What Is a pip?
A Pip is a small unit of measurement used to track Price Movement in forex trading.
It stands for "Percentage in Point" or "Price Interest Point."
Think of it like this. If forex trading were a ruler, pips would be the tiny lines that show how far the price has moved.
So, how much is one pip?
In most Currency Pairs, 1 pip = 0.0001. That’s the fourth decimal place.
For Example, If EUR/USD goes from 1.1000 to 1.1005, it moved 5 pips. Some pairs like USD/JPY use only 2 decimal places, so for them it would be 1 pip = 0.01
Why do pips matter?
Pips help you measure the profits and losses, set up your Stop Losses and Take Profits, and also understanding how much the market moved
How much is a pip worth in money?
That depends on your Lot Size.
For example, for 1 standard lot (100,000 units), 1 pip is about \$10. For 1 mini lot (10,000 units), 1 pip is about \$1. And 1 micro lot (1,000 units), 1 pip is about \$0.10
Heres an example:
If you trade 1 mini lot and earn 20 pips, you made about \$20.
Pro Tip:
You’ll see pips change in the "Quotes" and "Charts" section of MetaTrader 5.
Watching how many pips the market moves helps you plan your entries, exits, and manage risk.
What Is a Lot Size?
If you're new to forex trading, understanding lot size is one of the first things you need to learn. Simply put, lot size means the amount of currency you’re trading. The bigger the lot, the more money you can make, but also the more you can lose.
There are four common types of lot sizes:
Standard Lot Size: 100,000 units
Mini Lot Size: 10,000 units
Micro Lot Size: 1,000 units
Nano Lot Sizes: 100 units
To make it simple, imagine you're buying sweets. A standard lot is like buying 100,000 sweets. A micro lot is like buying just 1,000. If the price of sweets goes up a little and you bought a lot, your profit will be big.
But if the price drops, your loss is also big. That’s why beginners usually start with micro or nano lots, they are safer and easier to manage.
Here’s another quick example:
If you open a trade with 1 micro lot and the market moves in your favor by 10 pips, you earn around \$1. If it moves against you, you lose about \$1. With a standard lot, that same move could gain or lose you \$100.
On platforms like MetaTrader 5, you choose your lot size under the “Volume” section when placing a new trade. For example, 0.01 is a micro lot, 0.1 is a mini lot, and 1.00 is a standard lot. If you’re using FXGT as your broker, they make it easy to start with small, flexible lot sizes.
Lot size matters because it directly affects your risk.
A beginner with \$100 in their account should never trade a big lot. It’s smarter to trade 0.01 lots and grow slowly, using good Risk Management and a stop loss to protect their money.
In other words, lot size tells the system how much you’re risking per trade. Always choose a size that matches your account balance and risk level. Small and smart beats big and risky.
What Is a spread?
In forex trading, a Spreads is the difference between the Buy Price and the Sell Price of a currency pair.
Let’s say you open MetaTrader 5 and see this on EUR/USD:
Buy (Ask) price: 1.1002
Sell (Bid) price: 1.1000
The difference between those two is 0.0002 — that’s the spread.
We call that 2 pips.
Why does spread matter?
Because it’s the cost of opening a trade.
As soon as you open a trade, you start with a small loss, that’s the Broker’s Fee.
The market needs to move in your favor by at least the spread amount before you start making profit. For example, If you buy EUR/USD at 1.1002, and the spread is 2 pips, the price has to move to 1.1004 just to break even. So if you’re trading with a 1 micro lot (1,000 units), those 2 pips are \$0.20 loss instantly. That’s the cost of the trade.
There are two Types of Spread:
1. Fixed Spread: The gap stays the same, even during big market moves.
2. Variable (Floating) Spread: It changes based on market volatility, can go higher during news events.
Which is better?
For beginners, low spreads are better because you keep your trading costs small. That’s why choosing a good broker like FXGT matters because they offer tight spreads and fast execution. Check the “Quotes” tab on MetaTrader 5 to see the current spread for each currency pair. The smaller the spread, the better for Scalpers and Day Traders.
What Is a Leverage?
