What are pips? - You will hear about this very often
If the currency pair EUR/USD is quoted at 1.1873 today and was quoted at 1.1973 yesterday, there is a loss of 100 pips.
A positive pip corresponds to a profit of 10 currency units when trading with 1 lot. The EUR/USD currency pair moves about 40 to 50 pips in each European session.
If you limit your loss to 5 pips, you accept a maximum loss of 50 currency units when trading 1 lot.
The term pivot is mainly used in technical analysis. Translated into German, pivot means as much as pivot point. In terms of currency pairs, the pivot indicates a level at which a trend reversal can occur.
It is important for players in foreign exchange trading to know in which direction their prices are moving. Pivot points and the knowledge of how to calculate them are advantageous for this. What is needed is a chart with price indication by means of candlesticks in a time interval that shows the previous day.
The central reversal point or pivot point (PP) is calculated as follows:
- High plus low plus closing price of the previous day divided by 3.
If the current price moves above the PP, a bull trend is possible. Below the PP, a bear trend is to be expected. In forex trading, the bull stands for a price increase, the bear signals a downward trend. You can use Exness download link to check it on your own.
Now, in forex trading there are forces that promote an upward trend and those that oppose an upward trend. Insiders speak of support and resistance. There are 3 support areas (S1, S2, S3) and 3 resistance levels (R1, R2, R3). If these lines fall, the way is open for more extensive price gains or losses.
Of course, all lines can be calculated in technical analysis or by you at home.
Support and Résistance Levels represent possible entry points, especially if the price fails at them. If all 3 R-lines are broken, a more extensive upward price trend can be expected. The same applies vice versa if all S-lines are broken.
Pivot points provide clarity regarding possible price developments. The calculation is simple and should be done by day traders on each trading day before trading begins.
You have now internalised the most important terms in foreign exchange trading. In order to understand the market in every respect, you should be familiar with the players.
Private Participants in the Forex Market
In many articles about the Forex market, the presence of private players is greatly overstated. Certainly, private players form the majority and therefore the largest group in forex trading. At the same time, this group has the least influence on the development of currency rates because they do not appear united.
The average private trader opens his trading account with 1,000 euros or dollars and uses between 100 and 500 currency units per position, depending on the leverage. You can probably imagine that the action of a private participant in a market with a daily turnover of 6 trillion dollars fizzles out without a trace.
Even if 1,000 traders were to form a trading community and act together, this would not have the slightest effect on the price of the traded currency pair. The maximum possible trading volume in that case would be 1,000 times 100,000 funded currency units equal to 100 million - still a drop in the ocean. The point here is not to evaluate the participants in Forex trading, but to clarify positions and opportunities.