Forex price are quoted in pips. Pip represents "percentage in point", and this is the 4th decimal place, that is 1/100th of one percent. In EUR/USD, a 3 pip spread is usually quoted as 1.2400/1.2403. If you are familiar with the quote prices of many currencies, you will discover that only the Japanese Yen is quoted in 2 decimal places. All other currencies are quoted in 4 decimal places.

For instance, the USD/JPY 4 pip spread is quoted as 113.00/113.04. This is like 1/100th of the Yen, compared to the 1/1000th ot most other currencies.

1. Base currency
When a base currency is the US Dollars, and the currency pair goes up, then it means that the US dollars has appreciated against the quoted currency.

Example, in the USD/JPY pair, if the first is 118.30, and after a while the price becomes 119.00, then it is said that the dollar have appreciated against the Japanese yen. It can also mean that the dollar is now strong enough to purchase more Japanese yen.

But there are certain exceptions to the general rule, such as the British Pound (GBP), Euro (EUR), and the Australian dollar (AUD). Example, when you see the GBP/USD quote price as 1.9000, this means that 1 British pound can buy 1.9000 US dollars. This also applies to the EUR/USD pair, and some others.

In this type of currency pair where the US Dollar is not the base currency, when there is a rise in the price of the quote, it means the dollar is getting weaker. This is because you need more money to be able to buy the base currency, such as the Euro, Pound, and Australian dollar.

And consequently, when the rise is also going down, it means the dollar is take a rise in value. And you need less US dollars to buy the base currency.


2. Cross currency
Such currencies pair that doesn't have the US dollar are usually referred to cross currencies, but the general rule are the same. Example, in the EUR/JPY of quote price of 125.90 means that the you need 125.90 Japanese yen to purchase 1 Euro. The basic rule is the same. If you get into the Forex trading, you will see that there is always a "bid" and "ask" price.

The bid quote is the price where you can go short the base currency in a particular trade, and the ask price is the price where you can go long on the base currency on a trade.

All these will get familiar to you when you stay on Forex for a while.

These are some trade examples that will help you know that forex trading is real. You can check up the statistics whenever you want to, and also be confident to study it from time to time.

I have also learnt that examples help fores traders to set goals, and targets for their trading techniques, which is a good thing. Here are some examples for your learning.


1. The first example was between the EUR/USD pair, and it occurred in the fourth week of June 2002.

Fisrt, i want you to observe the hourly and 10-minute EUR/USD charts. Take note of when the price is above the 200-period moving averages on the two charts. On the hourly chart, the price is almost above the 200-hour moving average, and it very much means an uptrend. On the 10-minute chart, prices reman above the moving average towards the last third of the chart. So what you have to look out for is find an entry point, that is the market is within 20 points of the moving average on the 10-minute chart, and also the stochastic lines ave made a cross.

So at about 1 p.m. and the midnight on June 27, the requirements are met. That is the entry point is where the fast stochastic cross over the slow stochastic, when the indicator is below 20 points.

You see there is a buy at the 0.9883 price at about 8 p.m., and a stop loss is placed at 0.9858, which is 10 points below the 200-bar moving average. And this stop loss is trailed upwards whenever the price rises. And also the currency pair gets to its top at 0.9992, and the stop loss is now at 0.9967 where the market position was closed and a profit of 84 pips was made which is $840 profit.


2. The second example gives an illustration that is similar to the one above, but in this case it is the USD/JPY currency pair.

Take note that prices were trading mch below the 200-moving average after the 21st of June. On the 10-minute chart, the market prices went below the moving average after 10 a.m. on 27th June, which clearly indicates going short on the currency. Also observe that prices went below the 20 points of the moving average. At 5 p.m., a position was opened at 119.57, just as the fast stochastic line crossed below the slow stochastic line, when the indicator was above 80. A trailing stop was placed at 119.86, and the trade was still on till the next day, and it was closed at price 118.58 for a 99 pips profit.

Quoting currencies is one important part of forex trading you must understand so well enough. The currencies you trade must be well stated, and their relationship with each other, and also their worth to each other should be known.

At the beginning of your forex trading experience, it may seem complex and confusing. This confusion comes about because currencies are quoted in various ways, different from the way equities are quoted.

So understanding the quoting of currencies will become very easy for you if you understand that the base currency is the first currency that is quoted. Again you must know that value of the base currency is 1.

Let's give an example so that you can understand how it works.

If you see a USD/CAD quote of about 1.5000, this simply means that 1 USD is equal to 1.5000 Canadian dollars. Or it means that you can buy one USD with 1.5000 Canadian dollars.

Similarly, if you see the USD/JPY currency pair, first you know that the US dollar is the bse currency, and the value is 1. So for a quote of USD/JPY of 118.00, this simply means that you can buy 1 USD with only 118.00 Japanese Yen, or 1 USD is equal to 118.00 Japanese Yen.


