$
$
Net Profit ($)
$0
Net Pips Gained
0
Est. Required Margin (2% Req)
$0
Formula / Calculation
Forex Profit = (Pip Difference - Spread) × Pip Value
Forex Economics
Forex (foreign exchange) trading is massive in scale but involves micro-movements called pips. Because exchange rates fluctuate by fractions of a cent, forex uses extreme leverage to amplify small pip movements into large profit (or loss) in fiat terms. Accounting for broker spread is vital before taking positions.
Forex Terminology
Standard Lot
One standard lot equals 100,000 units of the base currency. A pip movement on a standard EUR/USD lot is worth $10.
Pips & Pipettes
A pip (Percentage in Point) is typically the fourth decimal place (e.g., 0.0001). A pipette is fractional, extending to the fifth decimal.
Margin & Leverage
Forex allows huge leverage (e.g., 50:1). This amplifies profits but also drastically increases the risk of margin calls and total account wipeouts.
Forex Best Practices
Always calculate risk-to-reward ratio and set rigid Stop Loss (SL) and Take Profit (TP) orders.
Trade highly liquid major pairs (like EUR/USD, GBP/USD) to benefit from the tightest bid-ask spreads.
Stay aware of central bank announcements (Fed, ECB) as they induce intense volatility and slippage.
Frequently Asked Questions
What is spread in Forex?
The spread is the difference between the bid (sell) price and the ask (buy) price. It is the primary way zero-commission forex brokers make their money.
What happens in a margin call?
If your losses exceed your required margin (the collateral you deposited), the broker will automatically liquidate your positions to prevent a negative balance.