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One of the best quotes I recently heard about oil is by the legendary Tommy Norris (Google his name if you are not quite on the same page), it goes like this…….
OIL.
“Good and bad don't factor into this. Our great-grandparents built a world that runs on this stuff, right here. Until it starts running on something else, we got to feed it, or the world stops. There is an alternative. You can throw your phone away and trade that Mercedes in for a bicycle or a horse and start hunting your own food and living in a tent, but you'll be the only one and it won't make a damn bit of difference. Plus, I hear the moral high ground gets really windy at night.”
If you trade forex and don’t pay attention to oil prices, you’re effectively ignoring one of the most powerful macroeconomic forces on the planet. Oil is not just another commodity ticking away on a chart, it is a foundational input for global growth, inflation, trade balances, and monetary policy.
Currencies respond to economic pressure. Oil creates that pressure.
When oil prices spike, inflation rises, costs surge, and central banks start paying attention. When oil prices collapse, entire economies wobble, currencies weaken, and producers start switching off supply. Forex traders who understand this relationship don’t just see price movement, they understand why it’s happening.
In this article, we’ll explore why oil prices matter in forex trading, examine real-world examples of oil price spikes driven by global tensions, and explain what happens to oil production, and currencies, when prices fall below $60 per barrel.
Why Oil Is So Central to the Global Economy
Oil sits at the heart of modern civilisation.
It fuels:
● Transport (cars, aviation, shipping)
● Manufacturing and heavy industry
● Agriculture and food production
● Heating, electricity, and plastics
Because oil feeds into almost every layer of economic activity, changes in oil prices quickly affect:
● Inflation
● Consumer spending
● Business costs
● Government budgets
Forex markets are forward-looking. They price what the economy will look like, not what it looks like today. Oil prices provide one of the clearest early signals of those future conditions.
The Direct Link Between Oil and Forex Markets
Forex traders focus on:
● Inflation trends
● Economic growth
● Trade balances
● Interest rates
● Capital flows
Oil affects every single one of these.
When oil prices rise, inflation usually follows. When inflation rises, central banks are pressured to tighten monetary policy. When policy tightens, currencies move.
Oil doesn’t just influence forex indirectly; it sits right at the core of macro currency pricing.
Oil Is Priced in US Dollars – A Critical Forex Mechanism
One of the most important oil–forex relationships is with the US dollar.
Oil is traded globally in USD, which means:
● Countries must buy USD to buy oil
● Rising oil prices increase global USD demand
● Falling oil prices can reduce USD liquidity flows
This creates a powerful but often misunderstood link between oil and major currency pairs.
During periods of high oil volatility, moves in:
● EUR/USD
● GBP/USD
● USD/JPY
often accelerate as global capital adjusts to changing energy costs.
Oil-Exporting vs Oil-Importing Currencies
Oil price changes do not affect all currencies equally.
Oil-Exporting Countries (Generally Benefit from Rising Prices)
When oil prices rise, exporting nations often see:
● Higher export revenues
● Improved trade balances
● Stronger government finances
● Increased foreign investment
This tends to support their currencies.
Key oil-linked currencies include:
● Canadian Dollar (CAD)
● Norwegian Krone (NOK)
● Mexican Peso (MXN)
● Russian Ruble (RUB)
Canada is the classic example. Oil exports form a significant part of the Canadian economy. When oil prices rise, USD/CAD often falls as CAD strengthens.
Oil-Importing Countries (Often Hurt by Rising Prices)
Countries that rely heavily on imported energy face rising costs when oil prices increase.
This can:
● Push inflation higher
● Widen trade deficits
● Reduce consumer spending
● Pressure economic growth
Currencies commonly affected include:
● Japanese Yen (JPY)
● Indian Rupee (INR)
● Eurozone currencies
● UK pound (to a lesser extent)
Real-World Examples: When Global Tensions Caused Oil Price Spikes
Oil price spikes are rarely random. They are usually driven by fear of supply disruption, not actual shortages.
1. Middle East Conflicts
The Middle East controls a significant portion of global oil supply. Any escalation in the region sends shockwaves through energy markets.
Examples include:
● Tensions involving Iran and the Strait of Hormuz
● Conflicts in Iraq and Syria
● Attacks on Saudi oil infrastructure
Even the threat of disruption to the Strait of Hormuz, through which around 20% of the world’s oil passes, is enough to send oil prices sharply higher.
For forex traders, these moments often create:
● Risk-off sentiment
● USD strength
● Volatility in oil-linked currencies like CAD and NOK
2. Russia–Ukraine Conflict
Russia is one of the world’s largest oil and energy exporters.
When the Russia–Ukraine conflict escalated:
● Sanctions restricted Russian energy exports
● Europe scrambled for alternative supplies
● Oil prices surged on supply fears
This had immediate forex consequences:
● Energy-importing currencies weakened
● Inflation spiked across Europe
● Central banks were forced into aggressive tightening cycles
Oil was a major transmission mechanism from geopolitics into forex markets.
3. OPEC and OPEC+ Political Tensions
Oil price spikes also occur when OPEC unity fractures.
