FOREX Leverage and Spreads

FOREX Leverage and FOREX Spreads are TWO distinct features of FOREX Market.

Let’s deal with FOREX Spread first.
A spread is the difference between BUY and SELL price of a currency pair.
The market will give you TWO different prices for the same currency pair –

EUR/USD: 1.5586 (sell) and 1.5589 (buy)
so, if you want to SELL the EUR/USD currency (because you think USD dollar is going to go up) – then you will be able to sell it at 1.5586

Spread is basically for opening your trade.
IF you are going to BUY the EUR/USD currency(because you think EURO is going up) – then you wil be able to buy it at 1.5589
The difference between buy and sell (1.5589-1.5586) = 3 pips is called the SPREAD.

Yes! its important to have a reliable broker – who has enough NET assets that allows the brokerage to liquidate your account easily.

However, your charting package is the “DECISION MAKER” – you make your decisions based on what the charts are showing you and your ability to read them correctly.

It is VERY important to get a charting package – which has at least a few of the following:
1. Tools that you know you need (will use).
2. Tools that you MIGHT want to use in your back-testing
3. Tools that generate “alerts” when needed – for example, you might have drawn what you think is an IMPORTANT support or resistance on the chart – what good is it gonna do you – if it doesn’t “ring a bell” when the market hits that price? – maybe your in the other room – or maybe you on the same computer reading an interesting article about US vs North Korea – shouldn’t your charting package “alert” you of a moving market?
4. I personally would prefer a package that would alert me a few PIPS – BEFORE my support or resistance is hit – either it can make noise on my computer or send me a text message – so far, I am yet to realize this joy in my life.
5. You also need a charting package that doesn’t use much of your computer’s resource – who wants something that freezes up your computer every now & then?
6. Last but not the least – you will need something that you “enjoy” or at least “tolerate” looking at – that’s only achievable if the charting package allows you to change backgrounds, candlestick colors, trendline, channel colors etc..

Prepare a list of “what my charting package SHOULD be” – and then compare it with what’s available. Take them for a test drive – almost all of the package subscriptions can be taken for a test drive – just make sure to cancel them (if you don’t like it)

FOREX Brokers on the other hand – the only test drive you can do – is use their demo accounts – and “feel” their trading platform and execution.

All the best in your setup.

Meaning and value of a PIP

Meaning and value of a Price interest point – PIP. It is the lowest denominator in currency trading – the actual value of a pip is based on your type of account – usually for
– standard accounts – ONE pip=$10
– for mini accounts – ONE pip=$1

Before we get into this more – let’s cover some topics that will make it easier for you to understand and appreciate the value of a PIP.