Forex - Beginner's Guide to Useful Terms

Pip: Price in Points, this is the single digit at the end of a currency pairs price. If the EURUSD changed from 1.5000 to 1.5001, it moved up 1 pip.

Pair: Currencies are always quoted in pairs. Examples, EURO and US Dollar are always quoted as EURUSD, US Dollar and Swiss Franc are always quoted as USDCHF.

Margin Requirement: A sort of security deposit that is set aside and unavailable when you open a position. Should the open trade erode the rest of the equity in your account, the trade would automatically be closed leaving only the margin requirement in your account.

Available Margin: The amount in your account hat is available to open up more positions. The equation would look like something like this - Equity - Open position value - Margin requirement = Available Margin

Balance: The Realized value of your account. Sometimes the account balance will be higher than the account Equity due to the value of Open trades.

Equity: The Unrealized value of our account. This is generally shown as the Balance + Open trade value

Rollover: At a set time in each session around the world, depending on where you are, interest is either paid or charged based on open positions. This happens at 5 PM EST in NY for US customers.

Spread: The difference between the Buy and Sell prices that a broker or bank is quoting. The spread is what the broker charges you to get in to the trade. Although there are sometimes other costs depending on the broker.

Pip Value: Without going into a detailed explanation and giving you the equations, pip value is the value of a pip in your accounts default currency. I have a US denominated accounts, a single pip up or down for the EURUSD is equal to USD $1, in my mini account and USD $10 in my standard account. The pip value of the USDJPY is USD $1.1 for my mini account and USD $11 in my standard account.

I have a daily blog that discusses this type of forex knowledge on a daily basis. I help individuals learn to mine data for the best trades. Thomas Edison said "I never did anything worth doing by accident, nor did any of my inventions come by accident; they came by work."



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