Know Forex Pips (Part I)

By Ahmad Hassam

A forex pip is the smallest unit of price movement in the exchange rate of a currency pair. Pip is an extremely important concept in the foreign exchange trading. Forex trading revolves around pips. Pip stands for Percentage in Points or some refer to it as Price interest point.

Pip is almost similar to the tick found in other financial markets like the futures market. Earned pips are the reward for a good trade. Traders trade foreign exchange in order to make as many pips as they can. And lost pips are the punishment for a bad trade.

Forex pip refers to one point change in the fourth decimal place of the most major currencies. Why most? Because there is a currency that is expressed up to two decimal places relative to the other currencies. Japanese Yen!

The convention is to express for most of the currency pairs the exchange rate like x.xxxx where a change of 0.0001 would constitute one pip. A pip would be the equivalent of 1/100th of one percent or one basis point. You must be familiar with the concept of basis points used in calculating the interest rate changes. You must have often heard that the FED or for that matter any other central bank has increased or decreased the interest rate by 15 basis points. Pip is almost similar to a basis point.

We said almost all the currency pairs exchange rates are expressed in term like x.xxxx except those that involve Japanese Yen on either side of a currency pair. The exchange rate format would look like xxx.xx where a change of 000.01 would constitute one pip, for the handful of currency pairs featuring the Japanese Yen like GBP/JPY or USD/JPY.

Many new traders worry about the pip value. You dont need to worry about the pip value when you trade forex. Calculating the exact value of each pip for the currency pair and lot size traded is the job of the brokers trading platform which should include a pip calculator created especially for this purpose.

Here is a simple calculation: Pip= (Lot Size) (No of Lots) (Pip Size). It is better that you also know how the exact value of a pip for a currency pair is calculated. The result of this equation will be denominated in the quote currency.

The first currency in the pair is known as the quoted currency. However, the most popular name for the first currency in any currency pair is the base currency. Quote currency is the second currency in the pair. The second currency in the pair is also known as the counter currency. So in the currency pair, EUR/USD, EUR is the base or quoted currency. USD is the quote or counter currency.

If the quote currency is already in US Dollar, no conversion is needed for the US Dollar denominated trading accounts. For example no conversion is needed for the currency pairs, EUR/USD, GBP/USD, CHF/USD, JPY/USD etc. In such a case the value of the pip will always be equal to $10.

It simplifies many things for the forex traders whose accounts are primarily in US Dollar when the US Dollar is the counter currency or the quote currency. This includes heavily traded pairs like EUR/USD, GBP/USD and AUD/USD. It helps to keep in mind that all currency pairs with the quote currency as US Dollar (ending in the US Dollar) will be $10/pip for a standard lot, $1/pip for a mini lot and $0.1 for a micro lot. - 23208

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try 1500 Pips a day Forex Signals. Discover a revolutionary Forex Robot Trading System!

How to Make Money from Share Investing and Trading Through Using A Stop Loss

By Sam McNeill

Even the best trading techniques struggle to deliver a success rate of more than 70%. Therefore even using some of the best trading techniques we will still end up with two or three losing trades out of every ten. For these losing trades we must keep our losses really really small. To do this we use a stop loss. This is a pre-determined price that we use as the trigger to sell out of a losing trade.

Another way of thinking about share trading is that any trade can only have one of five possible outcomes:

A small profit.

A small profit.

A small loss.

A large loss.

Breakeven.

That's it. Five possible outcomes, no more, no less. Every single trade will result in one of these five outcomes. Now if we could eliminate one of these five outcomes, which one would we choose? That's right - the large loss. If we eliminate the large loss we are only left with the other four possible outcomes. If our small losses, breakeven trades and small profits even out over a period of time we will only be left with the rather pleasing occasional large profit.

By now you should be in no doubt about the wisdom of eliminating large losses. The Stop Loss is what we use in every trade in order to eliminate any large losses.

We use a Stop Loss Rule. The stop loss rule has three parts to it:

1. With every single trade that you do you must have a Stop Loss in place.

2. The level at which you set your Stop Loss price is set at the level where your loss will be 2% of total trading capital.

3. When your Stop Loss price is hit then you sell.

The most difficult part of this rule is part 3, selling when your stop loss price is hit. It's the most difficult part of the rule because most of us hate admitting that we are wrong about anything! Despite this huge emotional drag not to sell - sell we must. When your stop loss price is hit you sell. Sticking to this simple and straight forward rule will protect your hard earned cash when you trade. - 23208

About the Author:

Learn more about share trading education. Stop by the Just Shares site where you can find out all about how to trade shares and what it can do for you.

Guide For Success in Penny Stock Trading

By Alfred Wayne

Penny stock trading is a proven way of making money quickly. It is possible to make a lot of profits in this business. But there are many a lot of risks about losing money. You can use the below tips for success in penny stock trading.

It is difficult to find the stock that may become the next Microsoft. Such companies are unable to meet the criteria set by investment bankers for an IPO. They may not have prepared a good business plan. You have to find the company by doing your own research.

