Key Terms in FOREX Trading - Stock Advisor Group

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For new FOREX Traders, it is imperative to understand the terminology associated with trading FOREX. The following are some of the important FOREX terms:

Currency Pairs: FOREX trading involves the simultaneous buying and selling of two currencies, for example, CAD/USD: The Base currency is the first currency in the currency pair. The quote currency is the second currency in the currency pair A FOREX trader will buy 1 currency and at the same time sell another currency. These two currencies are called currency pairs.

Major Currencies: The major, and most frequently traded currencies are: USD, EUR, JPY, GBP, CHF, CAD, and AUD.

Minor Currencies: All other currencies not referred to as the major currencies are called minor currencies. The most traded minor currencies are: NZD, ZAR, and SGD.

Cross Currency: A cross currency is a currency pair in which neither the currency is the USD.

PIPs: A pip, also called a point, is the smallest unit of price in FOREX. For example, CAD/USD equals 0.7973, the pip is 0.0001.


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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts