Preparations for Market Leaders Group

Last Update: June 25th, 2019

Forex Trading Basics

Key Forex trading terms 

Let’s get familiar with the basics:We always trade Forex in pairs with each currency’s value being compared to another:The Base currency – the first currency (on the left)The Quote currency – the second currency (on the right)
euro base currency vs us dollar quote currency

By selling the base currency, we are buying the quote currency. When we buy a pair, we actually buy the base by selling the quote. In our example – buying 1 GBP In exchange for selling 1.4135 USD. When we sell a pair, we are doing the opposite.
a quote of GBP USD currency pair
When you see a currency pair quoted you’ll see two different prices listed:
 The Ask price is the price the broker is asking me to pay to buy the base currency.
 The Bid price is the price (in the quote currency) which Forex brokers will pay me if I want to sell the base currency.
The Exchange rate is the ratio between the values of the two currencies. Let’s look at another quote as an example:
EUR USD bid ask price
Base Currency = EUR
Counter = USD
Bid price = 1.3272
Ask price = 1.3276
When selling Euros, 1 Euro = 1.3272 USD
When buying Euros, 1 Euro = 1.3276 USD
Spread = 1.3276 – 1.3272 = 0.0004

If we buy a pair it means that we sell the Quote currency in order to buy the Base currency. We do it when we believe that the value of the base currency will increase (relative to the Quote currency). If we sell a pair it means that we believe that the value of the Base currency will fall (relative to the Quote currency).

What you also need to know

Lot – the standard level of deposit per single trade. There are 3 main sizes:

Micro lots = 1,000 currency units (e.g. 1,000 Euros)
Mini lots = 10,000 currency units
Standard lots = 100,000 currency units

In a mini account a single pip is worth approximately $1
In a standard account a single pip is worth approximately $10
standard account and mini account safes

Long Position – A Buy action (expecting the currency to go up)
Short Position – A Sell action (expecting the currency to go down)

About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.