Leverage in forex trading is like borrowing money from your Broker to open bigger trades than your actual balance would normally allow. It helps you control a larger position with a smaller amount of your own money.
For example, if your broker (like FXGT) gives you 1:100 leverage, it means for every \$1 in your account, you can trade \$100 in the market. So with just \$10, you could open a trade worth \$1,000.
This sounds powerful right? and it is. But it’s also risky.
Leverage amplifies both your profits and your losses. A small move in the market can give you a big win or a big loss, depending on the direction.
Let’s use a simple example:
Imagine you want to buy apples at \$1 each. You only have \$10, so you can buy 10 apples. But if someone lets you borrow money and gives you 1:100 leverage, now you can buy 1,000 apples. If the price goes up by a few cents, you make much more. But if the price drops, you lose more too, sometimes even more than your original \$10.
In MetaTrader 5, your leverage is set when you open your trading account with a broker like FXGT. Some brokers offer leverage up to 1:500 or more, but for beginners, it’s safer to start with something lower like 1:50 or 1:100.
Leverage is important because it gives small accounts more power. But it must be used wisely. If you trade too big using high leverage, one bad trade can wipe out your whole account. That’s why proper Risk Management, Lot Size, and Stop Loss are crucial.
Reminder, leverage lets you trade big with a small account, but the bigger you trade, the more careful you need to be.
What Is Risk Management?
Risk Management is how you protect your money while trading. In forex, the goal isn’t just to win trades, it’s to survive long enough to grow your account safely. Even professional traders lose sometimes, but they stay in the game because they manage their risk properly.
Here’s an idea before you open any trade.
First you need to decide on how much you’re willing to lose if the market goes against you. This help you keep your emotions out and your account safe. Never risk more than 1% to 2% of your total account on a single trade. For Example, If your account has \$100, don’t risk more than \$1 or \$2 per trade. Even if you lose, you still have most of your money to try again.
How do you control risk?
1. Lot size: Use smaller lots so your trades aren’t too big. (We explained lot size earlier.)
2. Stop loss: This is a setting on MetaTrader 5 that automatically closes your trade if it hits a certain loss. It protects your account from blowing up.
3. Risk-to-reward ratio: This means if you risk \$1, try to make \$2 or \$3. That way, even if you lose some trades, one win can cover your losses.
4. Don’t overtrade: More trades don’t mean more money. Be patient, pick quality setups, and avoid chasing the Markets.
Why is this important?
Without risk management, even a good strategy will fail. One wrong trade without a stop loss can wipe out your entire account. But with strong risk control, you can lose several trades and still come out ahead.
In the end, forex isn’t about winning every trade. It’s about making sure that when you lose, you lose small. And when you win, you win bigger. That’s how real traders grow, and to fully understand how Risk-Reward-Ratio works, click here.
What Is a Stop-Loss?
A Stop Loss is like a safety net. It tells MetaTrader 5 to automatically close your trade if the market goes the wrong way and hits a certain price so you don’t lose more money than you’re willing to risk. For example, let’s say you’re buying EUR/USD at 1.1000, and you set a stop loss at 1.0980. If the price drops to 1.0980, MetaTrader will automatically close your trade.
You lose just 20 pips, not more.
Why is this important?
Because Forex Markets move fast. You can't always be watching every move. Stop loss helps you protects your account from big losses, especially during News or sudden price changes.
Where to set it up?
When opening a trade on MetaTrader 5, look for the “Stop Loss” box. Just enter the price where you want your trade to close if the market turns against you. You don’t just guess your stop loss level. Place it based on your trading plan and how much money you’re willing to risk.
Take note that Stop Loss doesn’t stop you from losing. It stops you from losing too much.
Final Words
Forex trading isn’t just clicking “buy” or “sell” on MetaTrader 5. It’s about protecting your money every step of the way. Lot sizes, pips, spread, leverage, and risk management are the foundation of every successful trader.
Take your time. Practice on a demo account with FXGT. Get comfortable calculating your lot sizes and setting stop losses. Once you master this, you’re no longer guessing, you’re trading like a pro.