A company can be good if its shares are traded heavily every day. You should not make a decision based on Average shares traded. It may not indicate healthy trading. Consistent trades are required.

You should also count on the number of trades for the company. This gives a picture about the liquidity. You should go for a company for which the buyers have an interest. It should be a company whose shares will be in demand in future.

Even as most startups do not make a profit from the beginning, they should know how they intend to profit in future. You should find out whether the plan is feasible or not. Then you can make an informed buying decision and make money.

You should decide on a stop point while buying stocks and exit at that point. It is better to not let your greed make you keep the stocks for more appreciation of the price. You should exit at the committed price.

You can find the good opportunities by subscribing to newsletters. You can also find information at various websites and newspapers. Before acting on the advice of a newsletter, check out the reputation of the person and act on his advice carefully.

Penny stock trading can make you loads of money. It is risky as well. You must be very careful and do your calculations before making a trade. - 23208

About the Author:

Investment in Stocks can generate huge profits if done the right way. Penny Stocks can generate the highest profits in the shortest period of time.

Option Trading Adjustments Based on Volatility

By Donald Scott

In today's article you'll find tips about managing an Options Portfolio based on Volatility in the stock market. We'll explore adjustment concepts that can be applied to any type of option strategy such as the famous Iron Condor, the Butterfly Spread, Calendar Spreads as well as all the others.

At the time that this article is being presented (the latter part of 2008), the VIX is presently in its higher range of the previous couple years, making options inflated in value. So while making adjustments nowadays, each trader must make it his duty to know where volatility is and forecast where it is leading to. Should we acquire expensive, inflated options or do we persuade somebody else to buy them? What is the latest volatility forecast on the major markets?

A very common mistake that option traders make is buying or selling options at the wrong time. If we buy options when the volatility is at a high, we are entering a trade with odds against us. Option traders that do this don't realize why their options lose value so fast. Every option trading adjustment should be made by thinking of the option Greeks and volatility. We really need to understand these fundamentals to succeed in the options market.

A TYPICAL OPTION POSITION THAT MIGHT NEED AN ADJUSTMENT

Let's say that we have on an Iron Condor, and the market has been in an uptrend for two weeks. If this is the case, then we might be looking at an adjustment right? We are getting close to our short strike, and we need to do something to manage our risk. In this situation the IV of the asset has probably been dropping, since the IV normally moves the opposite direction of the underlying being traded. So, what do we do? Well, if the IV is at support and the technicals indicate that it might rise again, then we'd be looking at doing a positive Vega adjustment.

Ok, so now we have determined that the IV is on support, and we think it's going to rise. Well, this means that the market might come back down also. So, do we do nothing at all? Well, that might not be such a good idea because our current position is at risk. So even though we forecast the market is coming back down, we still put some insurance on our trade. We have to avoid catastrophic losses if we want to be successful in the long run. So, in this case, we hedge our portfolio or position with a positive Vega strategy, one that will benefit from a rise in IV.

There are many positive Vega option strategies, but some of the most common ones are Debit Spreads, Broken Wing Butterflies, Short Condors, Short Butterflies and Calendars. In our options mentoring course we cover them in great detail.

To summarize, when your option trades come to an adjustment point, always think about the IV of your asset. If you can make decisions based on volatility, direction, and time, then your option trading skills will be much better. It's the little things like this that make a difference at the end of the year. - 23208

About the Author:

Learn what Maximum Safety, Maximum Reward Option Trading is all about, and visit www.SJOptions.com to receive your FREE Options Trading Video on Option Greeks.

How To Choose The Best Forex Signal Software.

By Kareechy Ken

Everyone seems to think that they know it all when it comes to Forex software. You want the best. Yet, you might not know which one is really the best one. So, how to pick the best Forex software becomes the question. Keep reading and we'll tell you how.

Many of them allow you to see how they work. They show you features that they have that set them apart from all the other software that are out there. This is something you should make sure that they have. If they don't they aren't being up front with you.

Now matter what sort of company you use there is something else that you need to look at as you look at how to pick the best forex software. This is how much support can they give you? Many people will offer you twenty four hour care, but what sort of care does that consist of? You might wan to know that you can speak to someone if something happens.

Something else that you want to look at when you are learning how to pick the best forex software is that you want something that will keep your stuff secure. If they can't do that, they aren't worth your time either. You should know that all your information is in safe hands. It can't be cracked and taken by some guy some where around the world looking to get other's information so he can rip them off.

The next thing that you need to know is how the economy affects your trade. This isn't just how your neighborhood affects it. How do congress and the world affect it? All of this is good to know as well when you are learning how to pick the best forex software.

Then you want to see how different things will affect your stock. You want the best interest rates and the best revenues that one can get. That is why you shop around. You find who has the highest revenues.

If you look for these key principles then you have mastered how to find the best forex software. You are in good hands and you can expect the software to be what it says to be. If now, then maybe you need to keep looking. Have fun searching and good luck. - 23208

About the Author:

Want to find out more about The Best Forex Signal Software, then visit Kareechy Ken's site on how to choose the best Forex Signal Software for your needs.