Forex Trading | Trading Lab 101 | Studio Aletheia
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Forex Trading

Trading Lab 101 · Lesson 11

Forex trading moves the world's largest financial market, one currency pair at a time. Today you study how pips, lot size, and leverage turn small price changes into meaningful gains or losses, and how interest rate decisions and global news drive pairs like EUR/USD and USD/JPY.

Focus Currency Pairs · Pips · Global Catalysts
Accountability Forex Playbook + Exit Ticket
Design Lens Know your session, know your catalyst.
The Aletheian Investments and Trading Institute lesson visual
The Aletheian Investments and Trading Institute · Trading Lab 101 · Lesson 11
Learning Targets

Learning Targets and Success Criteria

Build the vocabulary and judgment needed to connect a currency pair to the economic story moving it.

Targets

What I will learn

  • I can interpret currency movement and evaluate how global events influence Forex markets.
  • I can calculate how a pip move translates into a dollar gain or loss using lot size.
  • I can explain how interest rate decisions affect currency value.
  • I can decide on a trade direction and exit plan that fits a trader's risk tolerance.
Success Criteria

What success looks like

  • I describe a specific currency pair and connect it to a real economic story.
  • I calculate the dollar impact of a pip move using lot size and leverage.
  • I explain why a specific news event or session could move the pair.
  • My plan uses today's vocabulary, pip, lot size, spread, major pairs, and carry trade, with accuracy.
Trading Vocabulary

The language of today's session.

These five terms carry through the reading, the Forex Playbook, and the trading session that follows.

01 · Increment

Pip

The smallest price unit in Forex, usually 0.0001 for most pairs, or 0.01 for pairs with the Japanese yen.

02 · Size

Lot Size

Standardized trade units, micro, mini, or standard, that determine how much one pip is worth.

03 · Gap

Spread

The difference between the buy, ask, price and sell, bid, price for a currency pair.

04 · Volume

Major Pairs

The most heavily traded currency pairs, usually involving the U.S. dollar, like EUR/USD, GBP/USD, USD/JPY.

05 · Yield

Carry Trade

Borrowing in a low-interest-rate currency and investing in a higher-rate currency to earn the rate difference.

The Reading

Reading The Pair

Forex trading rewards traders who can connect a currency pair to the economic story moving it.

Lesson Video · Forex Trading

The foreign exchange, Forex, market is the world's largest financial market. Instead of trading shares, Forex traders exchange one currency for another, such as EUR/USD, euro versus U.S. dollar, or USD/JPY, U.S. dollar versus Japanese yen.

Each currency pair is written as base currency over quote currency. If EUR/USD equals 1.1000, that means 1 euro is worth 1.10 U.S. dollars. When traders buy a pair, they are buying the base currency and selling the quote currency at the same time.

Forex prices change due to many forces, including:

  • Interest rate decisions by central banks.
  • Inflation and employment reports.
  • Global political and economic events.

Because Forex markets operate 24 hours a day across different global sessions, Tokyo, London, New York, there is almost always movement happening somewhere. Traders must know which session they are in and what news events might be coming next. Forex uses leverage as well, but instead of ticks, it uses pips, which represent tiny price changes, 0.0001 for most pairs. Even a small movement in a currency pair can lead to big gains or losses when combined with leverage and large lot sizes.

Scenario: USD/JPY and Interest Rates

The U.S. Federal Reserve is expected to raise interest rates. Higher rates usually strengthen a currency because investors earn more by holding assets in that currency. A trader predicts the U.S. dollar will gain value against the Japanese yen.

The trader buys the currency pair USD/JPY. After the rate hike is announced, USD strengthens significantly and the pair rises, allowing the trader to profit from the decision. A move of just a few dozen pips, multiplied by the chosen lot size, can create a large gain.

If the rate announcement had gone the opposite way, or if the market had already priced in the news, the pair might have dropped sharply instead. In that case, the trade would have moved against the trader, and leverage would have magnified the loss. The same ideas carry into other strategies too: spread matters in day trading, scalping, and options, while leverage is a shared concept across futures and options.

Mini-Lesson · Check for Understanding
In two or three sentences, define pip in your own words and explain why it matters in Forex trading. Use the word leverage in your answer.
Toolkit

Materials for the session.

  • A. A chosen currency pair, major, minor, or exotic
  • B. A news catalyst or economic event
  • C. A defined lot size and pip value
  • D. A risk tolerance in pips or dollars
  • E. A trade direction and exit plan
Non negotiable routine

Every Forex trade: know your pip value and lot size, size the position to your risk tolerance, and track the session and news event that could move the pair.

Guided Practice

The Forex Playbook

Map a full Forex trade end to end, from currency pair and news catalyst to pip math and your final decision.

Forex Playbook
Choose a sample currency pair, then complete the blueprint protocol.
1 · Currency Pair and Economic Story
Describe which currency pair you are looking at, major, minor, or exotic, and why. Explain the economic story, what news, trends, or expectations are shaping your idea.
2 · Pips, Lot Size and Leverage Math
Explain the pip value and lot size for this trade. How much does each pip change your profit or loss? Show how leverage makes these movements bigger than they first appear.
3 · Risk, Drawdown and Account Impact
Describe how much you are willing to risk on this trade. How many pips, or dollars, of movement against you could your account handle before the loss is too large?
4 · News Event and Session Timing
Forex trades across global sessions. Explain which news event or session you are focused on, Tokyo, London, New York. What could cause a sudden move for or against you?
5 · Trade Direction and Exit Plan
Decide whether you will go long or short this pair and why. Describe your exit plan, where you will take profits and where you will cut losses.
6 · Summary: Telling the Forex Story
Write a 4 to 5 sentence summary telling the story of your Forex idea, from the currency pair and news catalyst to pip math, risk, and your final decision.
Hands-On

The Trading Session

Trace the five moves a Forex trader makes, from choosing a pair to exiting once the catalyst has played out.

1
Choose: Choose a currency pair, deciding whether to focus on a major, minor, or exotic pair.
2
Evaluate: Evaluate interest rates and news, studying central bank decisions, inflation, employment data, and political events.
3
Enter: Enter a long or short position, going long if you expect the base currency to strengthen, short if you expect it to weaken.
4
Manage: Manage leverage and risk, choosing lot sizes and stop-loss levels that keep risk at a reasonable level.
5
Exit: Exit when the catalyst has played out, closing the trade after the key economic event or once the market reaction is clear.
Required

Trader's Journal

Using the currency pair you chose in the Forex Playbook, write a short journal entry that answers: what the economic story was, how pips and lot size shaped your position, and where your exit plan sat.
Checklist

Accountability Checklist

Required · Exit Challenge

What is a pip, and why does it matter?

Every Forex trade is measured in tiny price units. Define pip in your own words and explain why it matters in Forex trading. Use the word leverage in your answer.

Continue Your Study

Trading Lab 101 · Course Navigation

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