Disagreements between major producers, such as Saudi Arabia and Russia, can:
● Reduce confidence in future supply
● Trigger speculative buying
● Create sharp, sudden price spikes
OPEC meetings are effectively macro events for forex traders, especially those trading USD/CAD or emerging-market currencies.
4. Attacks on Energy Infrastructure
Oil prices have spiked following:
● Drone attacks on Saudi facilities
● Pipeline sabotage
● Shipping disruptions
Markets react instantly. Oil prices rise first; currencies adjust second.
Why Oil Prices Collapse
Oil prices can also fall dramatically, sometimes faster than they rise.
1. Global Economic Slowdowns
When growth slows:
● Transport activity falls
● Manufacturing demand weakens
● Energy consumption drops
Oil prices often act as an early warning sign of economic trouble. Forex markets take note.
2. Oversupply and Price Wars
Oil producers don’t always coordinate well.
Oversupply can occur when:
● OPEC members cheat on quotas
● New producers flood the market
● Shale oil output rises rapidly
When supply overwhelms demand, oil prices don’t drift lower, they collapse.
What Happens When Oil Falls Below $60 per Barrel?
This is a critical level for both oil markets and forex traders.
The $60 Threshold Matters
While exact break-even levels vary, $60 per barrel is widely seen as a psychological and economic tipping point.
Below this level:
● Many producers struggle to remain profitable
● Investment in new projects slows
● Supply growth begins to contract
Impact on Oil Production
When oil prices fall below $60:
1. High-Cost Producers Reduce Output
Producers with higher extraction costs, such as shale oil and offshore drilling, may:
● Scale back production
● Delay new projects
● Shut down marginal wells
This reduces future supply, often planting the seeds for the next oil price rebound.
2. Capital Investment Dries Up
Oil production is capital intensive.
Low prices mean:
● Fewer drilling projects
● Reduced exploration budgets
● Layoffs across the energy sector
This doesn’t affect supply immediately, but it creates supply constraints later.
3. Government Budgets Come Under Pressure
Many oil-exporting countries rely on oil revenue to fund public spending.
Below $60:
● Budget deficits widen
● Currencies weaken
● Political risk can increase
This is why prolonged low oil prices often coincide with weakness in CAD, NOK, and emerging-market currencies.
Forex Implications of Sub-$60 Oil
For forex traders, low oil prices usually mean:
Oil-Exporting Currencies:
● Weaker exchange rates
● Reduced foreign investment
● Increased volatility
Oil-Importing Currencies:
● Lower inflation
● Improved trade balances
● Potential currency support
However, if oil falls due to a global slowdown, risk-off sentiment can overwhelm these benefits.
Context always matters.
Oil, Inflation, and Central Banks
Oil prices feed directly into inflation.
Rising Oil Prices:
● Push inflation higher
● Pressure central banks to hike rates
● Can support currencies if growth holds
Falling Oil Prices:
Reduce inflation pressures
Allow dovish policy
Can weaken currencies tied to energy exports
Central banks watch oil closely, and so should forex traders.
How Forex Traders Can Use Oil in Practice
You don’t need to trade oil directly.
Smart forex traders:
● Track WTI and Brent crude
● Watch oil during geopolitical escalations
● Monitor USD/CAD correlations
● Use oil as a macro confirmation tool
● Avoid trading oil-linked currencies blindly during oil shocks
Oil provides context, it explains why currencies are moving.
Final Thoughts: Oil Is a Macro Driver You Cannot Ignore
Oil prices influence inflation, growth, trade balances, and central bank decisions, the foundations of forex pricing.
Understanding oil won’t make you perfect but ignoring it will eventually make you wrong.
Because when oil moves aggressively, forex markets rarely stay quiet for long.
And a final word from our friend Tommy Norris:
“We have a 120-year petroleum-based infrastructure. Our whole lives depend on it.
And, hell, it's in everything. The roads we drive on The wheels on every car ever made, including yours. It's in tennis rackets and lipstick and refrigerators and antihistamines. Pretty much anything plastic. Your cell phone case, artificial heart valves. Any kind of clothing that's not made with animal or plant fibres. Soap, even hand lotion, garbage bags, fishing boats. You name it. Everything. And you know what the kicker is? We're gonna run out of it before we find its replacement.”
● Silver hits $84
● Platinum touches $2,500
● Chaos in precious metals
Precious metal pandemonium
Silver, platinum and palladium are in complete chaos this morning, with all three metals exhibiting violent, double-digit price swings within hours of the market open. Silver reached all the way to $84 per ounce earlier today, before electing to explore lows of $75. Platinum briefly breached $2,500 at one point, only to dip back down to $2,200. Palladium is equally unstable. Gold has been practically stationary in comparison, incurring only a minor loss so far today.
The rallies in precious metals achieved full-on hysteria last Friday, with silver, platinum and palladium all registering double-digit gains. Silver closed the week at $79 per ounce, meaning the white metal has gained $50 since the start of the year. There is no other way to describe the rise in silver other than parabolic, and yet the metal is not alone. Platinum started the year under $900 per ounce; it now stands above $2,400. Palladium, while not quite matching the outrageous performances of silver and platinum, has still doubled this year, from $900 in January to over $1,900 last week. Gold meanwhile had a relatively humble week, gaining around $200 by Friday and registering a fresh record high of $4,550 per ounce.
