Understanding Forex

1. Understanding Currency Pairs

Forex trading involves buying one currency and selling another simultaneously. These currencies are paired for trading purposes. Imagine our deer choosing which two stones to jump between. The first currency listed is the 'base' currency, and the second is the 'quote' currency. The pair represents how much of the quote currency is needed to buy one unit of the base currency.

2. Major and Minor Pairs

Just as rivers in the jungle have major and minor tributaries, currency pairs are divided into major and minor pairs. Major pairs involve the US Dollar and one other major currency like the Euro, British Pound, Japanese Yen, Swiss Franc, Canadian Dollar, Australian Dollar, or New Zealand Dollar. Minor or cross-currency pairs involve two major currencies but do not include the US Dollar.

3. The Pip: Measuring Your Steps

A 'pip' is like the smallest step a deer can take - it's the smallest unit of price movement in a currency pair. In most pairs, a pip is 0.0001 of the current quote. Pips provide a way to calculate profit and loss in Forex trading.

4. Forex Market Timings: The 24-Hour Jungle

The Forex market, like the jungle, never sleeps. It's open 24 hours a day, five days a week because it operates in multiple time zones. So, when the trading day in the U.S. ends, the Forex market in Tokyo and Hong Kong is just getting started.