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Forex 101 – pips

Here at Trader’s Way, Prime Online Forex and CFD broker, we encourage all new traders to check out some of the basic info on the market in order to familiarize with all aspects of trading. As part of our series, here’s a recap on what the pip is all about. The pip traditionally was the smallest price increment, with relation to currency quotes.

Example: Currency pair prices used to have 4 digits after the decimal point (e.g. EURUSD at 1.2539), and 0.0001 was the smallest amount by which the price could change (e.g. from 1.2539 to 1.2540).

Now, prices can change by one-tenth of a pip or a pipette.
Example: USDJPY was usually quoted with 2 digits after the decimal point, e.g. 77.21/77.23, and 1 pip = 0.01. Now you can see the following quotation - 78.513/78.524, where the smallest price change is 0.001 = 0.1 pips = 1 pipette.

So the pip traditionally was the smallest price increment - 0.0001 for almost all currency pairs and 0.01 for pairs with JPY as a quote currency. And despite the fact that a currency pair can now be quoted with more decimal places thanks to more precise pricing, the pip remains the same. In our platform, traders can access most accurate quotations with 5 digits pricing. For more information check out Trader’s Way.

 

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MT4.FIX.

At Trader’s Way, Prime Online Forex and CFD broker, we understand that each trader may have a specific trading requirement, given which we offer many types of accounts. Our MT4.FIX deals with trading with fixed spreads on our Metatrader 4 platform. Traders, who prefer to deal with fixed spread size on each trading instrument, often opt for this account. This account is perfect for traders who prefer automatic trading - realizing the spread in advance enables them to hone their trading strategy and trade effectively. For more information, check out Trader’s Way.

 

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Lot

At Trader’s Way, Prime Online Forex and CFD broker, we provide our clients with endless opportunities including access to edu resources covering all aspects of forex trading. As part of our ongoing series, here’s a recap on lots and lot size. A lot is a standard size of a transaction. It is measured in base currency units.
The common lot sizes are:
Standard: 100,000
Mini: 10,000
Micro: 1,000
Nano: 100
Example: 1 standard lot of EURUSD = 100,000 euro; 1 nano lot of EURUSD = 100 euro.
For more information, do check out Trader’s Way.

 

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Margin - 1

At Trader’s Way, Prime Online Forex and CFD broker, we ensure that our traders can get access to all the information they need, in order to trade effectively. As part of our ongoing series on Forex education, here’s a brief recap on Margin and stop out levels. Margin is the amount of money required to open or maintain a position. The initial margin required to open a position equals the position divided by leverage:
Initial Margin = Position / Leverage

The maintenance margin requirement (Stop-Out Level) is the level below which the position is closed:
Maintenance Margin = Initial Margin x Stop-Out Level

For more information, check out Trader’s Way.

 

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MT4.VAR

At Trader’s Way, Prime Online and CFD broker, we understand our clients’ trading requirements may differ from one other – which is why we offer different account packages. For example, our MT4.VAR account provides the trader with variable spreads. Traders prefer accounts with variable spreads, especially if they prefer trading in real market conditions. The spreads can vary and can get as low as 0.7 pip. The minimum transaction is 0.01 lot or 1000 units of base currency. For more information and details, check out Trader’s Way.

 

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Leverage

At Trader’s Way, Prime Online Forex and CFD broker, we ensure that our traders have access to all the information they need in order to trade effectively. As part of our ongoing series on forex education tips, here’s a brief recap on leverage. Traders often use leverage to open positions larger than what their account would normally allow. Leverage is more of a credit, which a trader can utilize to trade more effectively, open larger positions, take advantage of market movements, use risk management and optimize trading opportunities, etc.

Example: Sam deposits 1000 USD into his account. Sam's broker provides him with a 1/100 leverage. The maximum position Sam can open equals his deposit multiplied by his leverage = 1000 USD x 100 = 100,000 USD. Sam's P&L is correspondingly multiplied by 100.

For more information, check out Trader’s Way.

 

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Commission

At Trader’s Way, Prime Online Forex and CFD broker, we provide our clients with endless opportunities, resource info covering all topics related to trading, state-of-the-art trading platforms, tools and applications. As part of our ongoing series, here’s a brief recap on commissions. We charge a small commission for ECN accounts on a per-traded-volume basis. Usually, these are quoted in USD/1 million USD traded volume. Calculating the commission is quite easy, a trader can determine their volume in USD, divide it by one million and factor in the ECN commission value.

ECN commission = Traded Volume in USD / 1,000,000 x ECN commission in USD per 1M USD traded volume

Example: Sam is buying 1 lot of EURUSD. The current EURUSD rate is 1.3000. The ECN commission would be 30 USD per 1M USD traded volume.

Keep in mind that deal volume is measured in the base currency terms. In this example, Sam's deal volume is 100,000 EUR.

The commission when Sam opens the deal = 100,000 EUR x 1.3000 /1,000,000 x 30 USD = 3.9 USD

If, for example, Sam chooses to close the deal at the same rate of 1.3000, the commission will be = 100,000 EUR x 1.3000 /1,000,000 x 30 USD = 3.9 USD

For more information, check out Trader’s Way.

 

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MT4.ECN

At Trader’s Way, Prime Online Forex and CFD broker, our MT4.ECN account provides clients with with direct access to interbank liquidity and extremely small spreads. And the spreads can get as low as 0 pip under certain market conditions. Traders can open an ECN account with a minimum deposit of $10, and start trading with the minimum deal size being 0.01 lot (1000 units). We charge some of the lowest commission in the market for ECN accounts. For more information, check out Trader’s Way.

 

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Metals (Gold and Silver)

At Trader’s Way, Prime Online Forex and CFD broker, we provide our clients with endless opportunities and the ability to trade multiple instruments from a single account. Precious metals, from gold to silver have always been a premium investment option for clients for the simple reason the supply is not unlimited. In short, precious metals have an intrinsic value and can be used to hedge against inflation while providing the trader with great ROI. We make it possible for our clients to trade in precious metals with preferred leverage while taking advantage of market movements. For more information, check out Trader’s Way.