Forex Pips & Lots Explained — Step-by-Step Guide & Transcript

[00:04] . If this is the first time this video has appeared for you, go back to the playlists on this channel and start from the first video to get here so that you understand every word I am saying. This video is very important. Sit in a quiet place and focus on me, away from the noise, and concentrate on every word I am

[00:19] saying. Let me tell you something. First, as an ordinary person, not a trader before becoming one, you might ask yourself, for example, how the price of one currency goes down against another, or how it goes up. Sometimes it doesn't move much. Let me explain. You go to a currency exchange and see

[00:36] move much. Let me explain. You go to a currency exchange and see 1.08 for the 1.08 for the dollar against the euro (EUR/USD). You dollar against the euro (EUR/USD). You go the next day and it's still 1.08, and the third

[00:49] day it's still 1.08. It sometimes stays the same for two or three days. sometimes stays the same for two or three days. How does a trader profit if the price isn't changing? Look closely at the decimal places between 1.08 and 1.07. These

[01:16] are the decimal places, the ones between 0.07 and 0.07 and 0.08. You don't see the cents that go up and down for the dollar on the exchange's screen, but a trader

[01:30] sees them on the chart because we work with these numbers. For example, you'll see the number written as the price of the numbers. For example, you'll see the number written as the price of the euro/dollar at 1.8362. These are

[01:47] one, the one we work on. Anyone who understands math will understand what I mean. math will understand what I mean. The price, between reaching 0.08 and 0.09, is a

[01:59] The price, between reaching 0.08 and 0.09, is a cent. It doesn't jump a cent instantly; there are fractions between cent. It doesn't jump a cent instantly; there are fractions between reaching that point. Do you understand what I mean? These are the fractions and points that traders work on. I use the

[02:11] that traders work on. I use the word "points" because today's video is about points, which we call "pips." A which we call "pips." A trader's

[02:26] whole life revolves around points: how many points did you gain today, and how many did you lose? Points are the today, and how many did you lose? Points are the small numbers. See here? Look at this example of the EUR/USD pair. See how great it is

[02:43] EUR/USD pair. See how great it is when it goes up? The price rose 10 points. The when it goes up? The price rose 10 points. The price was 1.100, then it went up to

[02:57] These are the first two numbers I mentioned. Then the price was 1.1, then it went up to the price was 1.1, then it went up to 1.099. It dropped 10 points. Here, it went up 10

[03:09] points. Here, 10 points are what I'm talking about, those small decimal places. So, talking about, those small decimal places. So, when the price moves, we say it moved by points. We don't say the price of the dollar against the euro or the euro against the

[03:26] dollar changed. I mean, I'm not saying the price changed by 10 cents. No, not even 10 cents. When that number changes, cents. No, not even 10 cents. When that number changes, when it becomes 1.20 or 20, we in the Forex market when it becomes 1.20 or 20, we in the Forex market gain points and lose points, not money. So, I

[03:43] gain points and lose points, not money. So, I entered a trade here and the market rose 20 points, 20 points pip, meaning I gained 20 points, points pip, meaning I gained 20 points, not $20. And if the opposite happens, I lose 20 points. A

[03:59] not $20. And if the opposite happens, I lose 20 points. A gained $20." No, they say, for example, "Today we gained 100 points" or "Today we lost 50 points." What determines the value of a

[04:12] point, I want to tell you about. Let's first give an example of points so we understand them correctly. Let's first give an example of points so we understand them correctly. Let's assume You entered the market with a buy order at

[04:24] assume You entered the market with a buy order at 1.100. The price rose to 1.10. You gained 10 pips. Then you entered another buy order, and

[04:36] pips. Then you entered another buy order, and the market dropped 10 pips, so you the market dropped 10 pips, so you lost 10 pips. So, profit and loss are measured in pips, not direct dollars. What determines the price of a pip? The

[04:52] What determines the price of a pip? The price of a pip is determined by the lot size. This is what we call a lot. Listen carefully: the

[05:04] size of the trade you entered in the market determines the price of the pip you entered. determines the price of the pip you entered. This is where we come in the topic of capital management and risk management. We'll have videos discussing these. What are the types of lots? We have the micro lot.

[05:21] Remember it like this: micro lot. Let's erase this. We denote micro lot as 0 x 1. Let's erase this. We denote micro lot as 0 x 1. So, if you enter a trade with a micro lot size,

[05:34] which is 0.01, it's a micro lot. If you enter this The trade, pay micro lot. If you enter this The trade, pay attention, is where the price per pip attention, is where the price per pip is 10 cents. Each pip equals

[05:47] is 10 cents. Each pip equals 10 cents, meaning each pip equals one dollar. So, if you enter a trade and your lot size is 0.01 to 0.1, then for every 10 pip increase you

[06:00] 0.01 to 0.1, then for every 10 pip increase you earn one dollar, and for every 10 pip decrease you lose one dollar. If it increases by 20 pip you earn two dollars, if it increases by 50 pip you earn five dollars, and if it

[06:12] dollars, if it increases by 50 pip you earn five dollars, and if it increases by 100 pip you earn ten dollars. Every 10 increases by 100 pip you earn ten dollars. Every 10 cents. Therefore, you need every 10 pip to make it one dollar. So, the lot size determines the pip value. Now, you have the mini lot.

