Sell or short positions are opened at bid and closed at ask.Įach of those can be opened either as a market or as a pending order:.Buy or long positions are opened at ask price and closed at bid price.Ordersĭirection wise, there are two types of trades: With the introduction of more accurate 5 digit precision pricing the smallest unit of price change is called point, however 1 pip is still calculated by 4th digit.įor example, if Bid price is 1.11443 and Ask price equals 1.11449, spread is 0.6 pips or 6 points. Previously, when only 4 digit precision was available, pip, or percentage in point, was the smallest unit to measure price fluctuations. The difference between two prices is referred as to spread, which is usually measured in pips or points. In Forex there are two prices given - Bid and Ask- the former shows how much of the quote currency is required to sell 1 unit of the base currency and the later represents how much will be required to buy it. Exotics tend to be less liquid and to have less tight spreads.Ĭurrency rate always represents the value of the base (first) currency expressed in the quote (second) currency. Exotic pairs consist of a major currency and another less traded one, for instance EURTRY, USDSEK, USDDKK, USDHDK, USDSDG.Cross pairs comprise of two major currencies neither of which is the USD dollar, for example: EURGBP, EURCHF, EURJPY, GBPCAD, GBPAUD and CHFJPY.Major pairs involve the US dollar and another currency from the list above, for example: EURUSD, USDJPY, USDCHF The most traded ones are usually referred as to majors and include the US dollar, the euro, the Great Britain pound, the Japanese yen, the Canadian dollar, the Swiss franc, the Australian dollar and the New Zealand dollar.Their names are given as a three letter abbreviation known as ISO code, where the first two letters represent the country and the third one is the name of the currency.ĭepending on how commonly they are traded, currencies can be divided into three categories: All currencies in forex trading are quoted in pairs, one against another.

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