Before you start trading Forex you need to understand the basics. You need to know what the basic terminology is what these words and concepts mean.

What are PIPs

  • PIP stands for Price In Points
  • Currency is usually quoted to 4 decimal places
  • A PIP is therefore 1/1000th of the currency. So if GBP/USD moved from 1.5500 to 1.5570 then this represents an increase of 70 PIPs (i.e. the Pound is going up against the Dollar). If your stake size was £1 per PIP you would have made £70 profit.
  • There is also something called a pipette, which is a tenth of a PIP (see the cyan blue ‘2’ below). You might see this after the 4th decimal but you don’t need to pay too much attention to it. It’s the PIPs that count!

My Recommended Forex Training Service

The Lazy Trader Forex Course >>>

Trade Size & Risk:Reward

This is best illustrated with colour in the image below:-

trade-size-risk reward2

You want to target a reward of at least 2x (or 2:1) to make a trade worth your while…

trade-size-risk reward1

I recommend the Lazy Trader. You will gain a good grounding in trading the Daily and Weekly charts without spending too much time on it so that you can still do this as a supplement to your day-job

My Recommended Forex Training Service

The Lazy Trader Forex Course >>>