Spread Pips And Leverage

Trading With Cautions

 

Today we will discuss very important Topics regarding forex.

So Let's started with Pips And Spread Today.

Pips :

what are pips?

Before we are going to learn pips we should learn spread first so we could better understand pips afterwords.

Spread :

The difference between Bid Price And Ask Price are called Spread. we always calcualed spread in Pips.

Let's consider an easy example if a currency euro/usd Pair has a Ask Price ( Buy ) is 1.30537 And

Bid Price ( Sell ) is 1.30500.The Spread would be 0.00037 and As i Said the spread always be calcuated in Pips.

The last digit value is called pips in the above example if the currency would go up ( 1.30539) we say the euro/usd pair is going up 2 pips ( 1.300537-1.30539 )=0.00002.

Similarily if the currency would go down 1.30499 we say the pair is going down/fall 1 pip.

I'm sure you get it :)

Now let's talk about Leverage !

What is Laverage ? why we used it Trading?

Leverage :

I believe if we understand something properly then we don't need to learn that thing neither read it again !

This makes sense to you? well yes

what I'm actually saying is I would like to teach anything with easy words and daily life examples so a person could understand it without any problem.

Before we go to leverage why don't we start from examples huh

if we have 100 bucks and when we go to the shopping center to buy some stuff like cloths or perfume etc etc. what if some one comes and say , hey man come to my shop I will show you some hot deals you dont have to pay me right now just buy cloths and perfume and much more . If you don't have enough money you would obviously go to that shop and buy anything you like.

The question is what he offers actually?

when you buy the stuff from his shop it is true you don't need to pay him rightnow but after 1-2 weeks or you can say you are paying his money through installments.

This way he will back his money with more profit. got it?
Similarly A broker gives you a facility so you can enjoy buy/sell currency more than your capital.

One thing you need to know regarding leverage if your decision would be right you would earn maximum income in very short period.

let's consider if you set your leverage 1:2000 then your profit would be maximum and loss would be huge.

So you might not need to set your leverage high if you have not enough knowledge about forex.

Happy Trading!