Currency trading pips are an important part of forex trading that any trader must understand. They are the measure of price movements, and therefore of profit and loss. Brokers usually translate pips into dollars and cents for you, or into the currency that your account is held in, if it is not US dollars. However, when comparing two trades with different position sizes it is the profit or loss in pips that tells you more than the profit in dollars.

PIP stands for percentage in point. It is used as a measure of change in price. Spread is also measured in pips. The pip is the smallest part of the measured price of a quoted currency.

In practice, most currencies are quoted to four decimal places, e.g. 1.2315. In this case one pip is 0.0001 units of the quote currency. So if that price changes to 1.2316, the price has increased by one pip.

The Japanese yen is the only one of the major currencies that is low enough in value to be normally quoted to two decimal places. So when the yen is the quote currency, one pip is 0.01 yen.

Some brokers are now beginning to quote the other major currencies to five decimal places. Logically this should mean that one pip would be 0.00001 currency units, but the potential there for confusion is huge, if a pip would be worth ten times as much with some brokers than with others. So it seems likely that the pip will stay at 0.0001 units for most currencies.

Most traders record their profit and loss in currency trading pips as well as in money. This enables easy comparison of one trade with another so that you can evaluate a system. It also means that traders can discuss their results in a forex forum without revealing the size of their account or their profits in dollars and cents.

If a trader tells you that they made 100 pips profit, you do not learn anything about their financial situation. If they are trading a pair like EUR/USD where the dollar is the quote currency, 100 pips profit would be $1,000 on a standard lot of $100,000 but only $10 on a $1,000 micro lot. To know the size of one pip in dollars in this situation, multiply 0.0001 by the lot size.

To calculate profit or loss from pips where the dollar is the quote currency, you just need to know that one pip is $0.0001 x lot size. If you have another currency as the quote currency, the pip is of course in that currency, and you can multiply by the exchange rate to know the pip value in dollars.

All of this may seem confusing at first glance but anybody who starts trading will very soon understand what a pip means in practice. Currency trading pips are a useful tool for measuring and recording price movements in forex trading.

Tags: currency trading pips, currency trading

We hear a lot about the advantages of reading expert advisor reviews before you invest in one, but can you actually trust them? There are so many different types of robots and different types of forex traders, that even if an EA or expert advisor has the best reviews in the world, it still might not work for every individual.

That might be a surprising statement. You can probably imagine that a trading system, which depends on the trader to put it into practice successfully each time, could have very varied results for different people. The assumption is often that robots either work or they don't, and that they will work in the same way for everybody, so that all users make the same profit at all times. But in fact this is not true.

In broad terms of course most traders' results will follow peaks and downturns at approximately the same time if they are using the same software, but surprisingly, the actual results can be quite different. In fact in some of the expert advisor forums you can find two people using the same EA and one is making a profit while the other is making a loss. So why is this?

There are several factors that contribute to the discrepancy. First, there is the question of currency pairs. Most expert advisors have the potential to work with several currency pairs and they will not always perform equally well with all of them. You can often get better results by concentrating only on the pair or pairs that are the most successful. Expert advisor reviews can be great for working out which are the best pairs to trade.

Second there is the question of settings. This is the most common question in forums, on blogs and to EA support staff: what are the best settings for this robot? It is a little like the quest for the best system: it is almost impossible to evaluate. The permutations are almost infinite and what would have worked best last month will not necessarily work best next month.

Generally, the safest option is to follow advice on settings from the company's own information, but in some cases you may pick up useful tips from expert advisor reviews and user websites. Remember though not to trust everything that you read, and always test new settings before going live.

Fourthly, risk management makes a huge difference to whether you can sustain profits in the long term. If your risks are too high, then even an EA that is profitable can wipe you out. This often happens to beginners. Remember that even the best EA (like the best human traders) will have losses and losing runs. It is vital to set your risk low enough that you can survive the bad times.

Finally, it makes a difference which broker you use. Some will have higher costs, some may operate in a way that tends to trigger stop losses more often, and so on. The EA will usually come with information about which brokers you can use, but that is often based solely on technical compatibility of the software. Forex robot reviews and users will sometimes recommend particular brokers for their quality of service, and that can be helpful.

So EA reviews certainly have their uses, even though no reviewer can guarantee that another individual will have the same experience with the robot. So do seek out feedback from those who have had a chance to use and analyze the software, but be aware that you will not necessarily achieve the same results. It is important to read expert advisor reviews carefully to assess whether a particular EA is likely to suit your individual case.

Tags: expert advisor reviews, forex