Major Currencies Traded in Forex

In Forex trading, most of the currencies are traded against USD. The other prominent currencies are Euro or EUR, the Japanese yen or JPY, the British pound sterling or GBP, and Swiss franc or CHF. These five currencies are known as the Majors. The pairs are quoted like USD/EUR or CHF/JPY, where the first one is referred to as the base and the second as the counter or quote currency. The value of the base currency is always 1. All trading is done with currency pairs.

Pips and Spreads

Prices in Forex are quoted to the fourth decimal point (leaving JPY, which is quoted till second decimal point) and in pips or percentage in point. It is the smallest price increment and one pip is equal to 0.0001. When the bid for EUR/USD is 1.0856 and offered rate is 1.0859, it has a spread of 3 pips. Spread, in simple terms, is the difference between the bid and the ask price. The forex market is mainly operated by the brokers who do not charge a commission for their services. And, it is the spread with which they make their profit. For investors, therefore, the lower the spreads the more saving is made.

Margin

Margin is the minimum security that ensures that the investor can pay back the amount in case of losses. It is a deposit that covers any future currency trading losses. With margin, you can hold larger positions than you have in your account.