SPREAD:
How do forex brokers get profit from the trading. This is from spread. Spread is simply the difference between bid or sell price (the exchange rate at which the trader sells the currency) and the ask price (the exchange rate at which the trader buys the currency). Generally the buy price is a little more than the sell price.
Lets say for EURUSD the bid and ask prices are as follows.
Bid Price: 1.2145
Ask Price: 1.2147
PIP:
We have been using the term PIP. PIP is “Price Index Point” or “Price Interest Point”. But what exactly does it mean? Most of the currency pairs exchange rate is represented as X.XXXX. That means there will be four digits after the decimal point. We can say that the change in one point in the fourth decimal point can be said as on pip.
Margin and Margin Call:
Margin is the minimum amount of money you have to keep in your account before you go for trading. This is generally determined by the broker.
LOT:
When you enter forex market trading, you generally sell or buy a currency in terms of lots. But what is a lot? A lot can be said as the amount of money that you put in the forex market. This depends on the type of account you have with your forex broker. There are generally three types of accounts that most of the forex brokers offer. They are
1) Standard account – Standard Lot
2) Mini Account – Mini Lot
3) Micro Account – Micro Lot
Why Forex Trading?
Forex trading has been there for over 30 years. Originally it was only for major banks and financial institutions. But later it became available to common people also through fincical institutions or brokers. These days all you need is a computer with an internet connection and a forex trading account. The broker from where you got the trading account, will supply you all the necessary software that is required.
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