Exuberance aside, some cracks are finally beginning to show for silver. Last week, Elon Musk said the situation in silver markets was “not good”, referring to the key role that silver plays in many industrial applications. The gap between supply and demand continues to widen as miners struggle to keep up, with deficits expected to persist in 2026. Meanwhile, the Chicago Mercantile Exchange has raised the margin requirement for silver futures from $20,000 to $25,000, starting from today. The move effectively limits the leverage on offer, forcing parties to either commit more capital or reduce position size. It is not the first time the CME Group has made such an adjustment, having also done so in 1980 and 2011, among other times. The salient point about the 1980 and 2011 adjustments is that they corresponded to local highs in the silver markets, which would take years to reattain. Adding yet more fuel to the fire, China is expected to impose export controls on silver starting on the first of January 2026. With that said, buyers are still putting pressure on precious metals as of this morning. How the situation resolves is anyone’s guess.
The week ahead
The economic calendar is once again devoid of content this week, with the notable exception of the latest FOMC minutes on Tuesday. The transcript should provide some insight into the Fed’s overall sentiment going into next year, but ultimately, few are expecting a rate cut at the end of January. On Wednesday, many markets will close early on New Year’s Eve, although US markets will remain open all day. Markets throughout the world will be closed on New Year’s Day, while Japanese markets will remain shut on Friday as well. In all likelihood, precious metals will dominate the week’s proceedings.
#Silver #Platinum #Metals
In forex trading, pips and pipettes are terms you will see constantly on your charts, in trade tickets, and in profit and loss statements. In simple terms, a pip is the standard unit traders use to measure how much a currency price moves. It matters because every gain, loss, spread, and trading cost is ultimately measured in pips.
To put it simply, if you do not understand what a pip is, you cannot accurately understand how much you are risking or making on a trade. This introduction will explain what pips are, why they exist, and why they play such an important role in forex trading. As a result, you will be better prepared to understand pricing, position size, and profitability as we move through the rest of the article.
What Is a Pip in Forex?
In forex trading, a pip is the standard unit used to measure price movement between two currencies. The term “pip” refers to percentage in point or price interest point, and it represents the smallest typical change in a currency pair’s exchange rate.
In simple terms, for most major currency pairs, one pip equals the fourth decimal place (0.0001). For example, if EUR/USD moves from 1.1000 to 1.1001, that price change is exactly one pip. This matters because traders use pips, not dollars, to describe gains, losses, spreads, and risk.
Most modern forex platforms display prices with five decimal places. In this case, the fifth decimal place represents a smaller unit called a pipette, which we will cover shortly. For this reason, understanding where the pip sits in the price quote is essential before calculating profit or loss.
A Quick Note on JPY Pairs
Japanese yen (JPY) currency pairs follow a different structure. Instead of four decimal places, most JPY pairs are quoted to two decimal places, meaning one pip is typically 0.01. For example, if USD/JPY moves from 150.20 to 150.21, that one-point movement equals one pip.
This difference exists because the Japanese yen has a much lower value relative to other major currencies. As a result, pip placement is adjusted to keep price movements readable and practical for traders.
Simple Pip Example
Here’s how a pip works in practice:
EUR/USD moves from 1.0850 to 1.0860 → 10 pips
GBP/USD moves from 1.2500 to 1.2495 → 5 pips
USD/JPY moves from 150.30 to 150.40 → 10 pips
Each of these movements is expressed in pips so traders can compare price changes consistently across different currency pairs. This is why pips are the common language of the forex market.
Pips vs Spreads (A Common Beginner Confusion)
New traders often confuse pips with the spread, but they are not the same thing. A pip measures price movement, while the spread represents the cost of entering a trade, measured in pips.
For example, if EUR/USD has a spread of 1.2 pips, the market must move at least 1.2 pips in your favour before the trade becomes profitable. Understanding this difference is crucial when evaluating trading costs and potential returns.
Read more:What Is the Spread in Forex? Learn to Calculate and Trade It
Pips vs. Pipettes: What’s the Difference?
In forex trading, the unit smaller than a pip is called a pipette. A pipette represents one-tenth of a pip and provides more precise price measurement in modern trading platforms.
To put it simply, if a pip is the main unit of movement, a pipette is the extra decimal that allows brokers to show tighter pricing. Most major currency pairs are now quoted to five decimal places, where the fifth decimal place is the pipette. For example, a move from 1.10500 to 1.10501 equals one pipette, while a move to 1.10510 equals one full pip.
How to Identify Pips and Pipettes in a Price Quote
Here’s how pip and pipette placement works in practice:
EUR/USD quoted at 1.08734
The fourth decimal place (0.0001) is the pip
The fifth decimal place (0.00001) is the pipette
Understanding this distinction helps traders accurately read spreads, volatility, and execution prices. This matters because even small fractional movements can impact short-term trades.
Why Pipettes Exist
Pipettes were introduced to improve pricing precision and execution quality. They serve several important purposes:
Offering more precise pricing
Enabling tighter spreads
Improving order execution accuracy
Reflecting true interbank market prices
Supporting short-term and high-frequency trading strategies
Aligning forex pricing with other financial instruments
As a result, pipettes give traders a clearer view of real-time market movement, especially during volatile periods.
