In Forex, we always focus on pips.
Pip is the last decimals of the quoted currency.
example 1EUR = 1.3714USD, the last two digits is pips. For USD/JPY, there are only 2 decimal, eg USD/JPY 92.25
In Forex, we are looking at making 20pips of profit, so for the above EUR/USD example, we are looking close trade at 1.3734.
In Forex, there are no commision charges & brokerage fees like in stocks, they charge base on spread. Normally EUR/USD is at 2 points, GBP/USD is at 3 points.
In order to break even, the currency must move 3-5 pips in your direction, the profit earn after that.
3 comments:
IF we look for 20 pips and break-even consumes 3 pips. Ratio=0.15 is gone when a bet is placed. Is that possible to target to more pips, SO the break-even ratio can reduce?
We already paid for the spread when we place trading. The cost already incurred in the trading. Of course when we aim higher profit, then the return of investment is a good deal.
The Spread is the difference between the bid & ask price. For example USD/JPY : 119.68/119.70. the spread is 2 pips - that is what you pay to your broker.
So, its important to consider the spread when you choose your Forex broker, the narrower the spread, the more you would save & also the quickest the breakeven on the trade.
Post a Comment