Forex Basic 2 Spread & Pips

1. Contact size
2. Current price

You can see spread as commission for the broker, as what they all like to claim that there is no commission for forex trading which is not true. The true statement should be there are no additional commission other then the spread.

In this case the spread is 2 pips, so if you buy and sell almost immediately you will lost 2 pip.
How much is 2 pips?
It depend on your contact size

standard contact = $100,000 = 1pip = $10
mini contact = $10,000 = 1pip = $1
micro contact = $1000 = 1pip = $0.10

Currently i only know fxcm micro which allow you to trade micro contact, for most brokerage the min is mini contact

I guess that also self explain what is pips.

Forex Basic 1 PAIRS

There are tons and tons of information on "What is Forex?" and term used for forex trading.

I will try to explain everything in layman's term but if you love reading up more there a good website investopedia , they have lots of information on investing not only forex. It worth to take a look.

Back to Forex.....

Forex is also known as currency trading, when it come to currency trading we always do it in pairs.
ie. EUR/USD, GBP/USD, USD/JPY

Some of the common pairs most people trade are EUR/USD, GBP/USD, USD/JPY, AUD/JPY, AUD/USD

This few pairs are more popluar due to pairs with the least spread, better rollover and more movement.

EUR = EURO DOLLAR
USD = AMERICA DOLLAR
AUD = AUSTRILA DOLLAR
JPY = YEN/ JAPAN DOLLAR
GBP = POUND / UK DOLLAR

I will explain using EUR/USD.

MAIN CURRENCY / TRADING CURRENCY
1 EURO = 1.4115 USD
What it means?

You are comparing this 2 currency the euro and the dollar.

When you buy this pair you are buying euro using usd, so when the euro get stronger say the exchange rate hit 1 EURO= 1.5 USD you will earn 0.0885 per euro dollar you buy.

If you will to sell this pair mean you buying USD using euro.

layman's term -
you think 1 EUR can change more USD = buy
you think 1 EUR can change less USD = sell

Next i will talk about spread and pips