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Understanding Forex Trading Made Simple
Understanding forex trading comes down to four numbers: how far a price moved in pips, how big the position was in lots, how much leverage stood behind it, and what the spread cost to get in. We show each one with the arithmetic laid out.
Pip value calculator
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Which venues are trading right now
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Status is worked out in your browser from each market's regular session. Public holidays, early closes and auctions are not included, so treat it as a guide rather than a timetable.
The four numbers behind every currency trade
- Pips. Exchange rates usually move in fractions of a cent, so the market counts in pips: the fourth decimal place on EUR/USD, the second on USD/JPY. A move from 1.1700 to 1.1725 is 25 pips.
- Lots. Because pips are tiny, positions are large. A standard lot is 100,000 units of the first currency in the pair; mini and micro lots are a tenth and a hundredth of that.
- Leverage. A provider lets you control the full position while posting only a slice of it as margin. The slice is small, but gains and losses are calculated on the whole position.
- Spread. The gap between the price you can sell at and the price you can buy at. You cross it on entry, so every trade starts slightly behind.
Our forex guide expands each of these, and the glossary defines the rest of the vocabulary.
Source: ESMA and FCA product intervention rules for retail clients. Australia's ASIC applies similar caps. The UK does not allow crypto derivatives to be sold to retail clients at all.
Those caps are why retail margin in Europe and the UK looks the way it does. At 30:1 on a major pair, margin is about 3.3% of the position's value; at 2:1 on crypto it is half. Run your own figures in the margin calculator.
Following the forex day around the globe
There is no forex exchange with a bell. Dealing moves from centre to centre as banks in each region start work, which is why the market runs from Sunday evening to Friday evening New York time. Liquidity is deepest when two big centres overlap, and spreads on the major pairs tend to be tightest then.
Gold follows a similar rhythm because it is quoted against the dollar and traded through the same dealing networks, with a short daily pause. Stock exchanges are different: each keeps its own fixed session, which the board above tracks.
Want the stock-market side of the picture? Start with how the stock market works or how to read the stock market.
Hours are conventional desk hours, not official opening times: forex has no single exchange. London and New York shift one hour earlier in UTC when their clocks move forward in summer.
One trade, costed line by line
An illustrative GBP/USD position, with every number checked. Prices are examples, not a view on where the pound is heading.
| Item | Working | Result |
|---|---|---|
| Position | Buy 0.5 lots at 1.2650 | 50,000 GBP |
| Value of one pip | 50,000 × 0.0001 | $5.00 |
| Stop-loss | 1.2650 − 1.2610 = 40 pips | −$200.00 |
| Target | 1.2730 − 1.2650 = 80 pips | +$400.00 |
| Spread paid | 1.2 pips × $5 | $6.00 |
| Margin at 30:1 | 50,000 × 1.2650 ÷ 30 | $2,108.33 |
Notice what the margin line does not tell you. It says roughly $2,108 is set aside, yet the stop-loss risks $200 and a bad gap past the stop could cost more. Margin is collateral; risk is set by distance to the stop multiplied by pip value.
That is why we suggest sizing from the loss you accept rather than from leverage. The position size calculator does it in one step, and our note on trading fees covers the overnight financing this table leaves out.
Beyond currencies: the other three desks
Forex and gold are our home ground, but most readers also hold shares or have tried crypto. Each market has its own structure, costs and rulebook.
Forex & gold
Pairs, pip values, sessions, and why XAU/USD behaves like a currency.
Stocks & indices
Shares, order types, index construction and the numbers on a quote screen.
Crypto & USDT
Blockchains, custody, stablecoin networks and the fees on each leg of a trade.
Calculators that show their working
Each tool runs in your browser, sends nothing anywhere and prints the formula it used, so you can check the answer by hand.
How TrivexPrime puts a page together
We start from rulebooks and official documentation: regulators' leverage rules, exchange trading hours, protocol specifications, index methodologies. Examples are worked in a script before they are published, and figures we cannot source are left out rather than estimated.
We do not rank brokers or exchanges, take referral fees, or tell anyone what to buy. Read who we are, the editorial policy and our disclaimer, or browse the reader FAQ.