Note: The most commonly traded currencies are the EUR, JPY, AUD, CAD, CHF and GBP against the
USD.
Currencies that are not paired to the USD that are
mentioned above are referred to as cross currencies.
Keep in mind, when the currency quote increases it
indicates that base currency has strengthened. This means that it
now takes more of the counter currency to buy 1 of the base
currency. Conversely, when the counter currency decreases the base
currency has weakened.
FOREX is quoted in pips (price interest point);
this is the smallest increment or change that the currency can make.
Most of the majors are 4 decimal points this means the change is
1/100 of one percent or 1 basis point. And exception to this is the
Yen, which only trades 2 decimal
points.
Almost all tradable instruments, will offer two
separate prices when quoted. These are the Bid and the Ask price.
The Bid is the rate at which the seller is willing to sell the
instrument, to you the buyer and the Ask is the rate the buyer is
willing to buy the instrument, from you the seller. The difference
between the Bid and the Ask price is called the spread. This spread
is where the market maker makes their money. For example, if the
GBP/USD is trading at 2.0147 Bid 2.0150 Ask then the spread is 3
Pips referred to as a 3-point spread.
