Question 1

What is Leverage?

Accepted Answer

Leverage lets you open a position larger than your account balance by borrowing from your broker. For example, 1:100 leverage means $1,000 of margin can control about $100,000 of notional exposure. Higher leverage amplifies both gains and losses, so risk management is essential.

Question 2

What is Spread?

Accepted Answer

The spread is the difference between the price you can sell at (bid) and the price you can buy at (ask). Tighter spreads usually mean lower cost to enter and exit trades. Spreads can widen during news or low liquidity.

Question 3

What is Margin?

Accepted Answer

Margin is the amount of equity your broker locks to open and maintain a trade. Required margin depends on trade size, instrument price, and leverage. If equity falls below maintenance margin, you may face a margin call or automatic liquidation.

Question 4

What is Lot Size?

Accepted Answer

A standard lot is typically 100,000 units of the base currency. Mini (10,000) and micro (1,000) lots scale exposure down. Lot size directly affects pip value, margin required, and risk per pip of movement.

Question 5

What is Stop Loss?

Accepted Answer

A stop loss closes your position at a predefined price if the market moves against you. It defines maximum loss in advance and helps enforce discipline. Stops should be placed with volatility and structure in mind — not arbitrary guesses.

Question 6

What is Pip?

Accepted Answer

A pip (percentage in point) is a standardized move in an exchange rate — often 0.0001 for many pairs and 0.01 for JPY pairs. Pip value tells you how much money each pip movement makes or loses for your lot size.

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