Frequently Asked Questions (FAQ)
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A pip (percentage in point) is the smallest price move in a currency pair, typically the fourth decimal place (0.0001) for most pairs, except for pairs involving the Japanese yen where it’s the second decimal place (0.01).
Lot size represents the number of currency units you are trading. The common lot size is a standard lot which equivalent to 100,000 units.
Pip Value = (Pip Size / Exchange Rate) × Lot Size
For example, in EUR/USD where the pip size is 0.0001, if the exchange rate is 1.2000 and your lot size is 100,000 units (standard lot), the pip value is:
(0.0001 / 1.2000) × 100,000 = 8.33 USD per pip.
In gold (XAU/USD) trading, one pip typically equals a price movement of 0.01. The monetary value of 1 pip depends on your contract size (lot size). For a standard gold lot of 100 ounces, a 1 pip move (0.01 change in price) equals $1. This means if the gold price moves from 1900.00 to 1900.01, the profit or loss for one standard lot is $1.
To calculate the Return on Investment (ROI) for a forex trade, you need to find the net profit from the trade and divide it by the initial investment, then multiply the result by 100 to express it as a percentage.
ROI = (Net Profit / Initial Investment) * 100
Example: If you invested $1,000 in a trade and earned a profit of $150:
ROI = (150 / 1,000) × 100 = 15%
Leverage is the ratio of the total value of a trade to the amount of capital (margin) you use to open that trade. It allows you to control a larger position with a smaller amount of your own funds.To calculate leverage in forex, divide your total position size by the margin required to open that position.
Leverage = Position Size / Margin.
Example: If you open a position worth $100,000 and your broker requires $1,000 in margin:
Leverage = $100,000 / $1,000 = 100:1