Cheat sheet
Forex Foundations cheat sheet
The core ideas from the Forex Foundations path on a single page. Use it as a quick reference while the concepts settle. It is educational and general in nature, not investment advice.
Currency pairs
- A pair is priced as one currency against another: the base currency is first, the quote currency is second.
- The price is how much of the quote currency it takes to buy one unit of the base.
- Buying a pair means buying the base and selling the quote at the same time.
Bid, ask and spread
- Bid: the price you can sell at, the lower of the two prices.
- Ask (or offer): the price you can buy at, the higher of the two.
- Spread: the ask minus the bid, a core cost that leaves a new position at a small loss the instant it opens.
- Heavily traded pairs tend to have tighter spreads; spreads can widen around major news.
Pips
- A pip is the standard smallest step in a price: the fourth decimal for most pairs, the second for yen pairs.
- A pipette is one tenth of a pip, the extra decimal some platforms show.
- The money value of a pip depends on your position size, not on the pair alone.
Lot sizes
- Standard lot: 100,000 units of the base currency.
- Mini lot: 10,000 units. Micro lot: 1,000 units. Nano lot: 100 units.
- A larger lot makes every pip worth more, in both directions.
Leverage and margin
- Leverage is a ratio, such as 1:100: the exposure a given deposit can control.
- Margin is the slice of funds held as collateral to keep a position open, released when it closes.
- Higher leverage means a smaller margin requirement and reaches a margin call sooner.
- The leverage available to you depends on your account type and jurisdiction.
Long vs short
- Going long: buy, expecting the price to rise.
- Going short: sell first, expecting the price to fall, aiming to buy back lower.
- Either direction can move against you as readily as in your favour.
Educational and general in nature, not investment advice or a personal recommendation. Trading carries risk to your capital.