Forex Currency Trading Lingo or "What the Heck are Pips and Lots?"

OK, now that I have sworn on my "Pips and Lots" that I won't begin Forex trading with real money until I've Demo Traded for at least two months, I am on to learning the lingo.

What I get from my study so far is that until one understands Pips and Lots, jumping into Forex trading would be financial suicide:-)

I read the term Pips on several other sites that were obviously for the more initiated than I, because there was no definition. Upon further investigation I found that a Pip is "the smallest price movement available in a currency." Ok, so what does that mean? (Hey! I hear you laughing but don't worry about me, I swore and everything, remember?)

PIP stands for percentage in point.

"Prices are quoted to the fourth decimal point in the Forex market - for example EUR/USD might be bid at 1.1913 and offered at 1.1916. In this example we can see that the spread is 3 pips wide. The Japanese Yen (JPY) is an exception - it is quoted only to the second decimal point." Clipped from TradersLog.com

So a pip is the value that indicates the movement of price of one currency against another, and they indicate the profit or loss margins that will be realized through the currency trades.

Got it? Good! Lol! Now on to Lots.

Spot Forex is traded in units called lots. The standard size for a lot is $100,000. There is also a mini lot size at $10,000. Your broker will specify how much they require on margin per position (lot) traded.

For example, for every $1,000 you have, you can trade one lot of $100,000. So if you have $5,000 they may allow you to trade up to $500,000 of Forex.

Simple, yes? But better than me trying to explain it without infringing on multiple copyrights, here are some resources I found for you to study this yourself. First of all the free course I am going through right now which is found here, BabyPips.com.

The National Futures Association is doing their part as well. This is a lovely pdf brochure on Forex from the NFA with complete overview of trading on Forex, the good, the bad and the ugly. They also offer a way to check the background of any broker you are considering using: Background Affiliation Status Information Center (BASIC).

Need I say that choosing the right broker is vital? Broker reputation is one thing that you want to be certain is stellar. We're talking about your money here, so don't fall for the first one you Google!

That's all for now.

Create an outstanding day!

Tracy

New to Forex Currency Trading from Home- the Adventure Begins!

I'm starting to learn about the FOREX and currency trading. I mean just starting today! I'll post what I discover here as I go along. I had studied futures and options trading in the past, so the terminology is not totally foreign to me. But what you will find here is a very green person's experience with learning about trading on the FOREX.

Today I was searching for some domain names to promote some programs that help people with trading on the currency markets (see sidebar). I was purely looking to promote these products, when I got the idea that this sounds like fun to me, so I decided to Google around and find a FOREX website or book for beginners. I know enough not to go into this sort of thing in ignorance!

I found a Dummies book on currency trading, which though annoyingly titled are usually informative:

Then I found what I think is going to be an awesome resource, loaded with info for the complete novice all the way to the well-seasoned trader. It's called www.BabyPips.com.

So I'll be reading there for a bit before posting again.

Peace & prosperity,

Tracy