I believe all of you already know by now that the Forex market is the largest traded market in the world. So how are these currency pairs quoted on the Forex market? You will see two numbers on all Forex quotes. The first number is called the bid and the second is known as the offer (or the ASK) price. Take for instance EURUSD, you will see 1.4394/1.4395. The first quote of 1.4394 is the bid price, the price where traders are prepared to buy Euro against the USD Dollar. The second number 1.4395 is the offer or ask price and it is the price traders are prepared to sell the Euro against the US Dollar. You will notice that there is a difference between the bid and the offer price. This difference is known as the spread. Based on the previous EUR/USD quote, you know that 1 Euro is equal 1.4394 US dollar.
The way profit is measured of a currency is by “pips” or point. PIP is the acronym for price interest point. If the EUR/USD moves from 1.4394 to 1.4444 that is 50 pips. A pip or 0.001 is the last decimal place of a currency quotation with the exception of the Japanese Yen and Yen cross rates. A price movement for the USD/JPY from 111.10 to 111.60 will be 50 pips.
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