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iStudyForex - Aakash Thorat

Forex – Terminology Explained (Part 1)

1) Currency Pair: - Forex is always traded in pairs, One currency is bought and the other is sold. Together the currencies can make a exchange rate in which forex traders trade.


2) Exchange Rate: - The rate at which one currency can be bought or sold for another currency. The exchange rate depends on various condition of market and is fluctuating rate.

3) Base Currency: - The currency which comes first in the currency pair is the base currency.

E.g. EURUSD – Eur is the Base Currency

AUDUSD – AUD is the Base Currency


4) Quote Currency – The second currency quoted is the Quote Currency

E.g. EURUSD – USD is the Quote Currency


5) Major Currencies: - Major currencies are those currencies which are majorly trade in the world forex market and have high level of liquidity. They have major movement in particular day of the Market trading.Some of them are listed below

a. USD

b. EUR

c. GBP

d. AUD

e. NZD

f. CHF

g. CAD

h. JPY

Other than the above listed currencies all other currencies are known as minor or exotic currencies.


6) PIP: - A pip is a unit of measurement of movement between two currencies. Fullform of PIP is “Percentage of Point”. Its normally the fourth point in the currency pair except in JPY where the same is second. For Example as below

EURUSD : 1.0400 to 1.0401 movement is called 1 pip movement

USDJPY : - 130.05 to 130.06 movement is called 1 pip movement


7) Being Long in Market or Long Position: -

It means that in forex market the trader has bought the currency expecting the market to go up.


8) Being Short in Market or Short Position: -

It means that in forex market the trader has Sold the currency expecting the market to go up.


9) BID – Market Price for Sale of currency


10) ASK – Market Price for Buying the currency.


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