Forex trading may look complex at first glance, but once you understand the basic components—pips, lots, spreads, profit calculation, and how the market moves—it becomes much clearer and easier to navigate.
This page gives your learners a crystal-clear foundation of how trading actually works in the Forex market.
Forex trading takes place through platforms like MetaTrader 4 (MT4) or MetaTrader 5 (MT5), where traders access live market prices, charts, and order execution tools.
When trading Forex, you are always:
Profit is made when the market moves in your predicted direction.
Forex charts show the historical and real-time price movement of a currency pair.
You can view charts in multiple formats:
Candlestick charts are the most popular because they clearly show:
Understanding chart behavior is essential before using any trading software or trading manually.
Every Forex quote shows two prices:
Example:
EUR/USD → 1.1050 / 1.1052
The difference (0.0002) is the spread.
You can profit from two types of moves:
You buy a currency pair when you expect the base currency to rise.
Example:
Buy EUR/USD → if the Euro strengthens, you profit.
You sell a currency pair when you expect the base currency to weaken.
Example:
Sell GBP/JPY → if GBP weakens, you profit.
You buy EUR/USD at 1.1000.
Price rises to 1.1050.
Difference = 50 pips profit.
If you traded 0.10 lot (mini lot):
Profit ≈ $50
If you traded 1 lot (standard lot):
Profit ≈ $500
The larger the lot size, the larger the profit/loss.
A pip (percentage in point) is the smallest price movement a currency pair can make.
1 pip = 0.0001
Example:
EUR/USD moves from 1.2000 to 1.2005 → movement = 5 pips
1 pip = 0.01
Example:
USD/JPY moves from 140.00 to 140.50 → movement = 50 pips
Some brokers quote in extra decimal places.
Example:
EUR/USD → 1.20054
The last digit (4) is a pipette, not a pip.
They are essential for automation and strategy building
A lot represents the amount of currency traded.
Lot size determines how much you earn or lose per pip.
= 100,000 units of the base currency
= ~$10 per pip on major pairs
= 10,000 units
= ~$1 per pip
= 1,000 units
= ~$0.10 per pip
= 100 units
= ~$0.01 per pip
Small lot = smaller profit/loss
Large lot = bigger profit/loss
This is why understanding lot size is crucial for managing risk.
he spread is the difference between the bid and ask price and represents your trading cost.
Example:
Bid: 1.2000
Ask: 1.2002
Spread = 2 pips
Always stays the same.
Common in market-maker brokers.
Changes depending on market conditions.
Common in ECN/STP brokers.
Wider spread = higher trading cost.
Slippage occurs when your order is filled at a different price than expected.
Example:
You want to buy at 1.2000, but the trade fills at 1.2003.
Slippage can be:
It usually happens during high volatility.
A requote happens when the broker cannot fill your order at the requested price, so you are offered a new price.
Reasons for requotes:
High-quality brokers reduce requotes.
Optimize performance, enhance productivity – Easy PIP makes it simple
Forex and algorithmic trading involve a high level of financial risk and may not be suitable for all investors.You may lose some or all of your invested capital; only trade with money you can afford to lose.The Easy Pip is not responsible for any profits or losses incurred while using the software.Past performance does not guarantee future results; markets can move unpredictably.
