Every trader must learn these terms and ideas before beginning Forex Trading

1. Pip

In Forex trading, a PIP or pip is short for ‘percentage in point’ and is a measure for exchange rate movement. The pip is a unit – a numeric value that ultimately measures profit and loss. A single pip is equal to 0.0001.

Forex traders will often quote the movements, profits or losses in pips. For example, stating something like “I made 30 pips on that last trade” or “the AUD/USD has just gained 30 pips in the last hour”.

MXT Global’s currency prices are displayed to the fifth decimal place (fractional pips) for improved precision. Our spreads can be too small to be seen with only four decimal places.

To find out more about pips, please see the following topics:

• What is a fractional pip?
• How do you calculate the Per Pip Value?
• How is the pip change or movement calculated?
• How do you calculate profit/loss in pips?
 

2. Spread

A spread is the pip difference between the bid and the ask price of an underlying asset. As it is essentially the cost of making a trade, it is important for Forex traders to know what spreads are. To find the spread we minus the Bid (Sell) Price from the Ask (Buy) Price.

From the example taken from the Trade Terminal below, the AUD/USD is currently priced at 0.93860/0.93865 (Sell/Buy).

AUDUSD

Buy Price – Sell Price = Spread
0.93865 – 0.93860 = 0.00005 or 0.5 pips

The MT4 Trade Terminal will show the spread quoted in pips between the two prices. Spreads are always variable and as we source our feeds from as many as 70 different institutions, we can provide lower spreads. To compare the spreads between different currency pairs and other Forex providers, please see here.
 

3. Leverage

Leverage is the ratio at which defines the loan amount, “margin”, that traders are allowed to use to gain access to larger sums of trading capital. Leverage can heighten both profits and losses and should be used wisely. Due to the nature of leverage, Forex providers like MXT Global have strict leverage restrictions in place to assist traders in minimising risk.

Let’s look at a numerical example:

Say two traders have $5,000 USD and they both wish to use $1,000 on one trade as margin. Trader A has an account leverage of 10: 1 and Trader B has an account leverage of 100:1.
The exposure they both have differs due to the difference of their account leverage ratios.

Leverage

 

4. Margins

In Forex trading, a margin is required to trade. A margin can be considered as the minimum collateral or deposit. This margin allows you effectively take a ‘loan’ – access to a larger amount of capital.

How do you calculate the margin per trade?

An account leverage ratio is used to determine how much margin will be required.

Overall Lot Size / Leverage Amount = Margin Required
Example with 2 lots at leverage of 400:1
200,000 / 400 = $500 margin required

A margin call is a notification you will receive when there are not enough funds in your trading account support open trades. Essentially, when your floating losses are greater than the minimum margin required. MXT Global’s margin call level is at 80%.

 

5. Volume

Looking at the your MT4 terminal, you will see the term ‘Volume’ appear.

Volume in the Order window refers to the volume to buy/sell.
Volume refers to number of lots whereby 1 lot = 100,000 units

Ratio1

Volume in on the Volume bar in the charts refers to the tick volumes. It counts how many times the price has changed in that period.

Ratio2

 

 

 

 

6. Slippage

When you’re trading, sometimes you’ll notice a slight difference between the price you expect and the execution price (the price when the trade is executed). When this happens, it’s known as slippage. It’s a common thing to experience as a trader and it can work either positively or negatively. The main reasons for slippage are market volatility and execution speeds.

Slippage Example

The price of the AUD/USD was 0.9010. After analysing the market, you speculate that it’s on an upward trend and long a one standard lot trade at the now current price of AUD/USD 0.9050, expecting to execute at the same price of 0.9050.

The market follows the trend but goes past your execution price and up to 0.9060 very quickly – within a second. Because your expected price of 0.9050 is not available in the market, you’re offered the next best available price. For the sake of the example, that price is 0.9045.

In this case, you would experience positive slippage:
0.9050 – 0.9045 = 0.0005, or +5 pips.

On the other hand, let’s say your trade was executed at 0.9055. You would then experience negative slippage:
0.9050 – 0.9055 = 00.0005, or -5 pips.

 

 

Related read: Trading Breakouts in Forex

When trading Forex, one can either choose to follow the myriad rules that other traders have put in place or go their own way. The path chosen will depend on several factors, such as experience, technical knowledge and risk appetite. As the saying goes, smooth seas never made a skilled sailor - and the same can be said for traders. Keep reading


Editors’ Picks

EUR/USD moves in a consolidative theme near 1.1570

EUR/USD moves in a consolidative theme near 1.1570

Following multi-year highs north of the 1.1600 barrier, EUR/USD now looks range bound around the 1.1570 zone as the NA session draws to a close on Thursday. The strong upside in the pair came on the back of broad-based decline in the US Dollar, which was particularly sponsored by lower US inflation data, further cooling of the labour market, and prospects of further rate cuts by the Fed.

GBP/USD looks bullish just below 1.3600

GBP/USD looks bullish just below 1.3600

GBP/USD maintains its constructive stance in place in the latter part of Thursday’s session, hovering just below 1.3600 the figure on the back of heightened losses in the Greenback. In the meantime, investors continue to pencil in two potential rate cuts by the Fed for the remainder of the year.

USD/JPY extends losses below 143.60 amid broad-based Dollar weakness

USD/JPY extends losses below 143.60 amid broad-based Dollar weakness

US Dollar is among the weakest G8 currencies on Thursday. The risk-averse sentiment triggered by a fresh tariff threat by US President Trump, coupled with higher hopes of Fed cuts, is pushing the USD/JPY to fresh weekly lows below 143.60.


Editors’ Picks

EUR/USD moves in a consolidative theme near 1.1570

EUR/USD moves in a consolidative theme near 1.1570

Following multi-year highs north of the 1.1600 barrier, EUR/USD now looks range bound around the 1.1570 zone as the NA session draws to a close on Thursday. The strong upside in the pair came on the back of broad-based decline in the US Dollar, which was particularly sponsored by lower US inflation data, further cooling of the labour market, and prospects of further rate cuts by the Fed.

GBP/USD looks bullish just below 1.3600

GBP/USD looks bullish just below 1.3600

GBP/USD maintains its constructive stance in place in the latter part of Thursday’s session, hovering just below 1.3600 the figure on the back of heightened losses in the Greenback. In the meantime, investors continue to pencil in two potential rate cuts by the Fed for the remainder of the year.

Gold consolidates its gains near $3,380

Gold consolidates its gains near $3,380

Gold maintains its weekly rebound well in place, now trading in the sub-$3,400 region per troy ounce in response to the persistent selling bias in the US Dollar, declining US yields across the curve and growing geopolitical tensions.

Cardano Price Forecast: Whales acquire 310 million ADA amid potential triangle breakout

Cardano Price Forecast: Whales acquire 310 million ADA amid potential triangle breakout

Cardano (ADA) shows weakness as it reverses from an overhead trendline of a triangle pattern. The altcoin edges lower by over 1% at press time on Thursday, fueling a steeper correction in its Open Interest. Amid weakness, Cardano whales have acquired 310 million ADA tokens so far this month, projecting increased confidence as the triangle pattern nears resolution. 

US tariffs here to stay, trade deals ‘largely symbolic’

US tariffs here to stay, trade deals ‘largely symbolic’

Despite legal challenges to IEEPA tariffs, US trade policy remains firm. Tariffs on steel and aluminium have doubled, and new sectoral tariffs are expected. Trade deals may emerge, but most will be symbolic. Effective tariff rates will stay high throughout 2025.

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