Opening your trading platform will provide you several types of currencies and they are usually quoted in pairs.
The first type of currency is referred as the “Base” while the second is known as the “Counter or Quote Currency”.
Along with the quoted pairs of currencies are their prices that have five significant digits. Simply deduct the price of the base from the counter and the result is what they called “Points” or “Pips”.
Comparing Forex from stock Trading, they are almost similar where it also includes “Bid” and “Ask” or “Buy” and “sell” prices.
Along with the quoted pairs of currencies are their prices that have five significant digits. Simply deduct the price of the base from the counter and the result is what they called “Points” or “Pips”.
Comparing Forex from stock Trading, they are almost similar where it also includes “Bid” and “Ask” or “Buy” and “sell” prices.
The primary concern of all brokers is to provide their traders the Bid and Ask prices in real-time. This will allow you to receive the best fair price of currencies on the market.
Opening any type of currency pairs or instrument will cost your to pay a certain amount depending on the number of lot size that you wish to trade.
Opening any type of currency pairs or instrument will cost your to pay a certain amount depending on the number of lot size that you wish to trade.
This cost is what they commonly called as the “Spread”. Take note that different FX Brokers vary in the cost of their spreads.
To provide further explanations about the Quoting Conventions let’s have an example:
EUR/USD Qoute 1.4550/1.4553
The pair of currency used on this example is EUR/USD. The EUR is identified as the “Base Currency” while the USD is the “Counter or Quote”.
To provide further explanations about the Quoting Conventions let’s have an example:
EUR/USD Qoute 1.4550/1.4553
The pair of currency used on this example is EUR/USD. The EUR is identified as the “Base Currency” while the USD is the “Counter or Quote”.
Along with the instrument is the current price value of EUR/USD. This means that a price of 1.4550 EUR is equivalent to 1.4553 USD.
If we are going to deduct 1.4550 EUR to 1.4553 USD then,
Pips or Points = Base – Quote = 1.4550 – 1.4553 = 3
A result of 3 Pips is calculated. This is the immediate cost that you will be paying the moment that you have opened a position on this type of instrument.
If we are going to deduct 1.4550 EUR to 1.4553 USD then,
Pips or Points = Base – Quote = 1.4550 – 1.4553 = 3
A result of 3 Pips is calculated. This is the immediate cost that you will be paying the moment that you have opened a position on this type of instrument.
The 3 Pips is commonly referred as the “Spread” and it is an instant loss on your part but it can be recovered when the market moves into your speculated trend direction.
No comments:
Post a Comment