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 places—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"
