What happens when you press Buy
What you learn in 3 minutesThis lesson follows one order from the moment it leaves the platform to the moment the position is closed, and shows where each cost attaches. The word order is read on the platform as an instruction, not as a result: it is a request to buy or sell at whatever price the market gives next. With AUD/USD near 0.6640, one pip on one standard lot is 10 units of the quote currency, which is about A$15.06 at that rate, so the numbers below are small but real.
One order, four steps, about A$15 a pip
| Step | Amount | Note |
|---|---|---|
| Order | Buy 1 standard lot AUD/USD | The instruction leaves the platform; no price is fixed yet. |
| Fill | 0.6640 | The price the broker returns for that order. |
| Open position | 100,000 AUD bought | One standard lot is 100,000 units of the base currency. |
| Pip value while open | A$15.06 | 10 units of the quote currency divided by 0.6640. |
| Close | 0.6650 | Ten pips above the fill, so the position is closed at a higher price. |
| Gross result | A$150.60 | 10 pips multiplied by A$15.06. |
The broker may round the pip value, quote a spread on entry and exit, and charge a commission or financing on top. Those amounts vary between brokers, so check the contract specifications before trading.
The mistake people make here
The common mistake is to treat the fill price as the price that was shown a moment earlier. Between the order and the fill the market can move, and the position opens at the price the broker returns, not the one on the screen. The fix is to read the fill price on the confirmation, then recalculate the pip value from that number rather than from the quote you first saw. If the fill is 0.6640 and the close is 0.6650, the ten pips are measured between those two prices, not between the screen price and the close.Check yourself
A position is opened at 0.6640 and closed at 0.6625. How many pips is that, and what is the gross result on one standard lot?
The move is 0.6640 minus 0.6625, which is 0.0015, or 15 pips. One pip is A$15.06, so 15 pips is 15 multiplied by A$15.06, which is A$225.90. Because the close is below the open on a buy, this is a loss before any costs.
If the broker charges a spread of 0.8 pips on entry and exit, what does that cost on one standard lot?
The spread is 0.8 pips, and one pip is A$15.06, so the spread costs 0.8 multiplied by A$15.06, which is A$12.05. If it is charged once on entry and once on exit, the total is 2 multiplied by A$12.05, which is A$24.10.