When it comes to the forex market, the particular sizes of the trades that are going on can actually be quite confusing.  Not only is there a little bit of language that you need to learn, but you’re also going to be working with figures that you may be unfamiliar with. 

To start familiarizing yourself with the sizes of trades in the forex market, the 1st type of figure you need to be conscious of is the exchange rate.  Where you may be used to exchange rates that are only 2 decimal places long, i.e.  1.42, you will find that when it comes to forex, they are 4 decimal places long, i.e.  1.4267. 

The tiniest decimal place, i.e.  $0.0001, is sometimes known as a pip or point.  Both are truly short for ‘Price Interest Points’. 

So if you’ve heard people talking about how a currency increased by ‘10 pips’, that just means that it increased by $0.0010.  Naturally, in the foreign exchange market plenty of the trades that go on are pretty large in size, and so for an investment of $100,000, a single pip’s worth of change is worth $10.  Therefore an increase of ten pips would be a profit of $100! 

Mind you, this pip price that we’ve been discussing does vary from currency to currency.  In the examples above, we’ve been talking about how it relates to the US Dollar, but for other currencies it may differ dependent on how the currency is traded. 

Frankly, you’re not going to be ready to remember the pip worth for every world currency ( unless you really are enormously experienced, or have an amazing memory ).  In all truth, you actually do not need to though. 

Knowing the language and appreciating forex trade sizes is helpful, just because it will allow you to wrap your head round the trades that are going on, and that you are undertaking for yourself. 

For the common currencies, you will even find that as you get to grips with the foreign exchange market, you inevitably finish up remembering their pip values. 

On the other hand, for other currencies you might just look them up on an as-needed basis. 

What you want to appreciate most though is that the pip cost of various currencies will play a role in the ‘lots’ that you can buy.  For example, a currency pair with dollars as the second currency ( i.e.  The one being traded into ) always has a pip value of $10 per lot, or $1 per mini lot. 

essentially, this suggests that you’d be trading in lots of $100,000 or $10,000. 

Identifying rules such as that will help you to ascertain what you can invest and where you can invest it.  After that, it’s all just a matter of picking what you feel will be worthwhile, based totally on the options that you have available.

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