tag:blogger.com,1999:blog-286413422011-12-14T18:55:18.793-08:00Sambalhttp://www.blogger.com/profile/16982311911661665906noreply@blogger.comBlogger11100tag:blogger.com,1999:blog-28641342.post-1148442105863817492006-05-23T20:38:00.000-07:002006-05-23T20:41:45.876-07:00<h4 style="font-family: arial;">Long/Short</h4> <p style="font-family: arial;">First, you should determine whether you want to buy or sell. </p> <p style="font-family: arial;">If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy. </p> <p style="font-family: arial;">If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell. </p><h4 style="font-family: arial;">Bid/Ask Spread </h4> <p style="font-family: arial;">All Forex quotes include a two-way price, the <b>bid </b>and <b>ask</b>. The bid is always lower than the ask price. </p> <p style="font-family: arial;">The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency. This means the bid is the price in which you the trader will sell. </p> <p style="font-family: arial;">The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price in which you the trader will buy. </p> <p style="font-family: arial;">The difference between the bid and the ask price is popularly know as the <b>spread</b>. </p><h4 style="font-family: arial;">Rollover</h4> <p style="font-family: arial;">No, this is not the same as rollover minutes from your cell phone carrier. For positions open at 5pm EST, there is a daily rollover interest rate that a trader either pays or earns, depending on your established margin and position in the market. If you do not want to earn or pay interest on your positions, simply make sure it is closed at 5pm EST, the established end of the market day. </p> <p style="font-family: arial;">Since every currency trade involves borrowing one currency to buy another, interest rollover charges are an inherent part of FX trading. Interest is paid on the currency that is borrowed, and earned on the one that is purchased. If a client is buying a currency with a higher interest rate than the one he/she is borrowing, the net differential will be positive (i.e. USD/JPY) – and the client will earn funds as a result. Ask your broker about specific details regarding rollover. </p><h4 style="font-family: arial;"><strong>Pip</strong></h4> <p style="font-family: arial;">The most common increment of currencies is the Pip. If the EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation. The Pip is how you measure your profit or loss.</p> <p style="font-family: arial;">As each currency has its own value, it is necessary to calculate the value of a pip for that particular currency. In currencies where the US Dollar is quoted first, the calculation would be as follows.</p> <p style="font-family: arial;">Let’s take USD/JPY rate at 119.80 (notice this currency pair only goes to two decimal places, most of the other currencies have four decimal places)</p> <p style="font-family: arial;">In the case of USD/JPY, 1 pip would be .01 </p> <p style="font-family: arial;">Therefore,</p> <blockquote style="font-family: arial;"> <p><strong>USD/JPY:</strong></p> <blockquote> <p>119.80<br /> .01 divided by exchange rate = pip value<br /> .01 / 119.80 = 0.0000834</p> <p>This looks like a very long number but later we will discuss lot size.</p> </blockquote> <p><strong>USD/CHF:</strong></p> <p> 1.5250<br /> .0001 divided by exchange rate = pip value<br /> .0001 / 1.5250 = 0.0000655</p> <p><strong>USD/CAD:</strong></p> 1.4890<br /><p> .0001 divided by exchange rate = pip value<br /> .0001 / 1.4890 = 0.00006715<strong></strong><br /></p><br /><span style="font-weight: bold;">Lot </span><strong style="font-weight: bold;"></strong> <p>Spot Forex is traded in lots. The standard size for a lot is $100,000. There is also a mini lot size and that is $10,000. As you already know, currencies are measured in pips, which is the smallest increment of that currency. To take advantage of these tiny increments, you need to trade large amounts of a particular currency in order to see any significant profit or loss. </p> <p>Let’s assume we will be using a $100,000 lot size. We will now recalculate some examples to see how it affects the pip value.</p> <blockquote> <p>USD/JPY at an exchange rate of 119.90<br /> (.01 / 119.80) x $100,000 = $8.34 per pip</p> <p>USD/CHF at an exchange rate of 1.4555<br /> (.0001 / 1.4555) x $100,000 = $6.87 per pip</p> </blockquote> <p>In cases where the US Dollar is not quoted first, the formula is slightly different.</p> <blockquote> <p>EUR/USD at an exchange rate of 1.1930<br /> (.0001 / 1.1930) X EUR 100,000 = EUR 8.38 x 1.1930 = $9.99734 rounded up will be $10 per pip</p> <p>GBP/USD at an exchange rate or 1.8040<br /> (.0001 / 1.8040) x GBP 100,000 = 5.54 x 1.8040 = 9.99416 rounded up will be $10 per pip.</p> </blockquote> <p>Your broker may have a different convention for calculating pip value relative to lot size but whichever way they do it, they'll be able to tell you what the pip value is for the currency you are trading is at the particular time. As the market moves, so will the pip value depending on what currency you are currently trading.</p><p></p><br /><br /></blockquote><span style="font-family: arial;"> </span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/28641342-114844210586381749?l=forexbasicterms1313.blogspot.com' alt='' /></div>Sambalhttp://www.blogger.com/profile/16982311911661665906noreply@blogger.com0