Forex challenges

A pair's price is how many of the second currency buy one of the first. EUR/USD at 1.1600 means one euro costs $1.16.

• Buying EUR/USD means you expect the euro to rise against the dollar.
• Selling means you expect it to fall.

Both pairs on Runtiler are quoted in US dollars, so your profit and loss is always in dollars with no conversion.

Margin is the trade's value divided by 100. Say EUR/USD is at 1.1600: 1 lot is worth $116,000 and needs $1,160 of margin.

A pip is the usual unit of a move in forex. On both pairs it's the fourth decimal place, 0.0001. A move from 1.1600 to 1.1625 is 25 pips.

Because both pairs are quoted in dollars, a pip is always worth the same:

Worked examples

• You buy 0.5 lot of EUR/USD at 1.1600 and close at 1.1630. That's 30 pips at $5 a pip: +$150.
• You sell 0.3 lot of GBP/USD at 1.3000 and the price rises to 1.3020. That's 20 pips against you at $3 a pip: −$60.

Forex sizing is simple because the pip value is fixed. You have a $25,000 account and risk 0.5%, which is $125.

• Your stop is 20 pips away.
• On 1 lot, 20 pips is $200.
• Size = $125 ÷ $200 = 0.625, rounded down to the 0.01 step: 0.62 lot.

The risk at the stop is 0.62 × $200 = $124. At 1.1600, the trade is worth $71,920 and uses $719.20 of margin. The Risk % setting on the order ticket does this from your stop. Position sizing has another forex example.

With 1:100, margin rarely stops you from placing a trade. That's not the same as being safe.

A $25,000 account at 1:100 could hold about $2.5 million, which is about 21 lots of EUR/USD. At 21 lots, just 10 pips against you is $2,100, or 8.4% of the account. That is past many challenges' max loss in a move the pair can make in minutes.

Leverage is how much you are allowed to hold, not how much you should. Size from your stop and your risk, and the leverage takes care of itself. See Leverage and margin.

Forex trades from Sunday 17:05 to Friday 17:00, New York time. Every weekday it closes for five minutes, from 17:00 to 17:05, the daily rollover. It's also closed on Christmas Day and New Year's Day, and closes at 17:00 on the evenings before them.

Within the week, activity follows the world's trading centres:

• Asia opens the day, usually the quietest stretch for EUR/USD and GBP/USD.
• London opens around 03:00 New York time and brings most of the volume.
• London and New York together, roughly 08:00 to 12:00 New York time, is often the busiest time of the day.

Real market spreads are usually widest around the daily rollover and at the Sunday open. The terminal shows each market's state and when it next opens or closes. See Market hours.

For 1 lot of EUR/USD at 1.1600 ($116,000):

• Standard: the extra spread is $11.60 for the round trip, a little over 1 pip.
• Raw: the commission is $4.06 each side, $8.12 in all, under 1 pip.
• Overnight: $5.80 for each 00:00 UTC held, on either account type.

So on forex today, Raw is the cheaper account type per trade, and the overnight fee is the lowest of any market on Runtiler. Both account types also pay the real market's own spread. Spreads, commissions and overnight fees compares them in full.

These are broad drivers. On any given day, one can outweigh the others.

• Interest rates. A currency often rises when its central bank raises rates, or is expected to. For these pairs, that means the US Federal Reserve, the European Central Bank and the Bank of England.
• Economic data. Inflation, jobs and growth figures shape rate expectations. The US jobs report, usually on the first Friday of the month at 08:30 New York time, often moves both pairs.
• Risk appetite. In stressed markets the dollar often strengthens.
• Politics. Elections, budgets and trade decisions can move a currency quickly.

Trading the news is allowed on Runtiler. Spreads in the real market often widen around big releases, and prices can jump past a stop, so many traders size down or step aside for the biggest ones.

• Count risk in pips and dollars, not lots. A pip is $10 a lot, every time.
• Size from the stop, and ignore how much the leverage would allow.
• Know the calendar for the week: central bank decisions and the US jobs report especially.
• Watch the Friday close at 17:00 New York time if you don't want to hold over the weekend.
• Pick the account type that suits you. On forex today, Raw costs less per trade.