In the vast world of finance, the foreign exchange market stands as a bustling epicenter, where currencies from around the globe change hands in a continuous dance of supply and demand. Often referred to as Forex or FX, this market is vital for international trade and investment, enabling businesses, governments, and individuals to exchange one currency for another. But how exactly does this intricate market work?

Understanding the Basics

At its core, the foreign exchange market is where currencies are traded. Just as goods and services have prices in local markets, currencies have values relative to each other. These values are in constant flux, influenced by a myriad of factors such as economic indicators, geopolitical events, interest rates, and market speculation.

Participants in the Market

The Forex market is unique due to its diverse range of participants. Let's meet the main players:

1. Banks and Financial Institutions: These are the largest participants, facilitating the...

Forex PIPs and Common Currency Pairs

Another day, another dollar. Let’s learn a bit more about PIPs and pairs. The most common currency trading are as follows: USD (U.S. dollar), JPY (Japanese Yen), GPB (Great British Pound), CAD (Canadian dollar), and EUR (Euro). Before we get ahead of ourselves, let’s talk about PIPs and what it is.

A PIP is an abbreviation for price interest point. PIP is a measurement tool that is used within currency pairs which correlates to the smallest price movement made by any change of the currency exchange rate. Most currency pairs, except JPY, are quoted to the fourth decimal position or one-hundredth of one percent. This means that smallest change in the currency pair would be the last figure. JPY denominated currency pairs are quoted to the second decimal position. A one PIP difference can equate to a consequential profit or loss, even though it is a small measurement unit. As an example, if we entered a trade for EUR/USD and we...