Course Content
What Is Forex Trading?
Forex is the world's largest market by trading volume and liquidity. Brokers, businesses, governments, and other economic agents trade currencies and forex derivatives to enable international commerce. Traders also use the market for speculative reasons. There are various arbitrage opportunities to be found with exchange rates and interest rates, making the market a popular one to trade in large volume or on leverage. The forex market consists of fiat currency pairs and their relative market prices. These pairs are typically bought and sold by the lot. A standard lot contains 100,000 units of the pair's base currency, but other smaller sizes are available, ranging down to 100 units. Traders commonly use leverage to increase the amounts they can invest with their capital. You can also offset risk by using forwards and swaps to trade a currency pair for a specific price in the future. Combining these two instruments with other trading strategies and products creates a variety of investment opportunities for forex traders.
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What Is Forex Trading?
About Lesson

In forex trading, currencies are bought and sold in specific amounts known as lots. Unlike stock markets, these lots of foreign currencies are traded at set values. A lot is typically 100,000 units of the base currency in a pair, but there are smaller amounts you can purchase too, including mini, micro, and nano lots.

Lot

Units

Standard 

100,000

Mini

10,000

Micro

1,000

Nano

100

When working with lots, it’s easy to calculate your gains and losses with pip changes. Let’s look at EUR/USD as an example:

If you purchase one standard lot of EUR/USD, you’ve bought €100,000 for $119,380. If the pair increases its price by one pip and you sell your lot, this is equal to a change of 10 units of the quote currency. This appreciation means that you will sell your €100,000 for $119,390 and have made a $10 profit. If the price increases ten pips, then it will be a $100 profit.

As trading has become increasingly digitized, standard lot sizes have decreased in popularity in favor of more flexible options. On the other side of the spectrum, large banks have even increased the size of their standard lots up to 1 million to accommodate the large volume they trade.

Exercise Files
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