In the currency market, market trends can be determined by examining currency pairs over time. The language of the market expands beyond generalizations such as, “the dollar is strong.” Such generalizations are used to express historic trends and trading norms. The knowledgeable trader indicates die relative position of a currency in a currency pair. For example, “The dollar is strengthening against the euro.”

The U.S. dollar is the basis of the global Forex market, and it is accepted universally as the basis for many other currencies typically expressed as the amount necessary to purchase one U.S. dollar, and thus, quote USD as the base currency. When USD is quoted as the base currency, the quote is in what is called European or indirect terms. When smother currency is quoted as the base currency, specifically, the euro (EUR), the British pound (GBP), and the Australian dollar (AUD), the quote is in what is called American, or direct terms.

Typically, when a bid price and ask price arc being quoted, only the final two digits of the bid price are shown as follows:

EUR/USD 06/08

When the ask price is more than 100 pips above (he bid price, three digits are displayed on the right hand side of the slash, for example EUR/CZK 32.2456/870. This occurrence indicates a weak quote.

TICKS

A tick is the smallest interval of time that occurs with a trade. Ticks do not occur at uniform periods of time. Trades on the most active currency pairs, such as EUR/USD or USD/JPY, during peak trading periods may result in multiple ticks during a one-second period. On the other hand trades during non-active periods with minor cross pairs may result in only one tick every two or three hours.

Pips and ticks may be graphically mapped to scale with the x-axis representing ticks and the y-axis representing pips. These graphs may then be used to evaluate (he market over rime or within price

MARGIN ACCOUNT

A margin account is used to deposit money with a Forex broker to serve as a security deposit For trades. The minimum amount required to be deposited into a margin account varies from broker to broker, but usually ranges from as low as $100 to as high as $100,000. Each time a new trade is executed a percentage of the margin account is allocated to the margin requirement for the trade. The amount allocated is dependent on the currency pair involved en the trade as well as the currency pair price and the number of units being traded. The number of units traded is referred co as the lot size, which is always as expressed as a unit of the base currency. Lot sizes are usually traded for 100,000 units.

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