Course Content
What Is Forex Trading?
Forex is the world's largest market by trading volume and liquidity. Brokers, businesses, governments, and other economic agents trade currencies and forex derivatives to enable international commerce. Traders also use the market for speculative reasons. There are various arbitrage opportunities to be found with exchange rates and interest rates, making the market a popular one to trade in large volume or on leverage. The forex market consists of fiat currency pairs and their relative market prices. These pairs are typically bought and sold by the lot. A standard lot contains 100,000 units of the pair's base currency, but other smaller sizes are available, ranging down to 100 units. Traders commonly use leverage to increase the amounts they can invest with their capital. You can also offset risk by using forwards and swaps to trade a currency pair for a specific price in the future. Combining these two instruments with other trading strategies and products creates a variety of investment opportunities for forex traders.
What Is Forex Trading?
About Lesson

A pip (percentage in point) is the smallest price increment possible that a forex pair can make. Looking at GBP/USD again:

A movement up or down 0.0001 would be the minimum amount the pair can move (1 pip). However, not all currencies trade to four decimal places. Any pair with the Japanese yen as the quote standardly has a pip of 0.01 due to no decimalization of the currency.


Some brokers and exchanges break the standard and offer pairs that extend the number of decimal places. GBP/USD, for example, will go to five decimal places rather than the usual four. USD/JPY typically is two decimal places but can go to three. This extra decimal place is known as a pipette.