Pips, Pipettes, and Trading Calculations
When calculating spreads, volatility, or profit and loss, pipettes are simply fractions of a pip. Ten pipettes equal one pip. For example, a spread quoted as 12 pipettes is the same as a 1.2-pip spread.
For this reason, traders usually focus on pips for analysis and risk management, while pipettes provide extra precision behind the scenes.
Summary
In simple terms, pips measure standard price movement, while pipettes measure finer detail within that movement. Both work together to give traders accurate pricing and better execution.
Pip vs Pipette Comparison Table
Item
Pip
Pipette
Definition
Standard unit of price movement
One-tenth of a pip
Decimal Place
4th decimal (0.0001)
5th decimal (0.00001)
Example
EUR/USD from 1.1000 to 1.1001
EUR/USD from 1.10000 to 1.10001
Main Usage
Measure market movement
Increase pricing precision
Impact on Trading
Determines profit and loss
Improves execution accuracy
Commonly Found In
All forex trading platforms
Modern broker pricing
Trader Usage Frequency
Very high
Mostly behind the scenes
Why It Exists
Standardised measurement
Tighter spreads and precision
How to Calculate Pips in Forex
The value of a pip in forex trading is not fixed. It changes depending on the currency pair you trade, the current exchange rate, and your position size. This matters because the same 10‑pip move can mean very different profits or losses depending on how the trade is structured.
In simple terms, pips measure movement, but pip value measures money. The following sections will show you how to identify pip movements and calculate what one pip is actually worth in real terms.
USD‑Quoted Currency Pairs
USD‑quoted pairs are currency pairs where the US dollar is the quote currency, such as EUR/USD, GBP/USD, and AUD/USD. These are the easiest pairs for beginners to calculate pip value.
The core principle is simple:
Pip Value = Pip Size × Lot Size
For most non‑JPY pairs, the pip size is 0.0001.
Example:
You trade 1 standard lot (100,000 units) of EUR/USD
Pip size = 0.0001
Pip value = 0.0001 × 100,000 = $10 per pip
This means thatevery 1‑pip move in EUR/USD equals a $10 profit or loss when trading one standard lot. For this reason, USD‑quoted pairs are often recommended for new traders learning position sizing and risk management.
Key characteristics of pip value for USD‑quoted pairs:
Pip value remains constant
No currency conversion is required
Lot size directly determines profit or loss
Cross Currency Pairs
Cross pairs are currency pairs that do not include the US dollar, such as EUR/GBP, AUD/CAD, or GBP/JPY. Calculating pip value for these pairs requires one extra step.
The formula is:
Pip Value = (0.0001 × Trade Size) ÷ Market Price
Example:
You trade 1 standard lot of EUR/GBP
Pip size = 0.0001
Current price = 0.8600
Pip value = (0.0001 × 100,000) ÷ 0.8600 ≈ €11.63 per pip
If your trading account is not denominated in euros, this amount must then be converted into your account currency. As a result, pip value for cross pairs fluctuates as exchange rates change.
JPY Currency Pairs
Japanese yen (JPY) pairs are quoted differently, using two decimal places instead of four. This means the pip size is 0.01, not 0.0001.
The formula for JPY pairs is:
Pip Value = (0.01 × Lot Size) ÷ Exchange Rate
Example:
You trade 1 standard lot of USD/JPY
Exchange rate = 150.00
Pip value = (0.01 × 100,000) ÷ 150.00 ≈ $6.67 per pip
Because of this structure, pip values on JPY pairs are usually smaller compared to major USD‑quoted pairs. For this reason, traders must always check pip value before setting stops or targets.
In practice, once you understand these three categories, USD‑quoted pairs, cross pairs, and JPY pairs, you can calculate pip value for any forex trade with confidence.
How Pips Affect Your Profitability
In forex trading, pip movement is what determines whether you make a profit or a loss. Every trade outcome is calculated by multiplying the number of pips gained or lost by the pip value of your position.
In simple terms, price moves first in pips, and money comes second. This is why experienced traders think in pips when analysing trades and only translate those pips into monetary terms when managing risk and position size.
A Simple Profit and Loss Example
Here’s how this works in practice:
You buy EUR/USD at 1.1000
You close the trade at 1.1010
The trade moves10 pips in your favour
If your pip value is $10 per pip, your profit is $100
The same 10-pip move with a smaller lot size would result in a smaller profit, while a larger lot size would amplify both gains and losses. For this reason, pip value and position size must always be considered together.
Pip Value and Profitability Comparison Table
The table below shows how pip values differ across currency pairs and how this directly affects potential profit or loss per pip.
FX Pair
One Pip
Lot Size
Pip Value per Lot
Price of Trade
P/L per 1 Pip
EUR/USD
0.0001
1 Standard
$10.00
1.1000
$10.00
GBP/USD
0.0001
1 Standard
$10.00
1.2500
$10.00
USD/JPY
0.01
1 Standard
$6.67
150.00
$6.67
EUR/GBP
0.0001
1 Standard
£10.00*
0.8600
£10.00*
AUD/CAD
0.0001
1 Standard
C$10.00*
0.9000
C$10.00*
Pip values marked with an asterisk may require conversion depending on your account currency.
