What is a Currency Pair?

Forex is a market that enables fast online trading. In Forex, exchange rates are shown as “currency pairs”, known as pairs. A pair expresses the value of one currency relative to another. For example, opening a long position on USD/TRY means buying USD and selling TRY.

Pairs are categorized as major and exotic/minor. Majors (examples): EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD. Majors have high trading volume; exotic pairs usually have wider spreads.

What is a Lot?

A lot represents the trade size. 1 standard lot = 100,000 units (of the base currency). Example: When EURUSD is 1.1200 and you buy 1 lot, you control 100,000 EUR (nominal value).

Lot Types

Mini lot = 0.1 lot = 10,000 units. Micro lot = 0.01 lot = 1,000 units. This allows trading with small accounts.

Margin and Leverage

To open a trade, you need sufficient margin in your account. Margin depends on the lot size, pair price, and chosen leverage ratio.

Simple Margin Formula

Margin = (Pair Price × Trade Volume × Lot Size) / Leverage

Example

EURUSD = 1.1200, 1 lot (100,000 EUR), leverage 1:100: Margin = (1.1200 × 100,000) / 100 = $1,120

If the same trade had 1:10 leverage, margin = (1.1200 × 100,000) / 10 = $11,200. Higher leverage means lower required margin — but also higher risk.

Effect of Lot Size

As lot size increases, required margin increases; as lot size decreases, investment cost is reduced. Micro and mini lots help manage risk more effectively.

What is Spread?

Spread is the difference between the bid (buy) and ask (sell) price of a pair — it's your transaction cost. Example: EUR/USD bid=1.0591, ask=1.0593 → spread = 2 pips.

Spread varies depending on liquidity and volatility. Some brokers offer fixed spreads, most use dynamic spreads.

What is Swap?

Swap is the overnight interest cost applied when positions are held overnight. The bought currency is borrowed, and the sold one is lent; swap is calculated based on the interest rate difference.

Example: In a long USDTRY position, you sell TRY and buy USD. The swap cost can be positive or negative depending on your broker’s conditions.

What are Pip & Point?

A pip is usually the fourth decimal place in a currency quote (e.g., EURUSD 1.3450 → 1.3453 = 3 pips). A point is the fifth decimal place; typically, 1 point = 0.1 pip.

The monetary value of a pip is calculated independently of leverage. Example: In EURUSD, 1 lot (100,000) and pip=0.0001 → 1 pip ≈ $10.