Pips currency trading

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Pips and spreads show the value of a currency pair to the investor and to the broker. A pip is a number value.

In the Forex market, the value of currency is given in pips. One pip equals 0. One pip is the smallest price change that an exchange rate can make. Most currencies are priced to four numbers after the point.

In the major currencies, the price of the Japanese yen does not have four numbers after the point. This quote has a three pip spread between the buy and sell price.

The spread is the difference between the buy also called bid price and the sell also called ask price. Two prices are given for a currency pair. The spread represents the difference between what the market maker gives to buy from a trader, and what the market maker takes to sell to a trader. If a trader buys any currency and immediately sells it — and no change in the exchange rate has happened — the trader will lose money.

The reason for this is that the bid price is always lower than the ask price.

This represents a spread of pips. In general, smaller spreads are better for Forex investors because a smaller movement in exchange rates lets them profit from a trade more easily.

The spread is where the market maker will make their money. Forward Rate Agreements, Options and CFDs OTC Trading are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone.

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