Before you start jumping in you should familiarize themselves with the market and terminology of the forex market, and if you've already been trading stocks online it should be easy to get started. The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point. A common exception is for Japanese yen JPY pairs which are quoted to the second decimal point.
The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency.
A pair of currencies traded in forex that does not include the U. One foreign currency is traded for another without having to first exchange the currencies into American dollars. The quotation and pricing structure of the currencies traded in the forex market: The first currency of a currency pair is called the "base currency", and the second currency is called the "quote currency". The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.
The second currency quoted in a currency pair in forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency. This is also known as the "secondary currency" or "counter currency".
Now that we've reviewed basic terminology, let's look at some of the differences between trading stocks vs. In currency trading you are always comparing one currency to another so forex is always quoted in pairs. Sometimes authors of currency research will refer to only one half of the currency pair. For example if an article is referring to the euro EUR trading at 1. When looking at the quote screen for the first time it may seem confusing at first, however, it's actually very straightforward.
The quote example shows traders how much one euro is worth in US dollars. The first currency in a currency pair is the "base currency" and the second currency is the "counter currency" or secondary currency. Thus the pair trade. You might have also noticed the quote price has four places to the right of the decimal. Currencies are quoted in pips. A pip is the unit you count profit or loss in. Most currency pairs, except Japanese yen pairs, are quoted to four decimal places.
This fourth spot after the decimal point at one th of a cent is typically what traders watch to count "pips". Every point that place in the quote moves is 1 pip of movement. Now depending on the lot size standard, mini, micro the monetary value of a pip can vary according to the size of your trade and the currency you are trading.
The most common lot size is to trade in increments of 10, mini. One of the nice things about trading currencies is there is no commissions. Looking at the quote image above, notice the small number of pips between the two quoted currencies: This is known as the spread.
Not all spreads are created equal. The spread differs between brokers and sometime the time of day can cause volume to be light and the spread to increase at some brokers.
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