How markets are priced

In Lesson 1 we said trading is buying low and selling high. Now the obvious question: what is the price you are buying and selling at, and how is a “move” measured? Get comfortable with quotes, the spread, pips and lots — and a chart stops looking like noise.

Every price is actually two prices

Open any market and you will not see one price — you will see two, side by side. The bid (what you can sell at) and the ask (what you can buy at). The ask is always a touch higher than the bid.

So when you go long EUR/USD you pay the ask (1.0852); when you sell you get the bid (1.0850). You always buy a hair high and sell a hair low.

The spread is your cost

That little gap between bid and ask is the spread — and it is the cost of doing business. Here it is 0.0002, or 2 pips. The moment you enter a trade you are slightly down by the spread; price has to move in your favour by at least that much before you are break-even. Tighter spreads = cheaper trading, which is why liquid markets like EUR/USD are popular.

Pips: the unit of movement

A pip is the standard smallest move in a price. In most FX pairs it is the 4th decimal — 0.0001. So EUR/USD going 1.0850 → 1.0851 is one pip; 1.0850 → 1.0900 is fifty pips. It is just a clean way to talk about distance without saying “0.0001” all day. (Gold and indices measure moves in dollars or points instead, but the idea is the same: a unit of movement.)

Lots: how big your trade is

A lot is your position size. One standard lot of EUR/USD is 100,000 units — where one pip is worth about $10. There are smaller sizes too: a mini lot (10,000 units, ~$1/pip) and a micro lot (1,000 units, ~$0.10/pip). Same pip move, very different money — because pip value scales with size. Drag it and watch:

That is the whole reason risk matters: size decides how much each pip is worth, so size decides how much a move can help — or hurt — you. We will turn that into a rule in Lesson 5.

The four arenas, quickly

FX trades in pairs and moves in pips. Indices (like the S&P 500) move in points. Gold is quoted in dollars per ounce. Crypto is quoted in dollars and swings far harder than the rest. Different units, same two-price, spread-and-size mechanics underneath.