk of loss.

Pips, Ticks and Spreads

Pip:

A “pip” is the smallest increment in which a currency pair can move. It is usually the fourth decimal place of the quote currency in a pair. In the case of the Japanese yen (JPY), the pip is the second decimal place of the quote currency.

Pips help traders determine profit or loss, which are calculated according to the number of pips that a currency rises or falls in relation to the price at which it was bought or sold.

To calculate the pip value in the quote currency of a currency pair:
Pip in Decimal Places X Trade Size

To calculate the pip value in the base currency of a currency pair:
Pip in Decimal Places X Trade Size / Market Price

Use the FxPro Calculators and make all your trading calculations quick and easy
Point:
The fifth decimal place of most currencies and the third decimal place of the Japanese yen is called a “point.” Points give traders a more accurate indication of price movements.
Tick:
While a pip is the smallest increment by which a currency can change in value, a “tick” is the increment by which it actually does. So, for instance, if EUR/USD moves three times in a minute (1.10345 to 1.10456, and then down to 1.10234), each of these moves, even though they may be greater or smaller than a pip, are known as ticks.
Spread:

The “spread” is the difference between the Bid and Ask prices of a currency pair.

Click here to learn more about the spreads FxPro offers.

Leverage and Margin

Leverage” and “margin” enable traders to control positions that exceed the value of their initial investment.

Leverage:

Leverage allows you to trade larger volumes and is expressed as a ratio. Look at the following table to see how it affects your trade size:

Initial Investment Leverage Trade Size
$1000 1:1 (no leverage) $1,000
$1000 3:1 $3,000
$1000 5:1 $5,000
$1000 10:1 $10,000
$1000 20:1 $20,000
$1000 33:1 $33,000
$1000 50:1 $50,000
$1000 100:1 $100,000
FxPro offers leverage up to 1:500. Click here for more information.
Margin:

Margin is the percentage of your account balance that is required to secure your positions. The more leverage you use, the less of your account balance is required as margin.

To calculate required margin in base currency:
Trade Size in Units / Leverage

To calculate required margin in quote currency:
Trade Size in Units / Leverage X Exchange Rate

Use the FxPro Calculators for quicker trading calculations.
Visit the FxPro Trading Academy or the Trader’s Glossary to learn more about Forex terms.
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Trading CFDs involves significant risk of loss.

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Safety of Client Funds
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Find out why traders the world over are choosing FxPro.

Read about the steps we take to ensure your funds are safe.

Read about the jurisdictions we are regulated in.

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