What Is a Pip, Lot, and Leverage in Forex Trading? Simple Explanation | Lian Trade Academy
Introduction
When starting Forex trading, many beginners get confused by words like pip, lot, and leverage. These three terms are very important because they directly affect your profit and loss.
In this post, Lian Trade Academy explains them in a simple and clear way.
What Is a Pip?
A pip is the smallest price movement in a currency pair.
Example:
EUR/USD moves from 1.1000 to 1.1001 → that is 1 pip.
Pips are used to measure profit or loss.
What Is a Lot?
A lot is the size of your trade.
Types of lots:
-
Standard lot = 100,000 units
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Mini lot = 10,000 units
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Micro lot = 1,000 units
Standard lot = 100,000 units
Mini lot = 10,000 units
Micro lot = 1,000 units
For beginners, micro lots are the safest.
What Is Leverage?
Leverage allows you to trade bigger money using small capital.
Example:
With $100 and leverage 1:100 → you control $10,000.
⚠️ Leverage increases profit and loss. Always use it carefully.
Beginner Advice
-
Use small lot sizes
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Use low leverage
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Always apply stop loss
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Never risk all money in one trade
Use small lot sizes
Use low leverage
Always apply stop loss
Never risk all money in one trade
Final Words
Understanding pip, lot, and leverage will protect your trading account and help you trade professionally.
CALL TO ACTION
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