How Pips spread is a Vital Part of a Forex Traders Life?

  • April 2014
  • Posted By Ninoslav
  • 0 Comments

Pip has been termed differently by people, such as “Price Interest Point”, “Percentage in Point” etc. Whatever may it be, its meaning is simple – a pip amounts to 0.0001 part of a currency pair that involves US currency. Another variant, which is a Yen-based one, has one pip equaling 0.01 parts. That forms the basis of pip part from the Pips Spread aspect.

Does that amount seem too much small for you? Well, consider the scenario of Forex Market in mind, where trades take place in sums of six or seven figures. That would make one pip a sizeable amount too. And almost every calculation that is carried out in the market today is based on the scale of pips only.

And what this Spread is all about?
The Forex Market has two terms for prices on which currency deals are carried out. Firstly, there is this Ask Price, which is the price at which a currency is being bought at one end. And for that same end, there is the bid price, which is the price at which that currency is being sold off.

Spread here is the difference between ask price and bid price. It would be wise to remember that a bid price will always be lower than the ask price. So, lower the spread, higher will be the chances for making a profitable deal. And that is exactly what Forex brokers and traders are always on lookout for.

Well, that was just a basic introduction of Pips Spread for you. But if you are eager to learn about what other factors influence the market, reading about “How is News Trading being used as tool in the Forex Market” would be a good idea.

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