What Is Forex Trading? SIMPLIFIED Explanation Easy To Learn For Beginners

Before we delve any deeper into the possibilities that exist in the Forex market, we need to go over some basic Forex market terms.

Pip: A pip (percentage in point) or point, is usually the smallest unit of measurement in the Forex market. Most currency pair quotes are carried out four decimal placesβ€”i.e. 1.4500. When you work with Alpari quotes are carried out to the 5th decimal place to provide better pricing. The 5th decimal place represents fractional pips. If the exchange rate of a currency pair moved from 1.45000 to 1.45100, we would say that the price moved up 10 pips. You make money when the pips move your way in a trade.

Note: Any exchange rate that contains the Japanese yen as one of the currencies will only be carried out three decimal places.

Currency Pair: We wouldn’t have a Forex market if we weren’t able to compare the value of one currency against the value of another currency. It is this comparison that drives prices. Forex contracts are always quoted in pairs. The Euro vs. the U.S. dollar (EUR/USD) is the most heavily traded currency pair. The U.S. dollar vs. the Japanese yen (USD/JPY) is another popular pair.

The following is a list of the most common currency pairs, their trading symbols and their nicknames:

  • Euro vs. U.S. dollar (EUR/USD): “The Euro”
  • Great Britain Pound vs. U.S. dollar (GBP/USD): “Pound,” “Sterling,” or “The Cable.”
  • U.S. dollar vs. Swiss franc (USD/CHF): “The Swissie
  • U.S. dollar vs. Japanese yen (USD/JPY): “The Yen”
  • U.S. dollar vs. Canadian dollar (USD/CAD): “The CAD,” or “Loonie”
  • Australian dollar vs. U.S. dollar (AUD/USD): “The Aussie”
  • New Zealand dollar vs. U.S. dollar (NZD/USD): “The Kiwi”

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
85% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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