10 Forex Terms Every Trader Must Know
1. 🧮 Pip (Percentage in Point)
- Smallest unit of price movement in Forex.
- For most pairs: 1 pip = 0.0001
📌 Example: EUR/USD moves from 1.1000 to 1.1005 = 5 pips
2. 💰 Lot Size
- Volume of trade in Forex.
🔹 1 Standard Lot = 100,000 units
🔹 1 Mini Lot = 10,000 units
🔹 1 Micro Lot = 1,000 units
👉 Lot size affects pip value and risk.
3. 📊 Leverage
- Borrowed capital from broker to control larger trades.
🔹 Example: 1:100 leverage means $100 controls $10,000
⚠️ More leverage = more risk + more reward
4. 🪙 Bid & Ask Price
- Bid: Price at which the market buys (you sell)
- Ask: Price at which the market sells (you buy)
💡 The difference = Spread
5. 💱 Spread
- The difference between bid and ask price.
🔹 Smaller spreads = better for scalping
🔹 Spread is also how brokers earn
6. 🔐 Stop Loss (SL)
- A preset price level where your trade closes at a loss.
📌 Used to control risk and prevent big losses.
Rule: Always set SL before entering a trade.
7. 🎯 Take Profit (TP)
- A target price level where your trade automatically closes in profit.
✅ Helps lock in gains without watching the chart all day.
8. 📅 Margin
- The amount of money needed in your account to open a trade.
🔹 It’s like a deposit held by the broker
Too much exposure = Margin Call (risk alert!)
9. 📈 Trend
- General direction of the market
🔺 Uptrend = Higher highs
🔻 Downtrend = Lower lows
📌 Trend is your friend – follow it!
10. 🧠 Risk-to-Reward Ratio (RRR)
- Compares how much you’re risking vs. potential reward
🔹 Example: Risk $10 to earn $30 = RRR of 1:3
✅ Good traders aim for at least 1:2