If a trader tells you that they made 100 pips profit, you don’t learn anything about their finance situation. If they are trading a pair like EUR/USD where the buck is the quote currency, a hundred 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 dimensions of one pip in bucks in this situation, multiply 0.0001 by the lot size.

To work out profit or loss from pips where the greenback is the quote currency, you simply need to know that one pip is $0.0001 x lot size. If you have another currency as the quote currency, the pip is naturally in that currency, and you can multiply by the exchange rate to grasp the pip worth in bucks.

All this may appear rather baffling at first sight but anybody who starts trading will very soon understand what a pip means in practice. Forex trading pips are a helpful tool for measuring and recording changes in price in foreign exchange trading.

Knowing how to read candlestick charts is necessary for both stock trading and foreign currency trading. Candlesticks are a record of movements in prices that will help a trader to identify trends and spot approaching breakouts and reversals or retracements. Many traders can develop profitable trading systems virtually entirely on the premise of candlestick charts, and many more systems depend on them as a first or first signal.

The chart is made up of a series of blocks or candles, every one showing the open, close, low and high prices over a period. These can be costs of anything: stocks, commodities, currencies or whatever. The open and close prices might be the prices for a day’s trading but mostly you have command over the period and you can set your chart to show a candle for each hour, for five mins or whatever. If you’re designing systems around this type of chart you’ll doubtless need to test your signals over more than one period of time before you open a trade.

If shown in monochrome, the candle will be unshaded or white for an amount that rose in the period. In this situation the open price is the bottom of the candle’s wide block and the close price is the apex of the block. If the price dropped in the period, the body of the candle will be shaded, either black or a color. In this example naturally the upper edge of the body is the open price and the lower edge is the close.

In both cases, the high in the period is the top of the vertical line or wick stretching upward from the top of the block. The low in the period is the base of the vertical line or wick running down from the base of the block.

Some charts nowadays are shown in 2 colours. You may have green or blue for a bullish period when the price was rising and red for a bearish period when the price was falling.