Pips, Lots, and Leverage MCQs
1. In Forex trading, a “pip” refers to:
A) The smallest price move in a currency pair
B) A type of currency
C) A trading strategy
D) None of the above
Answer: A) The smallest price move in a currency pair
2. If the EUR/USD pair moves from 1.1000 to 1.1005, how many pips has it moved?
A) 0.5 pips
B) 5 pips
C) 10 pips
D) 50 pips
Answer: B) 5 pips
3. A “lot” in Forex trading refers to:
A) The amount of money in a trader’s account
B) A standard unit of measurement for a trade
C) The total number of pips in a trade
D) The number of currencies in a pair
Answer: B) A standard unit of measurement for a trade
4. What is a standard lot size in Forex trading?
A) 1,000 units
B) 10,000 units
C) 100,000 units
D) 1,000,000 units
Answer: C) 100,000 units
5. A “mini lot” in Forex is equal to how many units?
A) 1,000 units
B) 10,000 units
C) 100,000 units
D) 1,000,000 units
Answer: B) 10,000 units
6. Leverage in Forex trading allows a trader to:
A) Trade without risking any money
B) Control a larger position with a smaller amount of capital
C) Increase their trading fees
D) Decrease their potential profits
Answer: B) Control a larger position with a smaller amount of capital
7. If a trader uses 100:1 leverage, this means they can control:
A) 100 times their capital
B) 1/100 of their capital
C) 10 times their capital
D) 100 times their losses
Answer: A) 100 times their capital
8. What happens to a trader’s potential loss when using high leverage?
A) It decreases significantly
B) It increases significantly
C) It remains the same
D) It becomes zero
Answer: B) It increases significantly
9. A trader who wants to buy 2 standard lots of EUR/USD would be trading how many units?
A) 10,000 units
B) 20,000 units
C) 200,000 units
D) 2,000,000 units
Answer: C) 200,000 units
10. In Forex trading, what does the term “margin” refer to?
A) The total profit from a trade
B) The amount of money required to open a leveraged position
C) The total amount of pips in a trade
D) The difference between the buying and selling price
Answer: B) The amount of money required to open a leveraged position