[06:30] See the mini lot, which we denote as 0.10. The mini lot is symbolized by 0.10. So, if you enter a trade with a lot size of 0.10 to 10, the size of one pip is one dollar.

[06:44] 0.10 to 10, the size of one pip is one dollar. See, one pip Its size is priced in dollars. So, See, one pip Its size is priced in dollars. So, if you gain 10 points, you gain $10. See here: if you gain 10 points, you gain $10, and if you lose

[06:57] 10 points, you lose $10. Okay, if you gain 20 points, you gain $20, and the price per point becomes $1. When you enter a mini lot, the standard lot (we denote it as 1, meaning a whole lot) has a price of

[07:14] whole lot) has a price of $10 per point. So, if you gain 10 points, you gain $100, and if you lose 10 points, you lose $100. If you gain 20 points, you gain $200, and if you lose 20 points,

[07:27] you gain $200, and if you lose 20 points, you lose $200. So, the price per point becomes you lose $200. So, the price per point becomes $10. It's impossible for anyone in the world not to know $10. It's impossible for anyone in the world not to know or understand this. Let me erase all this scribbles. The

[07:39] price per point in the market is determined by the lot size: in the market is determined by the lot size: micro lot, mini lot, standard lot. Okay, there are... You only have the numbers, but I can enter, for example, a trade size of 0.20. For those who are focused, whoever knows the

[07:57] answer will be a very strong person and will write it to me in the comments because you are a strong person. If you enter the comments because you are a strong person. If you enter a trade with a lot size of 0.20, what will the price per pip be a trade with a lot size of 0.20, what will the price per pip be ? Look, if 0.10, the price per

[08:10] ? Look, if 0.10, the price per pip is $10. See? Okay, if 0.20, the price per pip is $2. It doesn't $2. It doesn't take much thought. Okay, if you enter a trade size of

[08:24] 0.30, what will the price per pip be? Please answer me, what will the price per pip be? Please answer me, write in the comments: $3, well done! If write in the comments: $3, well done! If I enter a trade of 0.50 to 50, what will the price per

[08:38] I enter a trade of 0.50 to 50, what will the price per point be? One point equals $5 until it reaches one, which equals $10, which is the standard lot. So,

[08:51] equals $10, which is the standard lot. So, let's summarize the price of a let's summarize the price of a point, which is determined by point, which is determined by the lot. The lot is the size of

[09:04] the trade. It is possible that I and you enter a trade at the possible that I and you enter a trade at the same time, and at the same second we enter a same time, and at the same second we enter a trade and exit it and close it, and I have profited,

[09:17] for example, $10,000 and you have profited $10. Why? Because I'll be entering with a larger Because I'll be entering with a larger trade size than you, and this is always determined by your capital. Look, here's a quick summary of everything: What are pips?

[09:31] They're the smallest movement in the price of a currency pair in the Forex market. The price rises or falls in pips, not The price rises or falls in pips, not dollars. Here it rose 10 pips, and here it fell 10 dollars. Here it rose 10 pips, and here it fell 10 pips. The lot size is what

[09:44] pips. The lot size is what determines the value of a pip for the trader. You have micro lots, mini lots, and standard lots. Here, the mini lot is worth determines the value of a pip for the trader. You have micro lots, mini lots, and standard lots. Here, the mini lot is worth

[09:57] 10 cents per pip, the micro lot is worth $1 per pip, and the standard lot is worth $10. So, market movement plus the number of pips plus the lot size equals profit market movement plus the number of pips plus the lot size equals profit or loss for the trader. This will be

[10:12] or loss for the trader. This will be very useful for you later in money management. I'll tell you how much you should enter a trade if your capital is $1000, and

[10:28] And that's when the world starts messing around with trading and taking risks. Why? Because, for taking risks. Why? Because, for example, he enters a trade and increases the volume so that if he has $1000, example, he enters a trade and increases the volume so that if he has $1000, it becomes $2000 in five minutes, or it becomes zero in five

[10:42] minutes. This is called risk. So you can risk your capital and you can trade in a can risk your capital and you can trade in a correct and safe way. There are crazy people who risk and lose, or risk and win. It's their business, we don't care. But correct trading is about proper management

[10:58] But correct trading is about proper management and a correct plan for your capital. Let's summarize a bit. What information do you have now? If you want to enter a trade using a program, we don't have a program yet, and we're still learning theoretically. So, you now know that the first thing is to determine if your trade is buy or

[11:13] sell. If you expect an uptrend, it's buy; if you expect a downtrend, it's sell. Then you have to determine the stop loss, and you have to determine the lot size, which is the price per pip. And that's how you now know how to take a trade in the

[11:32] Forex market. You know the chart, you know the candlesticks, you know the lot size, you know what the candlesticks, you know the lot size, you know what pips are, and you know everything. Wow, you're a pips are, and you know everything. Wow, you're a beast! That's enough for this video. I want you to

[11:45] beast! That's enough for this video. I want you to understand what points and lots mean, and that's the most important thing. The understand what points and lots mean, and that's the most important thing. The next video is very important; we'll talk about what a broker is and what you need to enter the Forex market. I

[11:58] hope you benefited from this video. If you did, please leave a nice comment because I'll read all of them. I wish you the best of luck.