Despite forex trading becoming more and more popular among retail traders, many individuals remain unfamiliar with a few concepts. According to expert trader Alan Solarsh, forex trading terms such as leverage and PIP are essential to fully understand this market and trade in it. In this article, these concepts will be explained in detail.
How to calculate pip value? PIP stands for "percentage in point" or "price interest point." It is the minimum price movement, equal to four decimal points, in the currency market. One pip equals 0.0001. For every 100 pips, there is 1 cent, and for every 10,000 pips, there is 1 dollar. The pip value may vary depending on the standard lot size offered by a broker. A standard lot of $100,000 will have a value of $10 per pip. Since currency markets use significant leverage for trades, small price changes -- defined in pips -can have a significant impact. For example, if you have a standard lot size of $100,000, the pip value will be ($100,000 x 0.0001) = $10. If your account has a leverage of 150:1, then you will have ($10,000 x 150) that you can use for investing. The effect of a one-pip change on a dollar amount is called pip value. It is imperative to note that the pip value does not change with the level of leverage used. Rather, it is the amount of leverage that affects the pip value. Most brokers offer traders leverage of 100:1, which means that for every $100,000 transaction, you will need $1,000 in your account. According to Alan Solarsh, leverage increases your position's volatility because small changes in pip value can result in larger fluctuations in your account value. Even though high leverage has a large downside risk, it also has a large upside-if you were to make 67 pips instead, your account value would double, raking in 100% returns in one day! If you looking for a broker with a higher leverage of 1:1000 and no swop fees then join here http://tiny.cc/cent-account If you’re looking for automated forex software or the best forex EA then go here https://the-best-forex-ea.com/