This table highlights an important lesson: not all pips are equal in monetary terms. As a result, traders must always calculate pip value before entering a trade, especially when trading cross pairs or JPY pairs.
Understanding how pips translate into profit and loss is a key step toward consistent risk management and long-term trading discipline.
What Influences Pip Value in Forex?
Pip value in forex trading is not constant. It changes based on several variables, including the currency pair being traded, exchange rate movements, and how the trade is structured. When the quote currency is not USD or when exchange rates fluctuate, the monetary value of one pip will also change.
This matters because even if a trade moves the same number of pips, the actual profit or loss can differ from one trade to another. The following factors explain why pip value rises or falls under different market conditions.
Quoted Currency
The quote currency determines whether a pip value requires conversion. When USD is the quote currency (such as EUR/USD), pip value is straightforward and remains fixed for a given lot size.
However, when the quote currency is not USD, for example, EUR/GBP, the pip value must be converted using the relevant exchange rate. As a result, the pip value fluctuates alongside the market price.
Example: If one pip on EUR/GBP is worth €10 but your account is denominated in USD, that €10 must be converted into dollars. Any movement in the EUR/USD exchange rate will therefore change the dollar value of each pip.
For this reason, cross pairs introduce an extra layer of variability that traders must account for.
Position Size
Lot size is one of the most significant factors influencing pip value. The larger the position size, the more money each pip movement represents.
In simple terms:
Micro lot (1,000 units) → smaller pip value
Mini lot (10,000 units) → moderate pip value
Standard lot (100,000 units) → larger pip value
Example: A 10-pip move on EUR/USD equals approximately $1 on a micro lot, $10 on a mini lot, and $100 on a standard lot. This is why increasing lot size increases both potential gains and potential losses.
Exchange Rate Conversion
When a currency pair does not include your account currency, pip value must be converted through the current exchange rate. This conversion causes pip value to fluctuate even if the number of pips remains the same.
As exchange rates change throughout the trading day, the monetary value of each pip can rise or fall. For this reason, pip value on cross pairs is less stable than on USD-quoted pairs.
Account Currency
If your account currency matches the quote currency, pip value remains fixed. However, when your account currency differs, e.g., a EUR-denominated account trading USD/JPY, the platform must convert pip value into your account currency.
Example: A USD/JPY trade may generate a profit of $50, but if your account is in euros, that $50 will be converted at the prevailing EUR/USD exchange rate. As a result, the final profit in euros may differ slightly from trade to trade.
Understanding these factors allows traders to anticipate how pip value will behave and manage risk more effectively under changing market conditions.
How to Use Pips in Forex Trading
A pip is more than just a pricing unit; it is the primary tool traders use to understand market movement. Once you understand pips, you can measure volatility, calculate profit and loss, and manage risk with far greater precision.
In simple terms, pips allow traders to turn raw price movement into something measurable and actionable. The following sections explain the practical roles pips play in everyday forex trading decisions.
Measure Price Movement
A pip is the fundamental unit traders use to measure how much the market has moved. Instead of saying a currency moved from 1.1000 to 1.1030, traders simply say the market moved 30 pips.
This matters because pips provide a standardised measurement across all currency pairs. Whether you are analysing EUR/USD or AUD/CAD, pips allow you to compare volatility, assess market strength, and judge whether a move is significant or just market noise.
Calculate Profit and Loss
Pips and pip value work together to determine your profit or loss on every trade. Once you know how many pips the market has moved and how much each pip is worth, calculating P/L becomes straightforward.
For example, a 20-pip gain on a trade with a $5 pip valueresults in a $100 profit. Conversely, a 20-pip loss produces a $100 loss. This is why traders focus on pip targets first and monetary results second.
Set Stop Loss and Take Profit Levels
Pips play a critical role in risk management. Traders use pips to set stop-loss and take-profit levels based on structure and market conditions rather than emotion.
Read more:Forex risk management: 10 tips to manage 6 key risk types in trading
For instance, a trader may place a stop loss 25 pips below entry and a take profit 50 pips above entry. This creates a clear risk-to-reward framework and helps remove guesswork from trade management.
Including Spread and Fees
Trading costs in forex are also measured in pips. The spread represents the difference between the buy and sell price and is deducted from your trade the moment you enter.
Example: If EUR/USD has a spread of 1.2 pips, the market must move 1.2 pips in your favour before the trade becomes profitable. This is why tighter spreads are especially important for short-term traders.
By understanding how pips interact with spreads and fees, traders gain a clearer picture of true trading costs and net profitability.
FAQ
How much is 1 pip in XAUUSD?
In XAU/USD (Gold vs US Dollar), 1 pip is a price movement of $0.01 (one cent) per ounce. This means a move from $2000.00 to $2000.01 equals one pip, and its monetary value depends on your lot size, e.g., $1 for a standard lot,$0.10 for a mini lot, and $0.01 for a micro lot.
Are 100 pips equal to 1 cent?
No. For most major currency pairs (excluding JPY pairs), prices are quoted to four decimal places, and one pip equals the fourth decimal place, which is one-hundredth of a cent. Therefore, 100 pips are equal to one full cent, not one pip.
