You should have comprehensive knowledge about forex pips if you are entering into the highly volatile forex market. A forex pip is a way to measure gains and losses when you are trading currencies. Let us discuss about this exhaustively in the following paragraphs.
What Is It Exactly?
Forex pips are least increment in price in forex trading. Pip stands for‘Percentage in Point.’ One pip is equal to $0.0001 of a US dollar and most other currencies, except Japanese Yen. I will give you a simple example to understand this concept easily. Suppose a EUR/USD currency pair is bid at 1.1615 and offered at 1.1620. Here, the spread is 5 pips (1.1620-1.1615). If you have bought it at the bid price and sold at the offer price, you would have made 5 pips. Your aim should be to maximize your forex pips. When you think about trading forex for a long time, you should aim for more pip gains than more losses. You should understand that you will not win always. Hence it is wise to think minimize the losses. You can aim for small forex pips in short term trade.
Value Of Forex Pips
Now you know what forex pips are. The next important thing you need to understand is what the actual value of a pip is. The pip value depends upon the value of your transaction. Your pip will worth around US$10 if you begin with $100,000 or a full lot, based on the currency pairing. Your pip value can go to $1 if you are trading with $10,000 or mini lot and to $0.10 if you are trading with $1000 or a micro lot. The important point for you to remember here is that profits and losses will be depending upon the value of the forex pips. If your pip is $10 and you trade with high leverage, chances are that you will make huge amount if the trade is favorable to you. At the same time, if the trade goes against you, you will end up in making huge losses. Traders with a long term perspective normally look for more than 100 forex pips, while short term traders look for 20 pips per trade.
A Good Strategy
Forex brokers would offer very high leverage to attract you towards them. If you divide the value of your transaction by your actual capital, that is called leverage. Let us see this with a small example. Say, you have $1000 as capital and your broker offers you 200:1, the transaction value is $200,000. Brokers make a lot of money from this margin. However, if you want to go for a mini lot or a micro lot, you need not to go to a forex broker. You can very well trade with the help of a good forex trading software. A forex trading software or forex bot helps you to trade with less risks. The automatic forex bot will help you to build wealth consistently with smaller investments through scalping. By scalping, I mean making small gains in forex pips over a short period of time. If you are a beginner, it is better to build your wealth with small leverage with an automatic forex trading bot.
Finally…
Although the daily movement of forex is very low these days, you should know that the current volatility is cyclical in nature. A complete upturn of the current forex trading signal trend is likely in the near future. It will be very difficult for the investors to make profits in the forex market if the Fx movement is low. An efficient forex trading software that is developed following extensive research, testing and deployed in trading for a long time would help you improve your forex pips even in these difficult times.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment