Forex Basics Every Beginner Should Know

The foreign exchange market is the largest financial market in the world, trading roughly $7 trillion every single day. At its core, forex is simply the exchange of one currency for another — you buy euros with dollars, or sell pounds for yen — with the goal of profiting from changes in the exchange rate over time.

What is a pip?

A pip is the smallest standard unit of movement in a currency pair. For most pairs quoted to four decimal places, one pip equals 0.0001. If EUR/USD moves from 1.0920 to 1.0925, it has moved five pips. Knowing your pip value relative to your position size is essential for calculating risk before you enter any trade.

Understanding the spread

The spread is the difference between the buy price (ask) and the sell price (bid). It represents the broker’s compensation for executing the trade and is effectively the first cost of every position you open. Tight spreads — like those on Fidorix major pairs — mean you start closer to breakeven, giving your trade more room to breathe from the moment it opens.

Leverage in one sentence

Leverage lets you control a position larger than your deposited funds. A 1:100 ratio, for example, means $100 of your own money controls a $10,000 position. While leverage magnifies potential profits, it equally magnifies potential losses, which is why using it conservatively — especially while you are learning — is one of the most important principles in trading.