How many pips can you make in a day?
There is no fixed number of pips a trader can make in a day. Daily pip gains depend on market volatility, trading strategy, time frame, and risk management, and consistency matters far more than chasing large pip totals.
Do all forex pairs have the same pip size?
No. Most currency pairs use a pip size of 0.0001, while JPY pairs use a pip size of 0.01. Some instruments, such as gold or indices, also use different pip or point structures.
Is a pip the same across all brokers?
The definition of a pip is standard across brokers, but pricing precision may differ. Some brokers quote prices with pipettes, which adds an extra decimal place and provides tighter spreads and more precise execution.
What risks are involved in forex trading?
Forex trading involves significant risk due to leverage, market volatility, and rapid price movements. Traders can lose more than their initial investment if risk is not managed properly, which is why understanding pips, position size, and stop losses is essential.
Start your trading journey with the best, open a Radex Markets account here
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● Platinum surpasses $2,300
● Gold hits $4,500
● US growth figures exceed expectations
Precious metals push higher
It may have taken seventeen years, but platinum has finally beaten its long-standing record high established back in 2008, pushing beyond $2,300 per ounce as of this morning. The precious metal has gained a staggering $700 over the last two weeks and is now up 160% since the start of the year, beating the rallies in gold and silver. Speaking of which, gold ventured over the $4,500 mark earlier today, exploring new territory and adding another significant milestone to this year’s accomplishments. Silver meanwhile blasted through $70 per ounce yesterday, closing the day over $71 per ounce and pushing even higher this morning. Precious metals have exceeded all expectations this year, and continue to surprise even the most fervent of gold bugs. With one week to go before the end of the year, the question on everyone’s mind is how much higher metals can go in 2025.
Surprise US growth figures
The latest US GDP figures, published yesterday, revealed that the American economy grew by 4.3% in the third quarter – the fastest rate of growth in two years. The acceleration was largely driven by consumer spending, but also by a smaller trade deficit due to an increase in US exports. The data thoroughly outpaced economists’ predictions of 3.3% and came as a pleasant surprise to US stocks, pushing the S&P 500 to a fresh record high. The latest figures carried over to the crude oil markets, which are in the midst of a rebound following last week’s lows. The Brent benchmark crept back over $62 a barrel yesterday, while WTI managed to reclaim $58.
#Platinum #Gold #SPX
If you’ve been trading forex for more than five minutes, chances are you’ve stumbled across the MACD. Short for Moving Average Convergence Divergence, this indicator has earned a spot on the charts of countless traders, from wide-eyed beginners to seasoned pros with multiple screens. Why? Because the MACD is like the most applicable of indicators, it can show you trend direction, momentum, and potential reversal points, all without looking overly complicated.
But like most things in forex, it’s not a magic wand. The MACD can be incredibly powerful when used properly, but it also has its quirks and limitations. Some traders swear by it, others think it lags behind price action, and a few just throw it on their charts because it looks cool (no judgment intended).
In this article, we’ll break down what the MACD is, how it actually works, and why traders use it. We’ll also look at its advantages, disadvantages, the timeframes it tends to shine on, and which currency pairs give it the most reliable signals. By the end, you’ll have a clear, practical understanding of how to put this indicator to work in your own trading.What Is the MACD?
The MACD (that’s Moving Average Convergence Divergence for when you’re trying to sound impressive in trading forums) is one of the most widely used indicators in forex. At its core, it’s built on a simple concept: moving averages. Trader’s love moving averages because they smooth out price action and make the chaotic forex market look slightly less like a busy heart monitor.
Here’s what makes up the MACD:
● The MACD Line – This is the difference between two Exponential Moving Averages (EMAs), typically the 12-period EMA and the 26-period EMA. If you’re not a fan of math, don’t worry-your trading platform does the heavy lifting.
● The Signal Line – A 9-period EMA of the MACD line. When the MACD line crosses above this one, it suggests bullish momentum. Cross below? Bearish momentum. Traders love this bit because it feels like the indicator is whispering buy/sell secrets directly into their ears.
● The Histogram – This little bar chart shows the distance between the MACD line and the signal line. When the bars are growing, momentum is building; when they shrink, momentum is fading. Think of it as a mood indicator for the market.
What does this all mean? In plain English: the MACD helps you identify trend direction, momentum, and possible reversals. When the fast-moving EMA (short-term price action) pulls away from the slower EMA (long-term price action), the indicator shows momentum building. When they start converging, it’s a clue the trend could be running out of steam.
Traders typically look for three main signals:
1. Signal line crossovers – MACD line crossing above/below the signal line.
2. Zero-line crossovers – MACD moving above or below zero, hinting at trend direction.
3. Divergence – When price and MACD move in opposite directions (often a warning sign of a potential reversal).
In short: the MACD is both a trend-following tool and a momentum indicator. That’s why it’s in almost every trader’s toolbox, right next to caffeine and questionable levels of optimism.How Does the MACD Work in Forex Trading?
Now that we know what the MACD is, let’s talk about how it actually earns its keep on your trading screen. Spoiler alert: it doesn’t predict the future (sorry to disappoint), but it does a pretty solid job of highlighting momentum shifts and trend changes.
