Pip
Currency movements in forex are measured in “pips,” which stands for “percentage in point,” representing the smallest standardized unit of change in a currency pair’s exchange rate.
Bid-Ask Spread
The bid-ask spread is the difference between the bid (sell) price and the ask (buy) price of an asset.
Ask Price
This is the price at which a broker is willing to sell the base currency to you (and buy the quote currency from you).
Base Currency
This is the first currency listed in the pair.
Bid Price
This is the price at which a broker is willing to buy the base currency from you (and sell you the quote currency).
Carry
This differential, often referred to as ‘carry,’ is typically paid or received daily through a process known as rollover or swap.
Carry Trade
This involves borrowing money in a currency with a low interest rate and investing it in a currency with a higher interest rate to profit from the interest rate differential.
Commodity Currencies
The currencies of commodity-exporting nations, often termed ‘commodity currencies,’ frequently correlate with the prices of their primary exports.
Cost Of Carry
Overnight funding in these markets reflects the ‘cost of carry’ – the natural movement along the futures curve – plus a broker administration fee.
Dovish
A term describing central bank language that favors looser monetary policy or lower interest rates.