Forex
15 Forex Strategies and Patterns for Beginners (and How They Fail)
15 forex strategy ideas and chart patterns, from head and shoulders to carry trades: what each one bets on, how it fails and how to test one honestly.
The ABC of Forex Trading: Pairs, Pips, Lots and Leverage
Forex has its own words, but the ideas behind them are simple. Learn the five you need first: pairs, long and short, pips, lots and leverage.
In this article
Forex means swapping one currency for another. Prices come in pairs, such as EUR/USD.
What is forex trading?
It means swapping one currency for another. People also call it FX. If you have ever changed dollars into euros for a trip, you have used the market.
Firms use forex to pay suppliers abroad, and investors use it to buy foreign shares. Traders use it to bet on exchange rates. This lesson is about that last group.
The market is huge. The Bank for International Settlements (BIS) says trading averaged $9.5 trillion a day in April 2025. The US dollar was on one side of about 89% of all trades.
That huge number counts deals between banks, firms and funds. It is not money waiting to be won. A big market can still give you a loss.
What happens when you buy or sell a pair?
Forex prices come in pairs. EUR/USD 1.1000 means one euro costs 1.10 US dollars. The first currency is the . The second is the .
When you buy EUR/USD, you buy euros and pay with dollars. This is called , and you gain if the price rises.
When you sell EUR/USD, you sell euros for dollars. This is called , and you gain if the price falls.
People who expect prices to rise are called bulls. People who expect a fall are called bears. Either one can be wrong, and either one can lose money.
What are pips and lots?
A is the usual small step in a currency price. For most pairs it is 0.0001. If EUR/USD moves from 1.1000 to 1.1010, it has moved 10 pips. For pairs with the Japanese yen, a pip is 0.01.
Forex comes in big amounts called . A standard lot is 100,000 units of the base currency. A mini lot is 10,000, and a micro lot is 1,000. Some apps let you pick any number of units instead.
| Lot | Units of euros | One pip is worth |
|---|---|---|
| Standard | 100,000 | $10 |
| Mini | 10,000 | $1 |
| Micro | 1,000 | $0.10 |
Your size turns pips into money. With 10,000 euros, a 10-pip move is worth $10, up or down, before costs. The pip value lesson shows how to work this out for any pair.
So how big should your trade be? First decide where you would get out if you are wrong. That exit is your . Then size the trade from the money you could afford to lose there, not from the biggest trade you are allowed to open.
Try it yourself
Size a trade from your risk
Keep the $1,000 balance and the 20-pip stop. Slide the risk on each trade from 1% up to 5%, and watch the trade size and the losing streak you could survive.
With $1,000 and a 20-pip stop on EUR/USD, risking 1% ($10) allows 5,000 euros, or 0.05 lots. It would take 69 losses in a row to halve the account. Risking 5% ($50) allows 25,000 euros, and just 14 losses in a row halve it.
What would you expect?
What this shows: Size your trade from what you can afford to lose. Risk 1% of $1,000 and it takes 69 losses in a row to halve it; at 5%, just 14.
A bigger trade does not just win more. It also cuts the number of bad trades you can survive. Leverage decides how big a trade you can open; your risk decides how big you should.
What is leverage in forex?
A standard lot of EUR/USD is worth about $110,000, and few people have that much. So trading firms offer . You put down a deposit, called , and control a much bigger trade.
Leverage of 1:30 (also written 30:1) means $1,000 of margin controls a $30,000 trade. Here is the catch: your gain or loss is based on the full $30,000. A 1% move against you costs $300. That is almost a third of your money, from one small move.
On EUR/USD at 1.1000, a 1% move is 110 pips. Big news can move it that far in a day.
Margin is not a limit on your loss. Leverage decides how big a trade you can open. Your risk decides how big a trade you should open. Our margin and leverage lesson lets you test what a 1% move does at each level.
What does a forex trade cost?
Every quote has two prices. The bid is the price you can sell at. The ask is the price you can buy at. Say EUR/USD is 1.1000 bid and 1.1002 ask. The gap of 2 pips is the .
Buy 10,000 euros at 1.1002, sell them straight back at 1.1000, and you lose $2. So you start every trade a little behind. Some accounts also charge a fee per trade, called commission. Keeping a trade open overnight can cost a financing fee too.
Check what you are buying. Changing cash at a bank, a futures contract and a are different things. A CFD (contract for difference) pays you the price change without you owning any currency. Australia's regulator explains the risks of forex trading and CFDs.
For the full cost picture, see what is the spread in forex.
How can you practise without risking money?
Try this on paper before you go near a live account:
- Write the pair. Mark the base and the quote currency.
- Write the bid, the ask, your trade size and every cost.
- Work out what a 10-pip move up or down is worth in money.
- Write why you would enter, and what would prove you wrong.
- Check the result later, without changing your rules.
A practice app with virtual money lets you repeat this many times. But a good practice score does not prove you would make money for real. When you are ready to look at real providers, our forex broker comparison shows what to check in each country.
Next lesson: how to read currency pairs. Wondering if forex is worth it at all? Read why trade forex, and the catch in each reason.
Questions beginners ask
Is forex trading the same as changing money for a trip?
Not usually. At a bank you receive the currency. Trading accounts often give you a leveraged position instead, such as a CFD, that pays you the price change. That makes the risk much bigger.
How much money do I need to start forex trading?
Many firms accept small deposits. But the deposit is not your risk: the trade size is. With leverage, a small deposit can control a large trade. Practise with virtual money until the numbers make sense to you.
What is the difference between a pip and a pipette?
A pip is the usual price step: 0.0001 for most pairs and 0.01 for yen pairs. Many platforms show one more digit. That smaller step is a pipette, worth one tenth of a pip.
Can I lose more than my deposit?
It depends on where you live and on your account. Retail CFD rules in the UK, the EU and Australia stop you losing more than your account balance. Elsewhere, read your contract. Fast moves and price gaps can also push losses past your stop.
Sources
- OANDA US: Micro lots (standard, mini and micro lot sizes)
- NFA Financial Requirements, Section 12: security deposits for forex
- FCA: Restricting contract for difference products (PS19/18)
- ESMA: Final product intervention measures on CFDs and binary options (2018)
- ASIC: Product intervention order strengthens CFD protections (20-254MR)
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