Why the pip is important in forex trading?

why the pip is important in forex trading

When you start trading foreign exchange currencies, you are going to run into what is called the “pip”. This is an acronym that stands for “percentage in point”. The pip signifies the difference in price from one currency to another. It is the smallest price move within a foreign currency exchange.

It is most commonly represented by 4 decimal places (ex. .0001 or 1/100 of 1%). This minute number refers to the spread between the bid and the asking price in a foreign exchange transaction and the basis for the gain and the loss in the transaction. The bid is the price that that a currency pair is sold at and this is going to be lower than the asking price. This spread is quoted in pips.

Many people want to set daily goals for their pips, but this is not always a realistic strategy. There are going to be up days and down. It is an everchanging trade market and one day is going to be very different from the next.

The best goals to set are the things that you can control. You can control your strategy and your research and preparation in establishing your strategy. Your “goals” should be focused on the process you use to conduct your trades and not the numbers you are looking to hit.

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