What Are Pips in Forex Trading?
Function
# Pips in Forex trading play a key role in how the cost of a trade is determined. A currency buyer will offer a bid and a seller an asking price. The spread (difference) between the two is extremely small, just 1-2 pips for currency wholesalers. Retail dealers (usually called brokers) mark this up to 3-20 pips (though usually no more than 10). Forex dealers do not charge commissions. Instead they keep the sum represented by the spread as their fee. The objective f Forex trading is simple. Traders try to anticipate which way the market will move. If they guess right, and the price change exceeds the spread, the trade is profitable. Otherwise, the trader loses money.
# Pips in Forex trading play a key role in how the cost of a trade is determined. A currency buyer will offer a bid and a seller an asking price. The spread (difference) between the two is extremely small, just 1-2 pips for currency wholesalers. Retail dealers (usually called brokers) mark this up to 3-20 pips (though usually no more than 10). Forex dealers do not charge commissions. Instead they keep the sum represented by the spread as their fee. The objective f Forex trading is simple. Traders try to anticipate which way the market will move. If they guess right, and the price change exceeds the spread, the trade is profitable. Otherwise, the trader loses money.
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