Money For Lunch – Forex Brokers and what is a pip (what is a pip in forex)

Forex Brokers and what is a pip (what is a pip in forex)

February 1, 2016 6:16 AM0 commentsViews: 23

 

A forex trader should feel confident when they are placing transactions though their forex broker and looking to make money in the forex markets.  Forex traders need to be sure that the tools that they are utilizing through their forex brokers are in line with their trading styles.  In today’s competitive forex markets there are literally dozens of forex brokers that provide numerous trading platforms and other tools for forex traders.  Before a forex trader jumps into the forex markets they should research the tools available presently on the market that will help them get the most out of their forex trading style.  Also, a forex trader should understand the difference between fixed and variable spreads.

Again, in today’s forex arena there are numerous brokers who are offering similar features as it relates to their trading platform along with other services and it is important that the forex trader know what these features are and how to best take advantage of them.  For example the forex trader wants to be certain that the broker they plan on working with can support their customer service needs.  The forex trader should have a sense of comfort that if they need to contact their broker they can utilize the various communication tools provided by the forex broker i.e.; telephone, fax, chat and e-mail.  A forex trader should keep an open line with their broker consistently and by utilizing these forms of communication they will be in a winning frame of mind.  In addition, many forex brokers offer a dedicated account manager and the forex trader should take advantage of this service.  In addition, several forex brokers offer tutorial videos along with on line forex training.

Some of the larger brokers presently offering their products are Plus500, EasyForex, FXPro, FXCM and OANDA.  All forex brokers are not the same particularly when it comes to look and feel of their trading platform (this is strictly associated to the forex brokers software).  Also, there are numerous financial products which can be traded through a forex broker.  The forex trader should have a firm understanding on which products they have the ability to trade.  Many of the better forex brokers on the street will allow you to trade financial products such as forex, indices, commodities, agricultural commodities, energy commodities, metals, options and equities.

Forex brokers make money through charging a spread on trades which forex traders place.  The difference between the sale and the purchase price is the spread and this is the incremental fee which the broker makes from clearing trades for the forex trader.  What is a pip in forex?  A pip is the smallest price movement of a specified traded currency.  The term pip means percentage in point and is the difference between the buy and sell price.  It is extremely important to note that the forex trader knows what a broker is charging them when placing trades.  The more trades the forex trader places the more money they will be paying for their trading activity.

Individuals that do not trade forex products typically will ask what is a pip in forex?  In addition, the same individuals may ask what is a fractional pip?  A fractional pip means that there is an extra decimal place within the quote provided by the forex broker.  This means that the quotes are usually more precise.   The more accurate/precise quotes will provide the best pricing to the forex traders.  The fractional pip pricing usually equates to lower transactional costs to the forex trader.

In closing, when thinking about what is a pip in forex the forex trader should think about the price movement between to currency pairs.  In addition, the forex trader should clearly understand that the forex broker is in business to make money and the difference between the sales and purchase price directly affects their bottom line.

 

 

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