If you are willing to enter Forex market, it is very important for you to have at least basic

knowledge over the main concepts of Forex market. Find them below.

Overview of Forex Concepts


What are currency pairs


Forex trading always involves

selling one currency with the

purpose of buying another.

That's why we quote them in

pairs that show which currency is

being bought and which is being

sold. Each currency in the pair is

listed in the form of its three

letter code, which tends to be

formed of two letters that stand

for the region, and one standing

for the currency itself.

Base & quote currency


The first currency listed in a

forex pair is called the base currency, and the second currency

is called the quote currency. The

price of a forex pair is how much

one unit of the base currency is

worth in the quote currency.

The spread


The spread represents the

difference between buying and

selling price. When you open an

FX position you’ll have two

prices. If you want to open a long

position, you trade at the buy

price, which is slightly above the

market price. If you want to open

a short position, you trade at the

selling price – lightly under the

market price.

What are Pips?


The movement in the Forex pair

price is measured in units called

pips. A pip is usually equivalent

to a one-digit movement in the

fourth decimal place of a

currency pair.

What is leverage in forex?


Leverage allows you to get

exposure to large amounts of

currency without having to

invest too much capital.

A single pip is a very small unit of

movement, and while Forex pairs

tend to be very volatile they

often move in relatively minor

increments. For this reason,

Forex traders will either have to

trade large quantities known as

LOT-s or take advantage of.

What is a lot?


A standard lot is 100,000 units

of currency. Alternatively, you

can sometimes trade mini lots

and micro lots, worth 10,000

and 1,000 units respectively.

The benefits of leveraged trading


Leverage allows you to open a position without having to pay its full value upfront. When you close a leveraged

position, the profit or loss is based on the full size of the trade. While that does offer a chance of higher profits, it

also brings the risk of amplified losses; including losses that can exceed your deposits.

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