Pips and Spreads in Currency

This article will explain in a simple way the concepts of pips and spreads concerning foreign exchange. Remember that when an asset is referenced, the subject will always be a currency pair. A broker sells assets to traders and also buys them. A spread is the price difference between what a broker sells an asset at, and what a broker is willing to pay to buy that same asset. The value of most currency pairs are measured up to the fourth decimal point. A pip represents the smallest movement in the pair, meaning 1/100th of one percent or a single tick of that last decimal. They can also be called basis points. When discussing Currency with a fellow trader, a universal knowledge of what pips, spreads and other important terms refer to means that complicated financial concepts can be understood with ease. This is key to the efficient absorption of information that will aid you in brisk trading. These terms also populate most market news articles and analysis pieces published today. This is why any beginner who is looking to become serious must strive to understand Currency vocabularies.

What is a spread?