Here’s how traders typically use it:
1. Signal Line Crossovers
When the MACD line crosses above the signal line, traders interpret it as bullish momentum-basically, “hey, buyers are waking up.” When it crosses below, it suggests bearish momentum-aka, “sellers are back in charge.” Of course, not every crossover means instant profit; sometimes it’s just the market trolling you.
2. Zero Line Crossovers
When the MACD moves above zero, it’s a sign the short-term EMA is stronger than the long-term EMA-momentum is bullish. When it dips below zero, momentum is bearish. This is great for spotting trend direction, but if you expect instant riches, you might want to lower those expectations (and maybe stop following those Instagram “forex gurus”).
3. Divergence
This one gets traders really excited. If the price is making higher highs, but the MACD is making lower highs, that’s bearish divergence-a warning sign the uptrend might be running out of steam. Flip it the other way (lower lows in price, higher lows in MACD) and you’ve got bullish divergence. Traders call it a “heads up,” but sometimes it’s more like a “heads up, but don’t mortgage your house on this signal.”
Putting It Into Practice
Let’s say you’re looking at EUR/USD on the 4H chart. Price is climbing steadily, the MACD line crosses above the signal line, and the histogram bars are growing momentum is building. A trader might enter a long trade, but a smart trader (read: not the one blowing accounts weekly) would also check support/resistance levels or maybe confirm with another indicator.
Because here’s the truth: the MACD is powerful, but it’s not meant to be used in isolation. Think of it as a reliable wingman. It’s there to support your decisions, not make them for you.Advantages of Using the MACD Indicator
Despite its quirks, the MACD has earned a place in nearly every forex trader’s toolkit. Here’s why:
1. Simplicity (Kind of…)
Once you understand the components-MACD line, signal line, histogram-it’s surprisingly easy to read. Your trading platform does the math, so you can pretend you’re a financial genius without actually crunching numbers.
2. Works Well in Trending Markets
The MACD shines when there’s a clear trend. Uptrend? Momentum signals build, helping you ride the wave. Downtrend? It warns you when sellers are gaining strength. In a perfect world, it’s like having a friend who whispers, “Yep, this trend’s got legs.”
3. Spotting Potential Reversals
Divergence signals (when price and MACD disagree) can give early warnings of reversals. Sure, it doesn’t come with a crystal ball, but spotting a trend losing momentum before it collapses is better than being blindsided.
4. Entry and Exit Confirmation
The MACD can help confirm your trade decisions. Whether you’re entering a trade after spotting a breakout or exiting before momentum fades, the MACD’s signals give you a little extra confidence. Think of it as the trading equivalent of double-checking your parachute before jumping.
5. Flexible Across Timeframes
From 5-minute scalps to daily swing trades, the MACD adapts to different trading styles. Just adjust your settings, and you’re good to go.
In short: the MACD is easy to use, versatile, and capable of providing meaningful insight-especially for traders who pair it with price action or other indicators. It won’t make you rich on its own, but it’s a tool that can help you make smarter decisions and avoid some obvious mistakes.Disadvantages of the MACD
As much as traders love the MACD, it’s far from perfect. Here’s what you need to watch out for:
1. Lagging Indicator
Because the MACD is based on moving averages, it reacts to price instead of predicting it. In plain English: it’s always a few steps behind the market. If you’re hoping it’ll shout, “buy now!” before the move, you might be disappointed. Think of it as your friend who’s always fashionably late-helpful, but not first to the party.
2. False Signals in Sideways Markets
The MACD works best in trends, but in choppy or sideways markets, it can throw out signal after signal, none of which actually lead anywhere. Traders sometimes call this “whipsawing”-when the indicator seems like it’s saying one thing, but the market is actually just messing with you.
3. Can’t Predict Price Alone
The MACD tells you about momentum and trend, but it won’t give you exact entry or exit points. Relying solely on it is like driving with only your rearview mirror-it’s informative, but dangerous if that’s all you’re looking at.
4. Needs Confirmation
Because it lags and can produce false signals, the MACD is best used alongside other tools-support/resistance, candlestick patterns, or even other indicators. Ignoring this can leave you nodding at the charts while your account silently cries in the corner.
5. Sensitive to Your Settings
Adjusting the EMAs or signal line can dramatically change what the MACD tells you. Some traders swear by the default 12, 26, 9 setups; others tweak it obsessively. Either way, you can’t just slap it on a chart and expect perfection.
In short, the MACD is great-but only if you know its limitations. Ignore them, and you might feel like a participant in a very expensive guessing game.Best Timeframes for the MACD in Forex
Not all timeframes are created equal when it comes to the MACD. Using the right one can mean the difference between a signal that actually works and one that makes you want to throw your laptop out the window.
Short-Term Timeframes (5M–15M)
Scalpers love these tiny charts because they can catch quick moves. The MACD here is fast-moving and produces lots of signals-sometimes too many. You’ll get a lot of excitement… and a lot of false alarms. If your heart rate spikes every time a crossover happens, maybe stick to coffee instead of 5-minute charts.
