Concepts of Forex Trading | ForexGen

This tutorial is about:

Currency Pairs.
How to read Forex qoutes(Bid / Ask)
Pip.
Lot.
Leverage.
Day Trading \Rollover.

Currency Pairs

Different currencies are priced together in pairs.

The most commonly traded currency pairs are :

· EUR/USD - Euro/Dollar
· USD/CHF - Dollar/ Swiss Franc
· USD/JPY - Dollar /Yen
· GBP/USD - Pound /Dollar
· USD/CAD - Dollar/Canadian Dollar

The first currency is called the base currency and the second currency is the qoute or counter currency.
A quote figure shows how much the base curreny is worth in the counter currency .

For example if EUR/ USD is quoted 1.023 it means that 1 Euro is worth 1.023 USD

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How to Read Forex Qoutes (Bid/ Ask)
A complete quote would have two figures the bid and the ask.

The bid is the amount the broker is willing to buy the base currency in terms of the counter currency. The amount which I can sell the base currency to the broker in terms of the base currency.

The ask is the amount the broker is willing to sell the base currency in terms of the counter currency. The amount that I can buy base currency in terms of the counter currency.
A qoute is therefore made up of two figures the Bid/ and the sell.

For example
IF the ABC Forex quotes me 1.023 / 1.020 for EUR/USD

It means I can either
Buy 1 EUR from ABC for 1.023 USD
Or

Sell 1 EUR to ABC and get 1.020 USD
The above is the core to forex trading IF you do not understand the above please do not continue. Read it repeatedly if need be.
Pip
This is the smallest increment or unit of a currency quotaion. This varies from currency to currency
A pip is the last decimal place of a quotation. The PIP or POINT is how we will measure profit or losses made on trades.

Example:
If EUR/USD is quoted 1.023 the pip size is therefore 0.001.
If the value of EUR/USD moves to 1.027 the movement would hence be calculated as
1.027 – 1.023 = 0.004 = 4 Pips.

USD/JPY is quoted to two decimals e.g if USD/JPY is quoted 116.73 therefore pip size would be 0.01

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