Forex Trading and How It Works

1. What is forex trading?

Forex trading is the conversion of one currency into another. FX is one of the most actively traded markets
in the world, carrying out around $6.6 trillion worth of forex transactions every single day.

Forex trading is majorly to earn a profit. The amount of currency converted every day can make price
movements of some currencies extremely volatile – which is something to be aware of before you start
forex trading.

2. What is a forex pair?

A forex pair is a combination of two currencies that are traded against each other. (EUR/USD), (USD/JPY)
(GBP/USD).

3. What are the base and quote currencies?

The base currency is always on the left of a currency pair, and the quote is always on the right.
The base currency = 1,
The quote currency = current quote price of the pair.
Shows how many of the quote currency it’ll cost to buy one of the base. So, when you’re trading currency,
you’re always selling one to buy another.
 4. What is a pip in forex?
A pip in forex is usually a one-digit movement in the fourth decimal place of a currency pair. So, if
GBP/USD moves from $1.35361 to $1.35371, then it has moved a single pip. But, if you’re trading JPY
crosses, a pip is a change at the second decimal place. A price movement at the fifth decimal place in forex
trading is known as a pipette.

5. What is a lot in forex trading?

Currencies are traded in lots, which are batches of currency used to standardise forex trades. As forex price
movements are usually small, lots tend to be very large. For example, a standard lot is 100,000 units of the
base currency.