1. Currency Quotation Mathematics

When you trade EUR/USD at 1.08500:

• EUR: Base Currency (Quantity = 1)
• USD: Quote / Term Currency (Value = $1.08500 USD)

The Pip & The Pipette

A Pip is 0.0001 for standard 4-digit currency pairs (or 0.01 for JPY pairs). Most brokers quote to 5 decimal places; the 5th digit is a Pipette (1/10th of a pip).

Lot Sizes & Monetary Value

• Standard Lot (1.00): 100,000 units → 1 pip = $10.00 USD
• Mini Lot (0.10): 10,000 units → 1 pip = $1.00 USD
• Micro Lot (0.01): 1,000 units → 1 pip = $0.10 USD

2. Algorithmic Dynamic Lot Sizing Formula

Never hardcode static lot sizes into your bot. Always calculate position size dynamically based on a fixed risk percentage of account balance:

function calculateLotSize(accountBalance, riskPercentage, stopLossPips) {
    const riskAmountUsd = accountBalance * (riskPercentage / 100);
    const pipValueStandardLot = 10.0; // For EUR/USD
    
    // Position Size = Risk $ / (StopLoss in Pips * Pip Value)
    const rawLotSize = riskAmountUsd / (stopLossPips * pipValueStandardLot);
    
    // Round to 2 decimal places (Micro lot precision)
    return Math.max(0.01, Math.floor(rawLotSize * 100) / 100);
}

// Example: $10,000 account, risking 1% ($100), with a 20 pip Stop Loss:
// lotSize = 100 / (20 * 10) = 0.50 Lots
console.log(calculateLotSize(10000, 1.0, 20)); // Output: 0.5

3. Global Market Sessions & Volatility

Trading bots must be programmed with time filters to avoid flat market conditions or unpredictable session openings:

• Asian Session (Tokyo): 00:00 - 09:00 GMT (Low volatility, tight consolidation ranges).
• London Session: 08:00 - 17:00 GMT (Heavy trend breakouts and high volume).
• New York Session: 13:00 - 22:00 GMT (High impact US economic news releases).
• London / NY Overlap (13:00 - 17:00 GMT): Highest liquidity and best execution speed.

4. Knowledge Check Exam