| Trading currencies is a good way of making extra | | | | to a large sum of money. It stands to reason that |
| money in your spare time. But as with other | | | | you should make the most of PIP gains rather than |
| professions, it comes with its own terminologies and | | | | losses. |
| strategies relating to its industry. Beginners should | | | | Minimizing losses |
| make the effort to learn as much as they can | | | | Losses are to be expected but you can minimize |
| before venturing into it. | | | | these with effective risk management and the use |
| Forex PIPS | | | | of a "Trailing Stop" -- which rises with the trade as |
| Forex PIPS is a term often confusing to the novice. | | | | long as it's in profit, but automatically closes trading |
| A PIP is a contraction of the phrase Percentage In | | | | when falling prices hit the Stop. |
| Point. It represents the smallest price change in | | | | It also stands to reason that in order to make a |
| currency trading. PIPS are the universally accepted | | | | profit you should buy currency when its value is low, |
| mode of measuring currency changes across the | | | | and sell when its value reaches its peak. However this |
| world. This is necessary because even though the US | | | | is easier said than done, as there are many factors |
| dollar plays the most important role in currency trade, | | | | that affect the rise and fall of currency. Beginners |
| not all trades involve the USD. In such cases | | | | can, in time, become proficient in assessing these |
| therefore, profits or losses cannot be measured in | | | | factors to the point of being able to anticipate |
| US dollar terms. | | | | currency movements. |
| Currency pairs are quoted to their 4th decimal place. | | | | Robotic help |
| The Japanese yen however is quoted to its 2nd | | | | But in the interim both novices and seasoned traders |
| decimal point. For example, in EUR/USD, an increase | | | | often avail themselves to the benefits of automated |
| from .8945 to .8946 is 1 PIP -- therefore a PIP is | | | | Forex robots. These monitor and assess all the |
| .0001. But in USD/JPY, an increase from 130.38 to | | | | various market conditions using preset indicators, and |
| 130.39 is 1 PIP -- therefore a PIP is .01. Currency | | | | then respond to favorable conditions by opening and |
| traders use PIPS to measure their profits or losses. | | | | closing your trades for you. This is particularly useful |
| If you were to bid on the EUR/USD currency pair at | | | | for the novice because it removes potential disasters |
| .8945 and sell at .8951, your profit (or spread | | | | that can occur when trading currencies -- especially |
| difference) is 6 PIPS. This may appear to be a very | | | | when the inexperienced trader succumbs to roller |
| small profit but when you consider that many Forex | | | | coaster emotions. |
| traders trade in lots of $100,000, profits can amount | | | | |