Basic Lesson 1

Introduction

The Foreign Exchange Market is the largest financial market in the
world, it does over 20 times the dollar volume than all the US
equity markets combined each day.
The Forex market is an interbank or Over the Counter market. This
means that all transactions take place between two parties directly
through an electronic network or over the phone. There is no
standardized exchange like stocks (NYSE, NASDAQ etc.) or
futures. (CME CBOT)


What Is a Pip?

Simply put, a pip is the smallest price change a currency
pair can make. As an example when we see a quote of
the USD/CAD at 1.0028, the minimum it could change
to the upside would be .0001 making it 1.0029. The
majority of currency pairs are priced with 4 decimal
places (an exception is the USD/JPY pair which is
quoted to 2 decimal places ie 108.84 )


Forex Quotes

Of all the Forex quotes available there are 6 that are
considered the most important; (In no particular order)
USD/CAD = United States dollar/Canadian dollar
USD/JPY = United States dollar/Japanese yen
GBP/USD = Great British pound/United States dollar
AUD/USD = Australian dollar/United States dollar
EUR/USD = Euro/United States dollar
USD/CHF = United States dollar/Swiss franc
Forex quotes involve a pair of currencies. Example
USD/CAD, AUD/USD, USD/JPY etc.

The currency listed first is what’s called the base currency and the
second currency is called the counter. Using a buy order
on the USD/CAD as an example, you have bought US
dollars and sold Canadian dollars.