Unit 04 · 40 minutes
Forex Mathematics and Trading Costs
Understand pips, lots, leverage, margin, spreads, commission, swaps and net trade results.
By the end, you can
- ✓Calculate pip and position value
- ✓Separate leverage from risk
- ✓Estimate the full cost of a trade
Pips and points
For many pairs a pip is the fourth decimal place; for JPY pairs it is commonly the second. Platforms may quote fractional pips as points. Always verify the instrument specification instead of assuming.
Lots and units
A standard forex lot commonly represents 100,000 base-currency units, a mini lot 10,000 and a micro lot 1,000. Lot size describes exposure, not the cash you are willing to lose.
Leverage and margin
Leverage reduces the margin needed to control a position; it does not reduce the position risk. Used margin supports open positions, free margin remains available, and margin level compares equity with used margin.
Trading costs
Spread is the distance between bid and ask. Commission may be charged separately. Swap or rollover may apply when a position crosses the broker cutoff. A strategy must survive its actual costs.
Net result
Gross price movement becomes a net result only after pip value, size, spread, commission, swap and currency conversion are included.
Practice room
Turn the idea into a decision
These are fictional learning scenarios. They do not place trades or use real money.
Position-size sandbox
Cash risk
$50.00
Position size
0.25 lots
Learning estimate only. Verify contract size, quote-currency conversion and costs in the instrument specification before any order.
Finish this unit
Pass each required activity, then save the current lesson version to your record.
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