What is the spread?
The spread is the difference between the buy and sell price.
Each currency pair has two prices, the first is the bid price and the second is the ask price.
Ask price: It is the price at which the purchase is executed.
Bid price: It is the price at which the sale is executed.
What is a lot?
Trading in the currency market takes place through specific quantities of contracts (lots). It indicates the number of units that you want to buy from the currency pair and there are three different types of contract quantities, namely:
Standard lot contract
Equals 10,000 units of the base currency.
Equals 1,000 units of the base currency.
What is a pip?
It is the smallest movement in the price of a currency pair and is represented by the last decimal number in the price.
If the EUR / USD exchange rate rises from 1.2360 to 1.2361, this means that the pair moved 1 pip (1 pip)
How is the pip value calculated?
Point Value = (0.0001 ÷ Exchange Rate) x Contract Size
If the price of the dollar against the Canadian dollar
USD / CAD = 1.2240
Point Value = (Standard Lot $ 100,000) x (0.0001 ÷ 1.2240) = $ 8.16
If the price of the dollar against the euro
EUR / USD = 1.2560
Point Value = (Lot Standard 100,000 euros) x (0.0001 ÷ 1.2560) = 7.69 euros
To convert euros into dollars
1.2560 x 7.96 = $ 10