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UNDERSTANDING PIPS AND
CURRENCIES
For those who are interested, posted below are Chart Setups
for the EUR/USD and GBP/USD. There are 3 different profiles
that can each be used individually or in conjunction with one
another: Longer Term, Shorter Term and Daily. Do not take
these signals for granted. However when used with the
strategies and systems they were designed for, they hold the
power to earn a Forex Trader very large returns. An investor
can make over ten thousand dollars a day or even more
depending on the size of the account. Imagine 1000 Pips x
$100.00 per Pip for a total of $100,000.00 profit off of 4 - 6
daily swing trades on a standard account trading 10 standard
lots therefore earning $100.00 per Pip. Even if you don't
glean a thousand Pips and it was just played conservatively,
you could still easily reach 200 - 400 Pips effortlessly
resulting in $20,000.00 - $40,000.00 for the day with a
healthy account to begin with.
Currency exchanges are built around buying foreign currencies.
For example, buying Euros with Dollars, on the expectation
that the Euro will rise against the Dollar, allowing your
positions to profit when sold.
This type of pairing is called a currency pair, and the
current price of a pair of currencies (how many dollars it
takes to buy one Euro) is called the exchange rate. Exchange
rates are measured in ten thousandths of a unit of currency;
this "ten thousandth" of a currency unit is called a "pip" in
Forex trading. For example, if a Euro costs $1.4328, that
means it costs one dollar and 43.28 cents.
Making a profit on Forex trading (at least as a day trader)
means watching the fluctuations of pips. Continuing the
example from above, if the price of the Euro were to change to
1.4331, it would have risen by 3 pips. Conversely, if it had
dropped to 1.4318, it would have dropped by 10 pips. Depending
on the currency pair, current events, the timing of the
change, and other factors, currency exchange rates can shift
by as many as 20 pips on a given news item.
The amount of profit you realize on a shift in pips depends on
what your minimum "lot size" is. Most brokers try to aggregate
investor positions into lot sizes of 10,000 units of a given
currency, so that a shift of a ten thousandth of a currency
translates into a reasonable amount of money; no one ever
became rich buying Euros or Dollars in a single transaction.
Where do you spend a ten thousandth of a dollar?
The exact ratio of how much you make per transaction or change
in pips is derived by the following formula:
1 pip = 0.0001 * the exchange rate * the lot size. So if
you're dealing with an exchange rate of 1.50, 1 pip means that
we make or lose a dollar fifty on the transaction for a lot
size of $10,000.
Brokers aggregate the investments of multiple investors to
make up their lots, or to use as collateral for loans to buy
lots of currencies. This is called leveraging assets, and is a
standard technique in the financial industry.
Currencies: is the
fastest growing market available today to earn money.
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