Exchange rate
Because currencies are trades in pairs an exchanged one against the other when traded, the rate at which they are exchanged is called the exchanged rate. The majority of currencies are traded aganist the US dollar (USD), which is traded more than any other currency. The four currencies traded most frequency after the US dollar are the euro, the Japanese yen, the British pound sterling and the Swiss franc. These five currencies make up the majority of the market and are called the major currencies or "the majors". Some sources also included the Australian dollar within the group of major currencies. The first currency in the exchanged pair is referred to as the base currency. The second currency is the counter currency or quote currency. The counter or quote currency is thus the numerator in the ratio, and the base currency is the denominator.
The exchanged rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchanged rate also tells a seller how much is received in the in the counter or quote currency when selling on unit of the base currency.
Spreads
It is the difference between BUY and SELL, or BID and ASK. In other words, this is the difference between in market maker's selling price and the price the market maker buys it from its clients.
If an investor buys a currency and immediately sells it, the investor will lose money. The reason for this is "The Spread". At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which selling a unit base currency.
For example the EUR/USED bid or ask currency rates at you bank may 1.4975 and 1.5025, representing a spread of 500 pips. Such a rate is much higher than the bid/ask currency rates that online Forex investors commonly encounter, such as 1.50151 and 105020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since they required a smaller movement in exchanged rates in order to profit from a trade.
* PIP- Percentage In Points
The exchanged rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchanged rate also tells a seller how much is received in the in the counter or quote currency when selling on unit of the base currency.
Spreads
It is the difference between BUY and SELL, or BID and ASK. In other words, this is the difference between in market maker's selling price and the price the market maker buys it from its clients.
If an investor buys a currency and immediately sells it, the investor will lose money. The reason for this is "The Spread". At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which selling a unit base currency.
For example the EUR/USED bid or ask currency rates at you bank may 1.4975 and 1.5025, representing a spread of 500 pips. Such a rate is much higher than the bid/ask currency rates that online Forex investors commonly encounter, such as 1.50151 and 105020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since they required a smaller movement in exchanged rates in order to profit from a trade.
* PIP- Percentage In Points
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