5 important Forex terms that you shall know.

Today we will speak about some important Forex terms such as pip, currency pair, majors, spread, currency correlation and cross rates.

These are the terms and notions that you'll be dealing with while trading on Forex and that you should be aware of.

1. So, the first term that we are going to talk about is "pip".

By "pip" in the context of Forex we understand the minimal fluctuation in the price growth or slump.

For example if the quotation of the currency pair (see below) changes from 1000 to 1001 so we say that the value of this currency pair changed by 1 pip.

So, a pip is a simply a measurement unit accepted on Forex dedicated to indicate a minimal price change.

2. Now let's consider what a currency pair is.

On Forex all the currencies are traded in pair, where in most cases on currency is represented by US dollar and the other one by some other world currency.

Any currency on the Forex market is considered as Base currency (the currency that goes before /) and Counter currency (the currency that goes after /).

For example if we have the following pair: EUR/USD 1.1000, it means that Euro is base currency there and US dollar is counter currency. In this pair one Euro costs 1.1 US dollar.

3. All the currency pairs can be divided into majors and cross rates.

Majors are the currency pairs that consist of the best traded currencies such as US dollars, Euros, Canadian Dollars, Japanese yens etc.

Cross rates are those pairs that go without US dollar such as for example EUR/

4. So, now let's see what spread is.

When you sell your base currency at the same time you buy the counter currency that goes in pair with the base currency.

The difference between the two currencies traded is called spreads. As you may know, the Forex brokers that trade there don't

5. And finally what is currency correlation, you wonder?

Currency correlation is the coefficient of two currencies in pair. This is some kind of linear relationship between two currencies expressed currency correlation.

So, these are the most popular Forex terms that you shall be aware of!

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