Forex 5000
The basics of trading Forex Market: Terminology Part One
Before you start trying to trade the Forex, you should be familiar with terminology and main ideas used in this market.
Pip
Pip stands for "percentage in point." This is the basic unit prices in the Forex market. This is similar to stocks, for instance, using dollars and cents as the number base. Pips can refer to the number of ticks or units of a currency pair has moved. For example, suppose you are trading the EUR / USD (euro and dollar U.S. dollar) match. If the price has climbed from 1.5480 to 1.5485, a pip movement 5.
A pip is also a unit of money that is being negotiated. A lot is based on 100,000 units and each pip is worth about $ 10.00. In general, trade one standard lot, you will need about $ 1,000 per lot (or unit).
Using the same example, that 5-pip move up would have been equal to a movement of $ 50. There are also mini accounts that allow you to operate with a much lower capital and reduce the value of the pipe. Typically, most brokers with mini accounts will base its mini lots of 10,000 units per lot, with a pip value of approximately $ 1.00 per pip. With mini accounts, you will need approximately $ 100 per lot or unit that wishes to trade.
Leverage
Leverage commercial or trade in the margin, you do not have to bear the full value of the position. As mentioned above, a lot is the approximate value of $ 100,000. If there were no involved influence (leverage 1:1 O), which would have to deposit the amount of trade in one lot. However, all runners will provide leverage 50:1 to 400:1.
As more influential is what makes the operations more lots, there is a danger with it too. Think of leverage as a double-edged sword. Yes, it can help you control more money, but if you have a loss, may also lose more of their own money.
Here is an example: suppose you have $ 5,000 in your account. Your broker offers 100:1 leverage. This means you can operate up to 5 lots and control $ 500,000 value currency. This also means that for every one pip in the price movement, you will win or lose $ 50. Remember, usually per $ 1000 in available margin 100:1 leverage is in control of $ 100,000 in currency and that every pip (ie price movement) has a value of $ 10.
Using the same information: if an agent offer 400:1 leverage, then your $ 5,000 would be able to control $ 2,000,000 in cash. This gives you the ability to negotiate 20 lots at a time, which means each pip movement would be approximately $ 200 – for that 5-pip movement from above would be equal to a gain or a loss of $ 1000!
So you can see that while higher leverage can help more effective control and give you the ability to make more money if you are wrong, you lose more. Take the use of leverage seriously and with respect and is already ahead of the game.
Margin Call
You never want to get one of these. Basically, you will be contacted if your account falls below a certain level (you'll know it's level when you open your account with your broker.) Here is a simple example: You open an account with $ 2,000. You open a position with a lot. You now only $ 1000 in available margin to open another lot or to buffer losses in his first start was a lot. Let's say you use the remaining $ 1,000 to open another batch. You now have $ 2,000 of margin used, with zero margin remaining usable. Its trade goes against you by 10 pips (which with 2 lots is $ 200). Depending on his agent, or close the trade automatically and you do not have anything in your account or You will be contacted by telephone or other means saying you must deposit additional capital to cover the deficit. Fortunately, most Forex Brokers, your risk is limited to the funds they had on deposit.
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