Forex terms

Welcome again,

As we had discussed before knowing the various forex terms is essential to your trading success it is the key to interpreting the market and understanding how to plot you next move. You can win in the market if you cant define the market. Also I’m sure you’ll soon be hanging out at the online forex bars, or forums as there called, and wouldn’t want to not understand the various forex traders talking. This will help you learn from other traders or jut plain understand what that forex broker you’ve chosen is talking about. So listen up take your time to understand them before you move forward.

Major and Minor Currencies
The eight most frequently traded currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD) and are called the major currencies also known the “majors.” These are the most liquid and the most traded. All others  are referred to as minor currencies.
Base Currency
The base currency is the first quoted currency in any currency pair. The currency quote shows how much the base currency is worth against the second currency. For example, if the USD/CHF rate equals 1.6450, then one USD is worth CHF 1.6450.
Normally considered the U.S. dollar is the “base” currency for quotes, meaning that quotes are written as a unit of 1 USD per the other currency in the pair. The only exceptions to this rule are Australian dollar, British pound, the euro, and New Zealand dollar.
Quote Currency
The quote currency is the second quoted currency in any currency pair. Also called the pip currency and any unrealized profit or loss is expressed in this currency.
Pip
This is the smallest unit of price for any currency. Almost all currency pairs are written with five significant digits and have the decimal point immediately after the first digit, eg. EUR/USD equals 1.2538. Here a pip equals the smallest change in the fourth decimal place, 0.0001. So, if the quote currency in any pair is USD, then one pip always equal 1/100 of a cent.
Pipette
One-tenth 0.00001 of a pip. These are fractional pips called  pipettes, they add precision in quoting rates. An example, if EUR/USD changed from 1.32156 to 1.32158, it has changed by  2 pipettes.
Bid Price
The price at which the market is to buy a specific currency pair in the forex market. Here, the trader can sell the base currency. Always seen on the left side of the quotation.
Illustrated, in the quote GBP/USD 1.8812/15, the bid price is 1.8812. This shows that  you sell one British pound for 1.8812 U.S. dollars.
Ask/Offer Price
The price at which the market is going to sell a specific currency pair in the forex market. Here, you can buy the base currency. Always seen on the right side of the quotation.
Illustrated as, in the quote EUR/USD 1.2812/15, the ask price is 1.2815. As such you can buy one euro for 1.2815 U.S. dollars. The ask price is also known as  the offer price.
Quote Convention
This is the way the exchange rates in the forex market are expressed the are written with the following format:
Base currency / Quote currency = Bid / Ask
Now that you’ve brushed up on those we move to FOREX ORDERS…

Leave A Response

* Denotes Required Field