As soon as the US dollars is the base currency, this principle works very fine. But there are some exceptions to this principle, and this is seen in the case of these 3 currencies; the British pound (GBP), the European currency unit (EUR), and the Australian dollar (AUS). So if you see a case where the British pound is the base currency, then it means the value of the GBP is 1. So in a case of the GBP/USD quote of 2.0000, this simply means that 1 British pounds is equal to 2.0000 US dollars, or 1 GBP can buy 2 USD.

Also, the rise of the base currency means that the value of that currency has appreciated against the other one. If US dollars is the base currency against the Yen, and the price goes up, it means that the US dollars is appreciating against the Yen, or you will need more Yen to buy the US dollars.

For example, if the USD/JPY quote is 118.00, and it rises to 119.00, that means the dollars have appreciated. It also means the same thing if the prices fall, that the US dollars have depreciated against the Yen.

But in the case where the base currency is not the US dollars, a rising price simply means that the US dollars is depreciating.

The meaning of 'Margin' in stock is not the same when it comes to forex. They simply mean different thing.

In stocks trading you need about 50 percent margin to trade which is very high. An example is this, if the value of microsoft shares is valued at $300/share, purchasing 200 units wil require you to pay $60,000 ($300 multiply by 200 units), and when you use margin, you will pay about $30,000 for the value of those 200 units.

The rest of the money is borrowed, and interest is being paid on such money. So as you can see, margin trading in stock is quite expensive, interest focused, and not suitable for all traders.

In forex, margin trading is something more interesting. Margin is the smallest money that you are required to open a trade. When an account is opened, the deposit you pay is the margin, and it is basically 1% of the worth of the position. As an example, when you purchase about $100,000 of USD/JPY, and this is at a leverage of 100:1, the amount that is required is only 1% which is about $1,000.

Where is the other $99,999 coming from?

The other money is collaterized with the rest in your account, and another interesting thing, you will not be paying any interest. You should also be aware that when you increase your leverage, you consequently increase your risk. The only way to reduce this risk is to watch your account balance on a regular basis, and also make use of stop-loss orders to cut down losses.

Lets give you a demostration of the effect of leverage.

If you have an acount balance of $5,000, and you want to purchase the USD/CHF pair, because you think the USD will rise in value. Ok thats a good one. At a current bid/ask price of 1.2300/1.2305, which you can sell 1 USD for 1.2300, and buy CHF for 1.2305. The spread is 5 pips, take note of that.

If your leverage is 100:1, your first deposit will be $1,000 for this trade.
And if at your speculation, the rise moves from its intial cost to 1.2380/1.2385, which is considered a rise of 80 pips, you need to sell off your USD for the CHF. Now selling price will be at 1.2380. So selling your position gives you a profit of about 750 CHF. Converted to USD, you will have a profit of $605.

This calculation is arrived at by dividing the profit in CHF by the current rate (750 divided by 1.2380).

In summary, you bought a trade with $1,000, and made $605 as profit, you return is about 60%. So if you bought this trade without the use of leverage, you won't make any significant return, and it will certainly be less than 1%.

Of course, the different currencies have their different unique qualities. As a fundamentalist, or generally a forex trader must find out these qualities and their relationships when quoted with other currencies.

This is an important thing to do in order to understand the factor that push the prices of these currencies. If you have ben trading for some time as an advanced forex trader, you will certainly know that the dollar/yen doesn't trade the same way as the dollar/swiss. There pattern of trades totally differs and so it is with all other currency pairs. In this article, you will be seeing the variations and the explanations for such variations among currency pairs.


1. The biggie
The Euro dollar is called the biggie. This currency pair is the most traded pair in the history of forex, and it has many exciting characteristics.

The EUR/USD should always be seen compared to other currency pair. For example, when there is a emerging trend in the USD/CHF, or GBP/USD, you will probably be looking out for the emergence of the break out also.

Not all indicators are also suitable for the EUR/USD pair, suggestions are that the momemtum indicator has a better change of analysis, although, this also depends on the trader.


2. The USD/JPY
The USD/JPY has also been recognized as a leading pair in forex. It records around 17 percent of total trades daily. They have the tendency to flunctuate in price in a more zig-zag fashion. But, traders are advices to study these pattern after analysing your indicators to suit your need, then opening a position to this pair may bring in some profit.


3. The USD/CHF
This pair has a very low liquidity, and thus tends to be less traded by advanced fores traders. Do not just pick a pair because prices are moving up and down, make sure you knw the relation before commiting a position.

4. THe GBP/USD
This currency pair is known as the cable. It also doesn't have a good liquidity, and it is as a result of its higher pip value.

Do not apply the same trading methods to all currencies because the differ in characteristics.