If you're interested in investing in the Foreign Exchange Market and have been doing some research on your own, I'm sure you have been coming across terms such as the "pip" and the "lot." I'm also sure that most of the articles you have read can hardly explain to you exactly what they are.
Fret no more. Here is a guide to these two ever-confusing words.
When people encounter the word pip, they think of the small eyes of a pineapple, or perhaps a bodily function. In Forex trading, a pip is the fourth or the last decimal place in which an exchange rate in represented. Pip is an abbreviation for percentage in point.
If the exchange rate of CHF / USD changes from 0.9777 to 0.9778, then the exchange rate has moved one pip. The measurement of your profits and losses are dependent on the pip.
To get incredible amounts of profit, you need to invest in bulk. Lots are the sizes or amounts in which courses are available. By and large, the amount of a lot is $ 100,000 but there are mini lots which are available for $ 10,000.
Different brokers have different ways of computing for profits and losses in terms of pips and lots. Make sure that you discuss computing methods with your broker first before finally making a huge investment. Do not go into forex trading without having at least basic knowledge of these two terms.
Of course, forex trading goes beyond just these two terms but if you need to master these 2 terms well first before you can try to go the next level!