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Chapter 2: First Steps in Forex Trading and Basic Terminology
1. How to Read Forex Quotes (Bid & Ask Prices)
Forex quotes display two prices simultaneously: the Bid Price (the price at which you sell the base currency) and the Ask Price (the price at which you buy the base currency). The difference between the Bid and Ask price is called the Spread.
2. Understanding Lot Sizes & Pip Values
A Lot measures the transaction volume size in Forex trading. Depending on your account balance and risk management rules, you can trade in Micro, Mini, or Standard lots.
| Lot Type | Volume Size | Pip Value (USD pairs) | Recommended Capital |
|---|---|---|---|
| Micro Lot | 1,000 units | $0.10 USD | Low ($10 - $50) |
| Mini Lot | 10,000 units | $1.00 USD | Moderate ($100 - $500) |
| Standard Lot | 100,000 units | $10.00 USD | Higher ($1,000+) |
3. Long (Buy) vs. Short (Sell) Positions
Long Position (Going Long)
You buy the currency pair expecting the base currency to appreciate against the quote currency. Profit is realized when selling back at a higher price.
Short Position (Going Short)
You sell the currency pair expecting the base currency to depreciate against the quote currency. Profit is realized when buying back at a lower price.
4. Essential Forex Order Types
Market Order
Immediate execution at the best live price presented on your trading platform.
Stop-Loss (SL) Order
Mandatory pending order automatically closing a trade to cap loss exposure.
Take-Profit (TP) Order
Pending order automatically locking in target profits when the market hits a preset level.
Limit & Stop Entry Orders
Pending orders set above or below market price to trigger breakout or retest entries automatically.
Chapter 3: Synchronize Time & Place for Forex Trading
Test Your Order Knowledge on FX Stall Terminal
Practice entering Market, Stop Loss, and Take Profit orders on live pairs