This entry is part 2 of 2 in the series Forex Trading For Beginners

Broker – The first thing you need in order to trade Forex is a broker. A forex broker is a financial services company that provides traders access to a platform for buying and selling foreign currencies.

Pip – Stands for Percentage in Point. A pip is the smallest amount by which a currency quote can change. Most currency quotes are four digits such as 1.1705 for EURUSD. Some brokers, however, have fractional pips called pipettes ( 1/10 of a pip ) so currency quotes are displayed as five digits. 

Bid – Bid is the price at which you Sell a currency pair. 

Ask – Ask is the price at which you Buy as currency pair

Spread – The difference between the Ask and the Bid is known as the Spread. 

Lot –  Forex trades are measured in lots. 1 lot represents 100,000 units of any currency. A micro lot ( 0.01 ) is 1,000 units of a currency while a mini lot ( 0.1 ) is 10,000. 

Leverage – Leverage simply allows traders to control larger positions with a smaller amount of actual trading funds. For example, a leverage of 1:200 lets a trader control a position worth $200 for every $1 in his/her trading account. 

Don’t worry if any of these terms do not make sense now. They will as we go through the upcoming lessons. Stay tuned.

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