Medium Timeframes (1H–4H)
These charts are sweet spots for swing traders. The MACD signals are more reliable than in ultra-short timeframes yet still frequent enough to provide opportunities. You get a clearer picture of the trend, and fewer instances of the “market trolling you” feeling.
Longer Timeframes (Daily)
Daily charts are where the MACD really shines for spotting larger trends. Signals are slower, but generally more trustworthy. Patience is key here, though-this isn’t for the trader who needs instant gratification. You might wait a few days for a signal, but when it comes, it’s usually meaningful.
Tips for Using Timeframes
● Align signals on smaller timeframes with trends on higher timeframes. For example, if the daily MACD is bullish, favour long trades on the 1H chart.
● Avoid relying on the MACD in tiny charts if you can’t stomach a lot of false signals.
● Remember: the indicator doesn’t know what news is about to drop, so sudden spikes can make even the most solid setups look like a sick prank.
In short, the MACD is versatile, but picking the right timeframe is crucial. Too short, and it whipsaws; too long, and you miss opportunities. The trick is finding a balance that suits your trading style-and your nerves.Best Currency Pairs to Use The MACD On
The MACD doesn’t treat every currency pair equally. Some pairs love it, others… not so much. Knowing where it works best can save you a lot of frustration (and possibly a few lost trades).
1. Major Pairs Are Your Friends
Pairs like majors, EUR/USD, GBP/USD, USD/JPY, and USD/CHF are highly liquid and tend to have smoother, more predictable trends. This makes the MACD signals more reliable and easier to interpret. If you’re trading these, the indicator is like that dependable friend who always shows up on time.
2. Trending vs. Ranging Pairs
The MACD thrives in trending markets. For pairs with strong directional moves, signals like crossovers and divergence are often more accurate. In contrast, pairs stuck in sideways ranges-especially some exotic pairs-can generate endless false signals. Using the MACD there is a bit like trying to predict the weather by watching clouds shaped like dinosaurs: fun, but mostly inaccurate.
3. Volatility Matters
Highly volatile pairs can make the MACD noisy. For example, exotic pairs like USD/TRY or GBP/ZAR often swing wildly, producing signals that might make your trading account scream in protest. Stick with the major and the odd minor pairs where price action is smoother for more dependable results.
4. Combining Pairs and Timeframes
For best results, combine the right pairs with the right timeframe. EUR/USD on a 4H chart is a good example. Usually reliable. USD/TRY on a 5M chart? Only if you enjoy adrenaline and regret. Always check higher timeframe trends before acting on a lower timeframe MACD signal.
In short, major pairs and trending markets are where the MACD really earns its stripes. Exotic, choppy, or low-liquidity pairs? Consider them “MACD-unfriendly zones,” at least if you want to keep your blood pressure in check.Conclusion
The MACD is one of those indicators that every forex trader seems to have on their charts-and for good reason. It’s versatile, relatively easy to read, and can give valuable insight into trend direction, momentum, and potential reversals. But let’s be honest: it’s not magic. It lags, it can give false signals, and it’s best used alongside other tools like support/resistance, price action, or even a dash of common sense.
When used wisely, the MACD can help traders spot opportunities on major currency pairs, confirm entries and exits, and avoid getting caught in sideways market whipsaws. Picking the right timeframe-whether it’s a quick 15-minute chart for scalping or a daily chart for swing trades-is crucial to making it work effectively.
Ultimately, the MACD is a tool, not a crystal ball. It can give you an edge if you understand its strengths and limitations, but relying on it blindly is a recipe for frustration (and possibly losing a bit of sleep). Test it, combine it with other techniques, and remember in forex, no indicator is perfect, but a smart trader can make even a lagging line feel like a superpower.
● Gold and silver hit record high
● Platinum touches $2,100 per ounce
● Palladium doubles since January
Precious metals rise together
Precious metals are pumping across the board. Gold wasted no time pumping straight to $4,400 per ounce this morning, surpassing its previous record high established back in October. It was not alone. Silver reached all the way up to $69 per ounce within hours of the opening bells across Asia, pushing even further into record high territory. The white metal is up a staggering 140% since the start of the year, and is by no means alone. After breaching $2,000 last Friday, platinum blasted straight out of the gate this morning, moving up to $2,100 per ounce. Platinum is up over 130% since January and is now only $200 away from beating its previous all-time high of $2,300 per ounce, recorded back in 2008. As if that were not enough, palladium also continued its ascent this morning, reaching to $1,850 and beyond, meaning the metal has joined silver and platinum in doubling since the start of the year. The drama in precious metals appears to be relatively self-contained for the time being, with markets further afield remaining unaffected.
The week ahead
Christmas is only a few days away, and the economic calendar is as barren as one would expect. With regard to the US economy, Tuesday has a couple of meagre offerings in the form of the ADP employment change and heavily delayed Q3 GDP figures, while the latest jobless claims arrive early this week on Wednesday. Other than that, there is very little to whet the appetite this week; the earnings calendar is equally mundane. With the Christmas break just around the corner, traders understandably have their sights on matters closer to home. Markets around much of the world will shut down on Thursday and Friday for Christmas and Boxing Day, while US markets will close for half a day on Wednesday but reopen on Friday.
#Gold #Silver #Metals
