01Read the price
Before any chart, learn what the number on screen actually means.
Practice version. These rules are a practice version for testing, not a verified profitable system. All outcomes shown are hypothetical.
Risk notice. Forex trading carries a high risk of loss. Most retail traders lose money. Leverage can make losses larger than your deposit in some markets. Stop orders can fill beyond their requested price. This site is education, not financial advice. Practise on a demo account first and check any broker's registration with your local regulator.
What EUR/USD means
EUR/USD means euros quoted in US dollars. At an example price near 1.1200, one euro costs about 1.1200 US dollars. A buyer gains if the price rises after entry; a seller gains if it falls. The result also depends on position size and costs.
Pips and points
For EUR/USD, one pip = 0.0001. On five-decimal platforms, 10 points = 1 pip, so do not confuse a three-point buffer with a three-pip buffer. JPY pairs usually use 0.01 as a pip; this book uses EUR/USD throughout.
| Price movement | Calculation | Pips |
|---|---|---|
| 1.1200 to 1.1225 | 0.0025 / 0.0001 | 25 |
| 1.1203 to 1.1173 | 0.0030 / 0.0001 | 30 |
| 1.1203 to 1.1253 | 0.0050 / 0.0001 | 50 |
Bid, ask and spread
The ask is the price you generally buy at. The bid is the price you generally sell at. The gap between them is the spread, a cost you pay on every trade.
Pip distance
One pip on EUR/USD is 0.0001. Count every distance in pips before you think about money.